
Shenzhen trip report – visiting the world's manufacturing ecosystem - sadfaceunread
http://joi.ito.com/weblog/2014/09/01/shenzhen-trip-r.html
======
Cookingboy
One anecdotal story: One summer I went back to Shenzhen and decided to get a
PlayStation 2 with a mod chip installed so I can play pirated games (I was a
poor student).

Now, there was this one mod chip that was really good but requires a bit of
soldering work to get it installed right, and me, being an EE student, was no
stranger to a soldering iron, so I planned to do it myself after buying the
chip.

So I bought a brand new PS2/mod chip combo from this small electronics store
and the shirtless owner actually offered to solder it for me for free. I took
up on the offer since I get to test the chip on the spot as well.

He opened up the PS2 case, with one hand took up a soldering iron, while the
other hand holding a cigarette, started working. I nervously watched him
tapping around my brand new PS2's motherboard with just one hand while paying
most of the attention to the live soccer game on TV at the time. 5 minutes
later he was finished and 8 years later that PS2 is still working and reads
all pirated discs with absolutely no problems.

Throughout college I've never met anyone who's as good at soldering as this
shirtless electronics shop owner I met in Shenzhen.

~~~
seanmcdirmid
You can find these people everywhere in China, even Beijing. Weirdly enough,
many of them here are Uighers.

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jonmrodriguez
> In an interesting twist, the factory boss suggested that we could build the
> precision molding tools in China and then send these tools to a US shop for
> running production.

> This role reversal is an indicator of how the technology, trade, and know-
> how for injection molding has shifted to Shenzhen. Even if US has the
> manufacturing capacity, key parts of the knowledge ecosystem currently exist
> only in Shenzhen.

This is what really saddens me about outsourcing manufacturing from America,
is that we lose the knowledge about manufacturing technology. Although we may
be at the forefront of software development, in many areas of manufacturing
technology the cutting edge development happens in China now.

I'd really like if we could bring about a revival in manufacturing engineering
in the US. Other than the ecosystem effect, the main way that China has an
advantage is labor cost, so I propose that we could build up a "Shenzhen of
America" in the San Diego / Tijuana free trade zone. The repetitive work that
takes a lot of hours would be done on the Mexico side, where labor is now
almost as cheap as China. The manufacturing engineering and tool-making would
both happen on the American side, bringing these jobs back to the USA from
China.

San Diego / Tijuana are shipping ports on the Pacific, facilitating importing
electronic components from China, Japan, and Korea, and then we could do all
of the PCB fab, PCB assembly, injection molding, and final device assembly (as
well as all tooling for all of these processes) over here in the Americas.

I'm very supportive of China's development but competition is good and as
American citizens we can't just throw in the towel, we have to build our
manufacturing knowledgebase back up and be willing to actually compete.

~~~
Wogef
>...we have to build our manufacturing knowledgebase back up and be willing to
actually compete.

Some days I think this, other days not. There’s an old expression “box a
wrestler, and wrestle a boxer”. Basically don’t compete on their strengths if
you can avoid it. Better to fight a shark on land than to start taking
swimming lessons:-)

The thing is- as huge as America's manufacturing gap with Mainland China is,
the creativity gap is equally large. That’s a result of our much maligned
Western educational system.

Art class in Mainland China is the teacher draws a bird on the board, all the
students copy that bird. I'm not passing judgement on that- it's just a
different system. When I was a kid in New York Public School- the teacher said
“draw a bird” and we had birds in the park, Godzilla size birds destroying the
city, robot birds- no two were alike. In China it's very much a color-inside-
the-lines affair. There is a little movement here, but it’s very slow and only
with very well educated Chinese parents who see the advantage:
[http://www.dddyin.com/portal.php?mod=view&aid=2580](http://www.dddyin.com/portal.php?mod=view&aid=2580)

