Shenzhen named as top 5 start-up hub, Hong Kong nowhere in sight

China's southern boomtown of Shenzhen could be the "Silicon Valley for hardware makers", according to a ranking of emerging start-up hubs around the world by well-respected US magazine Inc.  

Shenzhen, which neighbours Hong Kong, is already home to a number of major tech firms, including Chinese web giant Tencent, drone maker DJI, and smartphone manufacturer OnePlus. 

"[It is] a place where accelerators are eager to help you build, test, refine and make a million of something all in the same day," writes Greg Lindsay, author of Aerotropolis: The Way We'll Live Next.

"Shenzhen is increasingly attracting startups that may have previously only outsourced their manufacturing here. It has become a global magnet for hardware companies eager to learn from the world's biggest (and often best) manufacturers of mainstream electronics." 

Lindsay singles out Haxlr8r, a Chinese-American accelerator which specialises in hardware start-ups and uses Kickstarter to build buzz and find a market for new products. By taking advantage of Shenzhen's quick prototyping factories and testing the market before mass production, startups "win a tremendous amount of time in getting to market and avoid the costly mistakes that come with 'parachute manufacturing'," according to founder Cyril Ebersweiler. 

One of Haxlr8r's recent successful Kickstarter projects is Prynt, a Polaroid-style instant photo printer in the form of a phone case which attracted more than 28 times its funding target. 

Start-up founders have praised Shenzhen as an ideal base from which to launch their businesses. Gao Lei, chief executive of wearable device maker Betwine, said he prefered the city over its mainland rivals Beijing and Shanghai. 

“The biggest help I had from this place was the chance to meet many other people who shared my dreams. They have gone on to become my business partners,” he told the South China Morning Post. 
 
“Giving maker spaces better places to work and making their work easier will facilitate innovation," Gao said. "The government aims to push entrepreneurship, and it is banking on a lot more makers and entrepreneurs to fuel the new growth engine."

Shenzhen has held an important position in the history of China's economic reform for the past three decades. Late paramount leader Deng Xiaoping's landmark visit to southern China in 1992 eventually led to a wider opening-up of the mainland market to foreign investors, including launching Shenzhen as a special economic zone on the mainland. In recent years, Shenzhen's rapid success in attracting and fostering start-ups has been in marked contrast to neighbouring Hong Kong.

While the city's government has voiced support for encouraging investment in and support for tech companies, it may be too little too late. DJI, the world's largest supplier of civilian drones, was founded by Hong Kong University of Science and Technology graduate Frank Wang Tao just few years ago. Though he wanted to start his company in Hong Kong, Tao was eventually forced to launch in Shenzhen due in part to lack of funding and government support on the Hong Kong side.

Launching a successful company in mainland China isn't without risks however. Inc warns that "possibly the chief negative for companies doing business in Shenzhen is intellectual property theft." The US National Security Agency estimates that IP theft accounts for US$320 billion in annual losses to the US economy. 

"Those willing to take the plunge and set up shop in China, however, will discover a vast universe of technical expertise," according to Lindsay. "Shenzhen is ground zero for technological serendipity."

Other world cities filling out the Top 5 were Istanbul, Turkey; Tallinn, Estonia; Santiago, Chile; and Dubai. 

Additional reporting by Adrian Wan