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An Insider’s Guide to Shenzhen Manufacturing (makezine.com)
130 points by sohkamyung on June 17, 2015 | hide | past | web | favorite | 49 comments

This is more like a guide for how to lose all your money, and have your product design stolen, in the minimum amount of time.

I have seen too many Kickstarter projects crash and burn because they read guides like this, speed dated some factories, and then lost all their money in a bad production run, by a factory who doesn't really care about them.

Unless you work with a factory who you not only trust, but know that they have an extremely strong motivation to not steal your product, they will both screw up your product, and your design will be cloned in a matter of weeks.

Even friends I have who are Chinese, living in Hong Kong, have warned me that even for them, it is hard to find trustworthy suppliers and factories in Shenzhen.

We are going to be doing all our manufacturing and assembly here in Europe. Luckily we're making a more expensive item and we have this choice.

" But if you’re undertaking a serious endeavor and you’re looking to make mission-critical parts, you have to visit to really know the situation at your suppliers, to establish relationships with factory owners and staff, and to get a sense of their quality control standards. " NO NO NO NO NO. Unless you are going to MOVE THERE AND LIVE THERE, then you need to absolutely forget about manufacturing there. You WILL lose.

I don't want to sound down on Shenzhen - it is where almost all our beloved electronics come from - but seriously - it is an environmental catastrophe, there is ZERO intellectual property protection, it is full of scam artists, there is a nearly insurmountable language barrier, and yes, there are in fact plenty of completely competent, worthwhile, trustwothy electronics manufacturing assembly companies in nearly every country of the world. Unless you are going truly mass-market (>200,000 pcs) then you should absolutely not even consider taking it to Shenzhen.

To provide a somewhat-contrasting anecdote, I've been dealing with Chinese factories (mostly in the Pearl River Delta area) for the last 3 years, manufacturing fairly high-tech products. We haven't had any of the problems you describe. We did our first small manufacturing runs sight-unseen with our initial partners and everything went well. I think the story of cratered Kickstarters has more to do with creators who have little experience in manufacturing and no clue what they're doing in China, rather than some intrinsic failing of Chinese factories.

There are plenty of ways to make your BOM work in your home country, but at least in the US it's surprisingly difficult to get low volumes (<5k units) manufactured economically.

> manufacturing fairly high-tech products. We haven't had any of the problems you describe.

Only because of the nature of your product...

It's all about the product type, its price range, and the availability of reaching the customers.

A US company that made a general consumer-level (non-pro) 1 milligram scale (e.g., accurate on the weight to within 1-3mg) outsourced its manufacturing to China, which then had the same production lines make 2x the order, placed its own brand/sticker on the additional units, got it into the US, and had the various distributors provide it at a price that was 80% less than the company was selling them.

I bought one off Amazon. Why pay $200 when I can pay $20-$40?

If this is legal or not it does not matter - if it can be done it will be done.

In your case, the time is not just right. But the moment when everything aligns and they think they can compete with you...

I'm curious - which scale was ripped off?

So what do you want, patents?

Patents won't save you. Trademarks can help you prevent imports like this, but nothing will ever stop your product from being sold in other places, especially mainland china.

Right, so ... you've just re-iterated my point. Whinging about the nature of reality aint gonna change it.

No, my point is you need to find people who won't steal from you, not because you have patents, but because they're not scumbags. Going to Shenzhen, the odds are very much stacked against you with this.

Do small fly-by-night factories care about reputation? No, probably not. Does having your stuff produced elsewhere given this reality protect against its copying? No. Realistically, we just have to recognize that the exclusive right to produce something does not exist, except as vaguely enforced at retail through certain developed markets' monopoly-assisting enforcement arrangements... if you have enough dosh for lawyers to back it up. From a business standpoint, the cold hard truth is that producing anything physical is more about the object's distribution and marketing than the design and production, which can be monopolized only temporarily.

How do you know that your product hasn't been cloned and sold inside China, for example?

Anyway, I am glad to hear that you're having good experiences, and I'd love to hear more about it. How can I contact you?