Before a project with the scale and ambition of bringing back American
manufacturing was launched, I’d like to see how this existing high value
attribute could better be monetize and scaled. It will take a long time before
we can ever hope to make things as well as the Chinese now do- but we can
design better things now. The problem is profiting from that without stifling
domestic innovation.

~~~
jonmrodriguez
You're definitely right - why not both? I'd like us to succeed in all areas.
To use a very cliché word, there's a big "synergy" if we have both creativity
and manufacturing in this country. For example, the product I work on is a
pair of smart glasses with a computer inside. The idea is not unique, it's our
innovations in engineering and manufacturing that let us make our product much
smaller and more stylish than competitors. Our creativity is applied in
solving these technical and manufacturing problems.

To make a metaphor with cofounders at a software startup: right now, the USA
buying from China is like the USA is an "idea guy" / "business guy" who has an
idea and access to capital, but no ability to implement the tech, and China is
like an outsourced coder. But this duo is a little disfunctional, I wouldn't
want to be either one of those characters. I'd much rather be the best of both
worlds: a smart and creative technical founder who can have the ideas AND
implement them. That guy's company will run circles around the other duo... As
an example, SpaceX, by having both the ideas (reusable rocket) AND owning the
factory, SpaceX can make rockets much more cheaply than competitors who design
in the USA but outsource e.g. the engine production (ULA Atlas V rocket uses
Russian-built engines)

~~~
walterbell
Some capital owners may prefer to use online labor marketplaces (e.g.
99designs, fiverr) to commoditize global creativity, drive down prices and
avoid labor law obligations that apply to full-time employees.

------
Wogef
I’ve lived in Shenzhen for almost 10 years (native New Yorker).

This article was a bit better than most for Shenzhen- it was at least willing
to speculate that a lot of Shenzhen’s advantage now comes from talent and
infrastructure. It’s still pretty common for people to attribute it entirely
to lower labor costs- which is just not the case.

Shenzhen, like New York is an immigrant city. People come from all over China
to get ahead, and get rich. Unlike New York it’s only a bit over 30 years old-
and back then it was basically a fishing village. This is important because of
the Hukou system:
[http://en.wikipedia.org/wiki/Hukou_system](http://en.wikipedia.org/wiki/Hukou_system)
It’s a bit long to go into (check the link) but basically it ties people to
their birthplace and gives them a significant “home field” advantage.

If you are in Shanghai or Beijing and have a local Hukou you have access to
the best education system, the highest paid jobs in both the public and
private sector, and often a large network of friends and family members in
local government. People from Shanghai or Beijing rarely immigrate to Shenzhen
because they lose that advantage and are forced to compete with what they
would consider the rabble. People from other provinces can rarely compete on
even ground with locals- both for legal and cultural reasons. The rivalry is
less like US States and more like countries within the EU- but worse.

A “local” in Shanghai may feel perfectly entitled to cut to the front of a
line if those people are "Waidiren” (outer province people- 外地人). It’s
considered perfectly reasonable for migrant children not to get the same
healthcare or schooling. The local dialog about them in every city is a
familiar one- basically “damned dirty immigrants taking our jobs and
committing crimes”. Needless to say the Central Government is quite keen to
keep the provinces deeply prejudiced against each other- because it distracts
their attention from the real culprits.

Shenzhen on the other hand is by far the most egalitarian city in China. The
city is so young that no one really has an "Uncle" etc. in local government
willing to “investigate” competitors or send some easy government contracts
their way. There is little difference between those few born in Shenzhen and
those who came a few years ago. There is no local dialect that is used to
subtly determine who’s “local”- everyone basically speaks Mandarin.

So for people in relatively poor provinces (Hunan, Hubei etc), with brains and
education but little in the way of prospects due to their Hukou, Shenzhen
represents the best possible opportunity to compete in a first tier city
almost purely on merit. Success here is based largely on hustle, brains and
hard work- while in other cities at least 50% is simple corruption (well
placed relatives in banking and government). Most Chinese would place the
number even higher.

So Shenzhen gets a lot of China’s best and brightest, but also those who are
inherently ambitious- because they were willing to leave their hometowns and
family (a much bigger deal here). A huge amount of the slow grinding machinery
of legacy corruption does not exist here (massive numbers of bureaucrats given
comfortable jobs doing basically nothing as a form of social welfare). It
happens occasional sure- but not to the point that it does in other cities
where merit and hard work is almost meaningless next to the right connections.

The result is a giant magnet for talent and a massive, well funded playing
field where that talent competes with significant rewards reserved for the
most skilled, clever and hardworking.

There are a lot of incredibly smart highly motivated people here- and that,
more than just simple labor costs is responsible for Shenzhen’s market
position.

~~~
possibilistic
How comfortable is it to live in Shenzen as an expat? I spent half a year in
Changsha and Shanghai as an undergrad and absolutely fell in love with the
country in ways I never did for Japan. I found that feeling odd since I spent
years studying Japanese and ultimately wound up teaching English in Hokkaido
for a year.

I'll probably spend another two or three years stateside with my family, but
ultimately I am disdainful of American materialism. I can't come to grips with
the price of rent, the long commutes, and the costs associated with living
here. Maybe I'm just too frugal. I grew up an only child honestly having more
than I needed, and as a consequence I don't want to accumulate anything
material that is just superfluous. I'd love to live in a capsule hotel with
just my laptop and bike. I suppose I'm getting way off topic...

My Mandarin is pretty bad as I only studied it off and on for six months or
so. Do you see a late 20-something white software engineer as being capable of
making a living in Shenzhen? Or is this a pipe dream? What recommendations
could you make?

