Why a Once Small Fishing Town in China Is a Badass Leader in Technological Hardware Innovation
Shenzhen, China. Once a small fishing community that boasted a mere 30,000 residents in the 1970s has boomed to over 15 million today. On top of that, there are over 3 million companies operating in Shenzhen. That means one in five residents of this major Chinese city is essentially a CEO.
The numbers are staggering, but what is even more eye-opening is the average age of its residents (which may very well account for its technological edge in global innovation and hardware development).
A Young Demographic
The average age of a resident in Shenzhen is 28.65. It is the true definition of a Millennial city and many of its residents embrace modern technology like few other locations in the world. Growing up with smartphones, the Internet, social media, and so many other technologies, it’s as though an innate desire to find the next great idea and develop it is driven and rooted in their DNA.
In 1987, Shenzhen accounted for 0.1 percent of Hong Kong’s Gross Domestic Product (GDP). Today, it is pumping out US$400 billion GDP.
Where Did This All Start?
In 1980, Shenzhen was the first city in China to be designated a Special Economic Zone (SEZ). Officials aimed early on to transform Shenzhen into a strong economic environment, which meant considerable financial resources were poured into this region.
A Mindset of Innovation
Partly because of its young demographic, but also because it has become a technological hub, there is an underlying and inherent mindset for innovation. In the past, though, China was driven by a “copycat” mindset, especially as it pertained to economic development and technological innovation.
Many products were copied and ‘fake’ imitations produced in this region. Due to difficulty gaining access and because of China’s laws, proving these cases was nearly impossible.
What that means is companies were essentially stealing ideas or doing the same things that other businesses and organizations around the world had been doing for quite some time, eventually finding some degrees of success. Today, that mindset is slowly evaporating, replaced by a strong confidence in the nation’s ability to market and generate ideas for tomorrow’s needs.
A Robust, Large Population Certainly Helps
There are an estimated 1.3 billion people living in China. Whereas the United States boasts a population just north of 300 million, China has 1 billion more people as a target market. There’s no need to look outside of its borders for feedback, having to accommodate laws, rules, and regulations of other nations, or wait for valuable feedback.
Much of China’s population has fully bought into technology. In fact, the use of credit and debit cards is virtually obsolete. Most people now rely on mobile payments for their transactions. If you were to travel to China and see somebody begging for help on the side of the street, you might see a sign reading, ‘Hungry, please scan me.’ This refers to transferring funds with mobile payments and making transactions using digital technologies.
If you had a desire to move to Shenzhen, China and start up your own technological firm, you would probably find a very difficult task and road to travel. While fully supportive of its own residents, the ecosystem in this city is relatively closed off.
You won’t find a lot of information online and it’s not easy for an outsider to establish residence here, let alone start their own company. It is a powerful market for technological startups, though, and companies bent on innovation.
That’s because many of the residents here are constantly clamoring for the next piece of hardware, the next generation of Artificial Intelligence (AI), smart devices, and technological tools that are cutting edge. There are numerous positive feedback loops right in town among the 15 million residents who live, work, and play here.
In short, there’s no shortage of people not just willing — but enthusiastically hoping — to see what’s coming next and to offer their insights.
In China, there are numerous incentives that local and regional officials offer companies for innovative ideas. There’s also significant financial investment available at the private level through what’s commonly referred to as venture capital.
By offering various incentives that — when a company creates a workable piece of technological hardware — offers numerous ongoing benefits, it inspires startups to strive harder and even began collaborating with other firms to develop ideas that will hold firm over time.
There is significant infrastructure investment in other major cities throughout China, too, including in Beijing where an AI development park is enjoying a $2 billion investment. In Hangzhou, $1.6 billion USD is being funneled into its own AI park. There are 19 cities investing in artificial intelligence that is aimed at creating smart cities and new technologies.
A Vast Plethora of Information
Another key benefit to technological hardware development and innovation involves information and data. Big Data, as it’s often referred to, involves tons of information, including what people buy, what websites they surf, how often they purchase items at a particular store in a week or a month, and so forth.
While U.S. tech giants enjoy reams of Big Data from their users and customers, all of that pales in comparison to what Chinese startup and technological innovative companies have access to.
As mentioned earlier, most residents of this nation now rely on mobile payments, which makes it far easier to track their purchases, habits, and even where they travel. Smart city technologies offer gold mines of real-world, actionable information. This all comes from everyday users, usually the target market or end user of new hardware designs and innovations.
HAX, or HAX Seed, is a hardware accelerator program developed in 2011. It is centered in Shenzhen and provides investment for select startups to help increase the speed of hardware development and innovation.
It was the first accelerator in the world that was strictly focused on hardware. Being rooted in Shenzhen provides that wealth of resources mentioned previously, along with a $100,000 investment, all in exchange for 10% of the equity produced by the hardware, once it’s completely developed and manufactured.
We would be remiss if we didn’t talk about Intellectual Property Rights. For many years, the copycat mentality in China meant numerous manufacturing sites could produce knockoffs, or fake copies of more popular products, from handbags to smartphones.
While few people would be fooled by a knockoff Apple iPhone, a fake Gucci bag could fool the average layperson. The Stikbox is another example of how China’s ability to quickly steal ideas can undermine some great innovators elsewhere in the world. The creator of the Stikbox, Yekutiel Sherman from Israel, had this idea for a smartphone case that had a built-in selfie stick.
When he sought funding through a crowdfunding campaign, he assumed his idea would take hold. He simply never counted on a company in China stealing the idea and bringing it to market before he could even fully develop his, and for a fraction of the price he would have to charge.
China’s Stated Enforcement of IPRs
While China has long been lax on protecting Intellectual Property Rights, because of its newfound technological innovation, it claims to be far more serious about taking steps to protect IPRs within its borders and from foreign innovators.
How that pans out is yet to be seen, but looking at Shenzhen can provide an overview of not only the challenge innovators have elsewhere in the world with copycats and knockoffs, but also with its young, technologically savvy population eagerly seeking the next technological hardware innovation.