'Created' in China: Shenzhen is making hardware like Silicon Valley makes apps

Like most of us, Lei Gao finds exercise tedious. The 33-year-old prefers playing video games on his smartphone, where he can score points alongside his friends on leaderboards hosted by WeChat, China’s dominant messaging app and social network. An interaction designer and developer from Hubei in China’s northeast, Gao had the idea to combine them. Video games require dexterity and skill, as does exercise, so it seemed like a natural fit. Inspired by the physicality of playing a Nintendo Wii, he started thinking about new forms of video game interaction. Could the same thing work with smartphones?

Based in Shenzhen, China, Gao lives and works near the city’s Huaqiangbei electronics neighborhood. Centered in the world’s largest and increasingly most famous manufacturing environment for hardware, Huaqiangbei is likely where the selfie stick and the hoverboard saw some of their early buyers. A visit to the market now offers a peek at future tech crazes of 2017: karaoke mics that plug into apps that rate your singing voice, computers the size of a USB stick, solar panels that suction cup to your window, and mini robot friends.

But Huaqiangbei is just one entry point for hardware. Often, new ideas see life online before ever entering physical stalls. Thanks to the networking potential of the internet, the physical products being made in Shenzhen are now starting to go viral on the web in the same way that Silicon Valley apps and popular YouTube videos do. In China, we’re seeing the rise of what a recent McKinsey report called wired companies: ones that use the internet in key aspects of their business. Connectivity helps them manage supply chains, access more diverse sources of financing, and reach an array of consumers.

Production culture here points at a world of networked manufacturing, as physical objects become as internetworked as our digital ones. Already, makers can develop and ship hardware products almost as quickly as they can develop and ship ideas. And this time frame is expected to shorten dramatically in coming years.

In the city today, internet platforms are speeding up production efficiency and enabling rapid, decentralized innovation through sharing and iteration. The implications of the internet meeting Shenzhen’s long-established environment for production point at substantial changes in what hardware can look like and who it can come from.

China is amidst a massive transition from a country primarily of manufacturers to one of makers. Lei Gao is part of this new generation that uses the internet’s agility to augment what the city has to offer. Within days, he had what he needed to experiment with his idea. It took just 10 yuan—about 1.50 USD—and an account on Taobao, an eBay-like e-commerce site run by Chinese tech giant Alibaba, to purchase an exercise gripper shipped from Fujian, a province about a nine hour drive up the coast. Alibaba’s efficient payment and shipping system saved him a trip, and he already had the other parts and pieces he needed from previous projects. After the gripper arrived, he and his team tinkered with code and a Bluetooth trigger, and they created a prototype: a “smart gripper” to interact with your phone. It was perfect for games like Flappy Bird.

Gao and his team make up Imlab, one startup amongst over a million small and medium-sized companies in Shenzhen. Hardware startups across the city can readily pull together a working prototype in a day, test it, and quickly figure out where to go next. Gao’s company is based at Emielab, a coworking space and hardware incubator modeled after successful ones in San Francisco. Inspirational phrases in English line the walls, like “It’s not how good you are, it’s how good you want to be” and “So mad, but so cool!” Emielab is itself one of numerous incubators across the city, attracting makers from China and abroad seeking entree to the region’s manufacturing expertise and efficiency.

“Since its inception, Shenzhen was a site of experimentation,” says Silvia Lindtner, an assistant professor at the University of Michigan’s School of Information who has been studying China’s maker scene and community since 2010. “Shenzhen is place that’s open and different from other places in China.”

As with much of the country, the government has played a key role in making Shenzhen what it is today. During the economic reforms under Deng Xiaoping, China established the city as the country’s first Special Economic Zone in 1980. As people moved there seeking economic opportunity, the small Hakka fishing village across the border from Hong Kong transformed rapidly.