~~~
SimpleMinds
Hi,

I'm living in Shenzhen for almost 10 months now, after moving from Beijing
after three years. I can only correlate living in Shenzhen with living in
Beijing for an expat. My Chinese is only basic too. Ok here were go with plus
sides first:

\- being smaller city, Shenzhen still have the "wow" factor for foreigners.
It's easier to find better paid (compared to Chinese counterparts) job, easier
to handle things, easier to survive by being "lost expat"

\- if you get tired of China (and many of us do), HK is just 1h away and you
instantly have different experience. It might sound silly but it's very
valuable

\- cheaper than bigger counterparts

\- Shenzhen is ~35 years old, build with grow in mind. That means that subway
is great, traffic is great. Notion of traffic jam here is very very small
compared to other big cities. If you drive, or, very probably, if you use
taxi, almost no traffic jams is amazing (there still are, but its way less
than what I experienced in other big cities)

\- Shenzhen is one of the cleanest cities in China in terms of pollution. Some
people say wearing a pollution mask in Beijing every day is like living in
future, but not for me :)

\- if you like warm, you will like weather here

\- taobao - no, really, you can find almost anything there and it's a great
asset to consider when thinking about China :)

Now, for the bad things:

\- for IT software, I found it very lacking compared to Beijing. There's not
that much talent (yet), not many startups. There's even no coworkers space
available. Similar with Hong Kong, where I'm guessing cost of living is
prohibitive for having a startup -> IT just goes towards big banks etc. On the
other hand, if you treat work as a paycheck thing, check the positive point
above, you could find boring, not demanding work in Chinese company just to be
"white face". Overtimes are happening, but afaik here expats are more often
excluded

\- unless you are willing to travel to HK, foreigner things are harder to get
by. If you like to cook especially. Taobao gets you covered in most cases but
some specifics are harder to find

\- food and available cousines are terrible. I like Chinese food, but what you
can find here is disappointing. I do miss Beijing range of tasty restaurants

\- good english speaking Chinese are much rarer, thus (until you learn good
Chinese) learning about their culture, way of life etc from natives (compared
to reading some post on internet, cough ;) ) is harder

Now, to answer your specific question: yes, I think it's very easy to make a
living in Shenzhen for software engineer. I would recommend two things:

\- making sure that company that you start with gives you a proper visa as now
gov is cracking down on illegal or wrong type of visas

\- if you would like to learn more Chinese, do not surround yourself only with
expats.

I hope this helped you a little bit, I don't have experience with sharing this
kind of information with people

~~~
Wogef
-There's even no coworkers space available.

Little bit of progress here- check out 3W:
[http://www.weibo.com/sz3wcoffee](http://www.weibo.com/sz3wcoffee) They also
host the Startup-Grind events:
[http://www.meetup.com/StartupGrindSZ/](http://www.meetup.com/StartupGrindSZ/)

Co-working for Chinese is someone complex due to requirements for business
registration (this is why 3W labels itself as a café even though the second
floor is all office space).

~~~
SimpleMinds
I've been to 3w coffee in June, and I thought coworkers space moved out of
there. Guys who were running [1] now rent small space for themselves in
Shekou. My feelings there were similar to [2], that is it's a coffee shop
feeling with a lot of power plugs.

(difference between coworkers space and working from coffee shops is that I
pay a month/day fee and don't need to worry about buying coffee/eating to not
feel guilty of taking their space :) )

There's one more place trying to open but their location is really far even
for Shenzhen standards :) (Bao'an)

[1] [http://szteam.com/](http://szteam.com/) [2]
[http://www.coworkplanet.com/coworking-in-
shenzhen-3w-coffee/](http://www.coworkplanet.com/coworking-in-
shenzhen-3w-coffee/)

------
userbinator
Visiting Shenzhen is highly recommended if you have any interest in
electronics at all --- I'd say it's definitely an eye-opening experience, and
can change your perspective on the manufacturing costs of all the things we
usually take for granted.

bunnie has organised another trip there near the end of this month, if you're
interested:
[http://www.bunniestudios.com/blog/?p=4087](http://www.bunniestudios.com/blog/?p=4087)

~~~
prawn
I would love to do more factory/production tours but in many countries it
seems that insurance and legal issues have made them too difficult. Brewery
tours are common (the Budvar one in the Czech Republic is great) but I'd be
just as interested in car manufacture, electronics, furniture, clothing,
almost anything.

Are there any formal tours in China? I don't mean the sort of tour where you
are driven around in a bus visiting factories, but an index of factories that
are willing to take an appointment to visit for a fee, just out of curiosity.

