The unlikely rise of Shenzhen: paradise for hardware innovators

Many cities aspire to become a Silicon Valley for their region, but Shenzhen may be the only one that started out as the world's factory – and a capital for pirated goods.

Shenzhen's manufacturing prowess is now key to its role as an enabler of global hardware innovation. Dozens of Kickstarter-funded consumer products are made in Shenzhen, developed and perfected alongside factories and supply chain managers.

It turns out that the phenomenon of pirated goods, especially in consumer electronics, is an indication of the flexibility, creativity and speed of Shenzhen's manufacturing system. Factories are able to produce small quantities, and willing to iterate on highly specific features of the new product. Although labour costs have risen, quality and technological know-how have also significantly improved.

“We are moving from ‘Made in Shenzhen’ to ‘Made by Shenzhen’ to ‘Designed by Shenzhen’,” Liam Casey, founder and CEO of PCH International, told the World Economic Forum in a report published in January. “Poor quality is now the exception rather than the rule.”

Like any other entrepreneurial ecosystem, having factories alone would not have made Shenzhen a hardware innovation hub. A suitable talent pool, the right culture, and a community of investors, accelerators and incubators are also needed.

In these respects, Shenzhen has also developed against the norm. Although this city of about 18 million people has nine universities, it lacks the equivalent of Stanford in Silicon Valley or Tsinghua University in Beijing’s Zhongguancun. Highly respected research institutions are usually considered essential for an entrepreneurial ecosystem, because a large pool of highly educated engineers and scientists is needed.