Shenzhen has the geographical footprint of Los Angeles, but a population three times its size at 12 million people. It’s part of the Pearl River Delta, which also includes Hong Kong, the global financial capital and port city; Macau, the world’s largest gambling city; Guangzhou, home to one of China’s major ports, trading centers, and factories; and Dongguan, a manufacturing hub. It’s as if the tech talents of Silicon Valley, the big banks of New York, the manufacturing plants of Detroit and Pittsburgh, the casinos of Las Vegas and the shipping ports of Long Beach were all in one small part of the US, and a two hour drive from one another.

MIT Media Lab director Joi Ito wrote of a recent visit: “Just like it is impossible to make another Silicon Valley somewhere else, although everyone tries—after spending four days in Shenzhen, I’m convinced that it’s impossible to reproduce this ecosystem anywhere else.”

The Pearl River Delta has historically served as the world’s factory, producing everything from toys to furniture to electronics. Outside of low cost labor, its scale and expertise are part of why Apple has factories in China. If something is “made in China,” it’s almost certainly made in the Delta, and if that something is technology, it’s likely made in Shenzhen.

Reports from the likes of the World Economic Forum and Siemens have also suggested a change in terminology from “Made in China” to “Created in China.” Local companies now aim to compete not just as producers but creators, and indeed, the government’s recent Made in China 2025 initiative continues to nudge the economy from production to innovation. Shenzhen is now frequently dubbed the “Silicon Valley of Hardware.”

People like Lei Gao are moving to the city not just for its network of factories and producers, but for its emerging values of rapid tech experimentation and DIY creativity. After a few iterations, Gao already has a working product, which he called an exercise toy. But was it any good? His team followed the traditional hardware testing route with a few hallway tests in their coworking space and refined the idea further. They then brought the gripper to the Shenzhen Maker Faire, an event attended by some 50,000 people from around the world. There, they were able to test the idea further and get feedback from Chinese and foreign attendees alike.

The critical moment arrived: they listed the Bluetooth gripper onto hi.taobao.com, one of a few popular crowdfunding sites which bear semblance to Kickstarter and Indiegogo. Nearly 400 buyers across China took to the idea—a $30 exercise toy that grown-ups can play with—and Imlab raised over 100,000 Chinese yuan, or about $16,000 to seed the product. With the idea validated, they could quickly and affordably plug into a factory elsewhere in the city and begin production and shipping while seeking seed money.

Just as important as the investment, Imlab now had a fan base excited to give feedback. They set up a WeChat group, helmed by community manager Tina Yang, and over a hundred users joined from cities as far away as Beijing and Shanghai. Spread across China, these young fans offered more diverse feedback than Imlab’s fellow technologists, and they were happy to share the toy with their friends.

As new models came out of Imlab’s factory in Shenzhen, they placed them in specific online stores on Taobao. Each virtual store functioned like an independent stall in Huaqiangbei’s many markets, with its own marketing strategies and audience. Thanks to analytics provided by Taobao, the stores kept Imlab posted on how quickly the products sold, so they could produce and ship more to meet demand, or make tweaks as needed.

Surprisingly, China’s manufacturing productivity has historically been lower than most developed countries. A 2013 report by McKinsey noted that US labor productivity in manufacturing and communications technology was 10-12 times greater than that of China. As the report argued, much of the inefficiency could be attributed to how Chinese companies were slow in digitizing their production practices.

But that’s changing. Digital platforms like WeChat, Taobao and Amazon have multiplied production and marketing efficiency for big and small players alike. “You can buy everything for do-it-yourself work online,” explained Doris Wang, who co-founded Barcamp in Guangzhou. “Leather for you to make a bag, sensors for you to make your bot, et cetera.”

The tools for sourcing parts, testing ideas, gathering user feedback, raising funds and distributing products can now rely as much on the internet as they do on the Pearl River Delta’s physical network of stalls and shippers. This has taken the form of an informal economy where “Shenzhen speed”—Shenzhen sudu—reigns supreme.