The easiest way to know is to watch the chinese deal websites. I use those for sourcing anyway so I perform an idle search here and there. In all honesty, if you're getting cloned it's a positive signal that you have a potentially good product (at least on the higher end of the technology scale--for someone like an early-stage fitbit it would be disastrous if the cloners were capable). If you aren't able to watch deal websites, there are other pretty easy ways to track it.

It's also about the strategy of your development--you can take a few very small actions early on that will make it orders of magnitude more difficult to copy your product. But, generally, it's not worth a factory's time to clone your product, especially if it integrates manufacturing processes they don't have access too. I have this benefit because I work mainly with small factories and while they do cooperate with each other, there isn't the infrastructure or margins to allow them to do anything other than focus on building parts as quickly as possible.

My email should be in my profile, drop me a line!

Ah yes. A guy I know designed a simple voltmeter based on a uC and a 3 digit LED display for some radio equipment. Shipped the design out to china.

Look on ebay or aliexpress now...

Boy is he pissed about that.

Interestingly though the product that contained this ended up being built in the UK for only about 20% more. Shafted on import costs of components though.

It's funny how "focusing on core competencies" usually reduces the set of core competencies gradually till all that left is management.

That is funny (though sadly common) because it's a good idea early on: focus on what really sets you apart when you start; then gradually expand your core competency so you can better control your fate.

Unfortunately building big companies is not really in fashion these days.

I was in Shenzhen a few weeks ago. It's indeed a wonderful city.

Originally the massive manufacturing industry was accelerated by the large amount of people from rural areas flocking into the city due to reform and opportunities. The increase in population resulted in a large unskilled workforce and thus very cheap manual labour and large factory assembly lines.

It's a lot better now given a much more competitive market. Salaries are higher and quality of living is better than the rest of the country. A lot of people became very rich in Shenzhen within the last decade.

I pay my Chinese employees in shenzhen the same wages I pay my workers in LA. The cost of living, from what I can tell, is fairly comparable.

Are they considered independent contractors or do you pay them through a Chinese subsidiary? I'm looking into issue currently and all the bureaucracy (on both sides) is driving me mad.

Arguably the easiest thing to do from the China side is to pay people with a normal international payment via SWIFT in USD. Benefits for them include: they get to store their cash in USD, they can convert USD to CNY or whatever else at leisure, they can always exfiltrate funds.

Another option is to open an international account link with HSBC so that you can ping money from the US to China quickly, then pay out locally. However foreign banks including HSBC have strict rules on what they are allowed to do in country so you may need to do a bit more shuffling to make this route happen.

Recommended domestic bank (Shenzhen based) is China Merchant's Bank.

That is actually much closer than I expected it to be.

> Prices Including Rent in Shenzhen are 36.96% lower than in Los Angeles.

To compare,

> Prices Including Rent in Los Angeles, CA are 36.34% lower than in Zurich.

LA is basically the same price for rent as third tier Chinese cities. (Source: I lived LA 2010, China before and after) However, you don't need a car in China, other aspects of cost of living such as food, utilities, transport and appliances are a lot cheaper, and the government doesn't really try to tax you (and certainly not on foreign earnings). Plus, you get to learn a new language. Flip side, no LACMA and it's a bitch to get decent avocados or orange juice, and a lot of alcohol is cheaper in LA.

Median or average cost of living doesn't necessarily translate across the entire population. Technology employee salaries skew towards the higher compensation edge of the distribution. If you assume that the income inequality in China is higher than that of LA, it stands to reason that cost of living / typical compensation for a technology employee salaries would be roughly the same.

It highlight the difficulty of comparison, that this tool assumes a western diet. I'm talking about milk, cheese as part of the cost of living. Nearly all chesse is imported and milk is rare. Also boneless skinless chicken breasts?

Not sure the solve for this, just found it interesting.