~~~
jonmrodriguez
In the USA at least, a lot of factories can give tours if you have a friend
who works there. For example, you could tour the SpaceX rocket factory in
Hawthorne, CA, which is AWESOME.

~~~
Scoundreller
I guess this is the case, as they like to wow suppliers/customers or use it as
a way to keep a trucker/customer to wait X minutes until the order is actually
done without complaining too much.

The "tour for a friend" is probably seen as an opportunity to practice the
tour when it doesn't really matter, test new things, etc.

I got to tour a sulphuric acid plant. It was fun. The friend worked in the
closest equivalent to hell that I've ever seen (well, the cauldron part
anyway). I love walking by a X000 fahrenheit tank with the guide saying as you
have to crouch around to get around it "Don't go near, hot!".

------
ausjke
As an embedded linux hacker I am very happy to see articles like this. I just
opened my small firm in Shenzhen to do hardware and embedded linux software.
The ecosystem there is just unbeatable and the willingness of engineers there
to get job done is hard to find here at US at the moment.

USA, by all means, is under attack in this regard. Unless one day the kids
here put education first, I somehow feel the future is hopeless.

------
narrator
The most interesting thing to me about China's capitalism is the massive
amount of small firms. I think there's a tendency among western firms to use
cheap financial capital to acquire smaller firms. I'm not sure if this is the
case in China where the government is more directly involved in directing
lending and not focused on mergers and acquisitions.

~~~
ams6110
Capitalism is pretty new to China. Check back in 20-50 years.

------
zhte415
If anyone is interested in the aspects of reuse and recycle touched on in this
article, I highly recommend Junkyard Plant, a book about recycling largely but
not exclusively focused on China. There are a couple of chapters on
electronics and Shenzhen, as well as other chapters ranging from paper &
cotton, steel, plastics, aluminium, etc, and the entire sourcing chain.

[http://www.amazon.com/Junkyard-Planet-Travels-Billion-
Dollar...](http://www.amazon.com/Junkyard-Planet-Travels-Billion-Dollar-
Trash/dp/1608197913)

------
aftbit
This is a great write-up about a world into which I normally have no
visibility. I didn't realize on a that manufacturing capabilities for small-
scale operations had advanced that much.

------
yamazi
Actually, due to China government policy change and labor shortage, more and
more major electronic manufacturers and their suppliers have moved their
operations to Eastern China, such as Suzhou in the past 10-15 years and now
even inland cities like Chongqing and Zhengzhou. Many of my friends have
already moved out of Shenzhen.

------
nraynaud
if some people are interested in a little bit more details than a reverse
culture chock blog post, there is a bunch of interesting videos here about the
link Shenzen/Hong Kong, shipping your product, finding your factory etc:
[https://www.youtube.com/user/iantube/videos](https://www.youtube.com/user/iantube/videos)

------
NicoJuicy
I'm curious, someone mentioned me about the (lot of ) empty buildings in china
(or big cities).

Banks lend to people with the right connections (it's otherwhise impossible),
they get an easy loan with the building as insurance.

They invest 25% of the money, leave with 75%. The bank takes the building back
and no one can live in it.

Is that right (asking to the ones living there)

~~~
akfanta
> someone mentioned me about the (lot of ) empty buildings in china (or big
> cities).

In some smaller cities, yes. The demand is always higher than supply in the
big cities like Shanghai/Beijing/Guangzhou/Shenzhen.

> Banks lend to people with the right connections (it's otherwhise
> impossible), they get an easy loan with the building as insurance.

Having the right connections will make your bank loan a lot easier, but if you
are qualified, you certainly can still get one without connections.

------
pmorici
"What's great about AQS is that, with the help of bunnie, they have started
working closely with startups and other projects that previously would have
had a very hard time finding a partner in China because of the small volume"

So I guess that is the secret to getting AQS to respond to your request for an
assembly quote.