We’ve seen this story before: as cost of production and distribution go down, the range of creativity goes up. For example, the ingredients that make video successful online are digital cameras, editing tools, broadband internet, and YouTube. Before the advent of digital tools, video was extremely costly to produce, edit and distribute. Cameras and editing tools have gotten cheaper, and as they are now on our phones, production is easier and more fun. Broadband has cut the time and effort to upload videos, and platforms like YouTube have solved the distribution problem with stable software, good compression, and access to viewers. In this new world of video, YouTube hasn’t replaced the big players—its most viewed videos are almost all commercial musicians—it’s just made room for everyone else to do their thing too. And now there’s an avenue for smaller producers to build an engaged audience.

In China, big companies like Huawei, one of the world’s largest smartphone makers, and DJI, the world’s largest drone maker, operate a lot like Beyoncé. They have massive user bases, global marketing reach, and an army of professionals working for them, so it’s no big surprise when they do well on the internet. But after a Beyoncé video comes out, think of all the fan responses, covers and remixes that get posted on YouTube. A quick search for “Beyonce cover” yields some 2.3 million results, some of them flat out copies and others redone in trap, afrobeat and orchestral styles.

This world of remixes and covers is like the culture of shanzhai—often translated to “bootleg”—in Shenzhen. It’s easy to look down upon, but the shanzhai practice includes open, templatized systems for hardware. V&A Gallery curator Luis Mengioni has likened it to creating an ecosystem of ingredients—circuit boards, cases—for an infinite range of recipes. This iterative, remixable mode of production helped create, for example, the dual SIM phone, which took years to become a feature with mainstream manufacturers.

Online platforms like Taobao, Jindong, WeChat and others are doing for hardware what platforms like YouTube and Vine did for video. Then, efficient shipping services make transporting products easier for everyone. Together, they’ve created a pipeline for experimental hardware to “go viral” and quickly adapt to user feedback and demand. “Ideas come from anywhere,” says technologist David Li. “It might be a distributor or customer. It might be a conversation.” As hardware ideas spread and get remixed, they start to look a lot like internet memes. From there, some products become a sustainable business supported by active input from fans, performance analytics, and outside institutions.

The danger in this model is that of all Darwinist markets: individuals shoulder the risk in a nonstop cycle. More established companies can invest in a few lucky products and bring in the legal and financial muscle to kill off competitors. Structural inequalities can make it harder for women and working class people to get investment or feel empowered to try their hand as founders. Those in urban areas have distinct advantages, like access to coworking spaces and mentorship networks. And especially if companies can’t afford a satellite office outside the country, language barriers and strictures on accessing online platforms outside China can limit their ability to reach global buyers.

Of increasing concern to businesses—as if the Silicon Valley comparisons are not enough—rising rents have made Shenzhen’s housing market the most expensive in China. Some companies are thinking about leaving the country altogether to other parts of Asia and even North America. Intellectual property violations run high, safety standards are lax, and electronic waste can reach dystopic levels. Products developed in the Pearl River Delta eventually make their way back to dumping and recycling grounds in China, where they join the ranks of e-waste from Western technology companies. As regulations increase and labor costs rise, the economic and environmental sustainability of the Pearl River Delta’s production ecosystem remains an open question.

Makers in Shenzhen nevertheless continue to fail fast. Like any startup, Imlab has seen its ups and downs, and Gao recently dissolved his team because of flagging revenue on the exercise toys. He is now working on improving circuit board quality with external partners, and exploring blood pressure and even sexual health monitoring as use cases. Of Shenzhen and the future of hardware production that uses the internet, Gao continues to remain optimistic. “It offers a good opportunity for Chinese people to make their own brand, from ‘Made in China’ to ‘Created in China,'” he says. “We don’t know what it will look like, but we know it will be very different.”

An “An Xiao” Mina leads the product team at Meedan, an organization building tools for global journalism and translation, and she co-founded The Civic Beat, a research collective looking at the creative side of civic technology. Mina has spoken at venues like the Personal Democracy Forum, the Microsoft Social Computing Symposium, Creative Mornings, and the Aspen Institute, and she has contributed writing to publications like the Los Angeles Review of Books, Hyperallergic, and the Atlantic. She can be found online at @anxiaostudio.