Ah Shenzhen! Such a wonderful and interesting city. If you are there, make sure you get to the Lo Wu Baby Factory AKA The Luohu Commercial City. I jest, it's actually not a baby factory, that's just what we called it for some reason. It's a humongous mall where you can buy pretty much anything in any quantity, of the lowest or highest quality, you just have to know what you are doing. I bought a 64 GB USB drive there in 2007. I knew it was fake, but I wanted to see how they were doing it. There was also the memorable time when I found a DVD shop, all pirated stuff, where they literally had every movie and TV show ever put on DVD, Like The Complete MacGyver . You peruse through a CD binder to find the DVDs you want and then a few minutes later a little kid pops out of the ceiling with your DVDs and the scampers back up into the ceiling. There are legit products there, don't get me wrong, but I was fascinated with the fake and knockoff stuff.

> I bought a 64 GB USB drive there in 2007. I knew it was fake, but I wanted to see how they were doing it

Out of curiosity (if you remember), what was its actual capacity?

Check out http://www.neowin.net/news/fake-chinese-500-gb-external-driv... for an impressive one of these.

It reports as a 500 GB drive to the computer and you can copy small files to/from it. But it's basically a ring buffer; once the actual (much smaller) capacity is full it goes back to the beginning and starts writing over the earlier data.

Heh it actually had zero capacity, or rather functionality. You could successfully move gigabytes of data onto the thing and when probed it would report back that it had like a 58 GB partition, but then you could not access any of those files. It was using some sort of custom controller to mimic a legit file system but I don't recall the complete details, just that there was definitely no flash memory chip on the PCB. I have it stashed away somewhere, I should dig it up do another analysis.

Interesting article, but I get the impression it was downplaying environmental and social concerns quite a lot. A lot of "promising signs" but in the meantime you get heavy metals in your food, and workers' conditions are just bearable. It's probably better than most other parts of China but still, the situation seems to be quite bad.

Meta: It's obviously a puff piece. It is also true that there are folks that enjoy the city.

I was going to flag it and file it under "why the heck did that appear on HN?", but if it generates some useful conversation about hiring and startups, it's worth it. A lot of puff pieces on HN (and elsewhere)

It makes for an interesting exercise to take all of the criticism that you see elsewhere and note how it is handled in the article. "...Labor practices are still a concern, but..." and "...environmental issues are still a major concern, there are hopeful signs..."

Note the use of the passive voice and the elimination of the subject of the sentence. It's never "I made a mistake" or "China's labor practices concern others", it's "mistakes were made" and "labor practices are a concern" (I also love the word "concern". What does that mean? If you're driving in your car and the radio doesn't work, is that concerning? If the car catches fire, is that concerning? "It's a concern" simply says that you thought about it. Brownies are a concern)

We could use a lot more China articles -- huge market, lots of really cool stuff going on there. But we would be remiss if we read any article on HN without a critical eye to context, style, and agenda.


GP does not come across as a raving lunatic. GP displays critical thought. You on the other hand..

> You on the other hand..

Please don't break the HN guidelines by responding in kind. Instead, flag an egregious comment by clicking on its timestamp to go its page, then clicking the "flag" link.


This episode gives a little different perspective on living in China.

Can someone explain why "Maker" is capitalized and "Factory Owner" or "Engineer" isn't? It seems that there's a certain amount of pretense among so-called "makers." How is a maker any different than any other kind of manufacturer? I am not trying for snark; I actually don't understand what distinguishes this 'maker' label from any other kind of manufacturer. Did we start calling chefs "Cookers?" It just seems like this attempt at being "Makers" rather than manufacturers smacks of pretentious hipsterism. How is this scene any different than people fifty years ago who manufactured toasters?

It's a brand. It's "Make" magazine who wrote this article, and so they branded folks of similar mindsets along the same lines: "Makers".

For better or worse, they have acted as a force to bring together folks with similar interests, so I have a hard time being critical of their choice of capitalization in their branding.

Someone did a global search-and-replace of "make" with "Make" ...?

Not really a guide. I was expecting names of people and businesses or how to actually make the connections with factories etc. Going to Shenzen is not by itself enough. You could wander around the city for a week and get nowhere.

Highway1 (http://highway1.io) is doing a great job of helping startups figure out how to get their manufacturing strategy set up. The advice and insight the two companies I worked with in their most recent cohort (Spinn Coffee and Game of Drones) received was absolutely essential to getting off the ground, so I'm expecting to see more of this kind of incubator/accelerator in the future.

I wish we would not need Shenzhen.

I think that we had it in the past in the USA.

Almost a hundred years ago an electronics market sprung up in New York City, and electronics manufacturing factories in the city and suburbs. I think it was Robert Moses who decided to raze Radio Row to build WTC. After the war, our electronics industry was mostly driven by the government's war on communism. When consumer electronics innovation picked up again, US companies were already looking to buy from or build in Asia (Japanese CB radios) or Asians were already here doing business themselves (Sony Walkman).

Try to open a factory in Marin county or build a house in Malibu. THIS is why manufacturing has left the U.S. In the U.S., people want jobs but they don't want the factories that create the jobs. To build a house in Malibu for example, It can take 2 years, just for permits! You can even hire someone called an "expediter" who can speed it up slightly, but not by much. ..and that's to build a house. Imagine trying to build a computer factory. Apple has a Mac Pro factory in California, but only because the margins are high enough on the Pro that they can absorb the huge differential for the California factory. If they attempted to make MacBooks in California, it would likely double the price.

The reality is that U.S. Corporate taxes are too high, the EPA often acts like the Gestapo, state and local permitting makes filing papers in India seem like ordering from Uber.

Don't misinterpret, I am not hating the EPA, however their obsession over CO2 is killing US industry. Taxes are killing growth and NIMBY politics has pushed the factories across the oceans and over the border. Obamacare is also a large disincentive to business.

You may agree with the above things, however when you can't even convince people to buy a useful app for $1.99, you certainly cannot convince consumers to pay hundreds of dollars more for electronics to have US manufacturing.

You make valid points, but the way you couch them comes across as being from someone who doesn't directly have manufacturing experience. I do, and have worked in electronics manufacturing my whole career (15 years). My company is based in the US (San Jose) but the two largest campuses are in Mexico & China, each of which contains >10,000 employees.

Yes, making electronics in the US would cost more, but you'd be surprised at what "cost" is most important to corporations when making those kinds of decisions. Depending what is being built, time to market & location of profit/revenue can be more critical than labor cost. At this point, Chinese wages in the first mover cities of Shenzhen/Guangzhou and Shanghai/Hangzhou/Kunshan have increased to the point of being noncompetitive with other regional options (Malaysia, Vietnam, Bangladesh), but because the Chinese domestic market is so huge, many companies are just relocating to cheaper places like Dalian, Fujian or Chengdu. Having the entire supply chain in one country is hugely compelling.

Factory labor in the US, even in high skill, high tech manufacturing, is still typically <$15/hr, with starting pay closer to $10/hr in many places. It doesn't make a bit of sense to build things like mops & brooms here, nor does it make sense to build extremely low margin electronics (like many consumer goods), but the manufacturing economy in the US is actually thriving now. It just happens that it's lately been high margin, complex stuff, military equipment, and a few other select types of goods.

US corporate taxes are too high, but the EPA isn't strong enough (in my backyard, just look at how Duke Energy got away with throwing coal ash into a local river for yeeaaaarrs). Most electronics factories produce nearly 0 CO2 emissions anyway. That's mostly limited to heavy industry & raw materials refining. State governments make stupid decisions, too, like offering short term tax breaks for companies to invest in factories there, but with no consideration for what happens when the company leaves immediately after the tax incentives disappear. Again in my backyard (North Carolina), we lead the nation in solar farm investment in 2014 ... but it was 80% due to tax incentives and 20% due to Apple & Google building data centers here.

I don't think the problem is NIMBY politics in most cases. The problem is short sighted politicians and greedy consumers.

care to elaborate ?

Presumably that person wants manufacturing "here" (wherever that is).

good read, love the part on how to choose among the factories by meeting directly with their boss(es)...

If this is the norm for other type of factories in China, I don't mind settling there too

Well, despite all the complaints here if the USA continues on this ridiculous path of trying to dictate a $15 an hour minimum wage the "Shenzhen Effect" will continue and grow. All kinds of businesses will continue to be forced, through regulation and artificial wage floors to get their work done outside the US. And this will lead to accelerating the loss of job, technology, intellectual property, independence, growth, etc.

Once you destroy your industrial base recovery could take a hundred years (or it could be impossible). The Chinese know this and happily do whatever the can do to effectively destroy US, European and other manufacturing centers by manipulating currency, ignoring environmental pressures, stealing intellectual property and more.

The lunatics (that is, those in government) are running the asylum.

The funny thing is that the world can actually force a change by hurting the Chinese where it counts: Business. We need to start a movement that is very vocal about having China be accountable for all of the violations they commit. And we need to refrain, as much as possible, from buying Chinese made products when possible. I know this is nearly impossible, but if we start somewhere they'll get the message.

Here in California I'd much rather dump 100 billion dollars into a tax free, relaxed regulation, flexible wages (meaning, market driven not minimum wage) manufacturing zone than on the stupid fucking joke of a high speed train we claim to be building. We can show the world how to do manufacturing efficiently, effectively, competitively and without destroying the environment. We can do so if we commit to creating a zone where government stays the fuck out other than to setting some basic rules and lets private enterprise take it from there.

If we don't do something like that as a State and a Country we are absolutely utterly doomed to be destroyed by a thousand cuts, and they all come from China. The same is true of European and any other countries where a reasonable manufacturing and industrial base exists that is being eroded by what China has been doing for decades.

Governments and politicians are only interested in their own survival --keeping their jobs-- and escalating in power. This interest has been proven to be diametrically opposite the idea of doing what is best for a country in the long term. Very often doing what is best is accompanied by some pain and the need to make concessions.

Using California as an example, we need to kill off all these stupid lawns in front of our homes that suck-up water frivolously. We have an intense drought to deal with. Yet, you drive around my neighborhood and you'd think we have no problem. I am one of the only homes that's taken out all grass and replaced it with a super low water utilization rock and flowers landscape. So, yes, some regulations are required and they also require the balls to make the case for them and enact them.

In other words, the problem with the way we do things is that we don't look far enough into the future. The drought problem isn't new. We could have been in a serious water conservation mode three years ago. Yet, three years ago it would have been political suicide to push for it. Being that politicians only care about their own survival and whatever advantages they can engineer through legislation rather than what is right, nobody made the hard decision that lawns had to go. And here we are.

This is exactly what is going on with China. Nobody in politics wants to attack this problem anywhere in the world. Why? Because having prices go up in Walmart isn't good for any politician. It takes balls and it takes not being guided by political ambition to swim completely against the current and push forward an agenda who's results could only be appreciated by the population 10 or 20 years later (or even as far as the next generation). Those are HARD decisions to make. I have seen no politician anywhere interested in tackling those problems, in becoming really unpopular today for the benefit of future generations.

And that's the problem.

China has an authoritarian government that produces pollution that threatens the entire world, uses the great firewall to attack tech companies in other countries, prints up to 282% of GDP [1] in order to buy their way into other countries real estate and companies, ignores human rights and free speech, and supports dictators in Russia and Africa. If China gets anymore powerful, the world is doomed. We need to curb commerce with China.

[1] http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/11/c...

The commerce with China is just about the only way to effect any of those humanitarian concepts. Given the government's perspective and intentions, there is little other than prosperity itself that would convince them to steer their country of 1.4 billion souls to do anything differently.

Sadly, everything (literally, every little singe bit) you've written can be said for the USA. Sadly...

Please show me where US

1.) artifically keeps dead and poisonous factories alive to produce massive pollutions that harms other countries 2.) has a great firewall that inhibits free speech, and use it to attack other countries 3.) is a authoritarian government

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