The Chinese Silicon Valley

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In the 1950’s, California’s San Francisco Bay was occupied by pastures and farms. Decades later, it turned out to be the valuable site for high-tech revolution. The farms and orchards gave way to Microsoft, Apple Computers and many other innovative technology companies. And thus the ‘Silicon Valley’ was born. Many countries all over the world tried to imitate this success story for unprecedented growth. The Silicon Valley model made a huge impact on two Asian cities – Bangalore in India and Shenzhen, China.

Shenzhen, situated in Southeast of China has been on the news for the past few years because of the copycat factories pumping out knockoff phones of famous brands. It was seen as an unimaginative counterpart to California’s Silicon Valley. It is said that China manufactures the products, designed and invented by Americans. But, now many companies have grown in Shenzhen that have changed the words ‘Made in China’ to Create In.’

Three or more decades ago, Shenzhen was a fishing village. Today, it has become an urban center supporting a population of 10 million. It all started in the mid 1980’s, when Chinese government declared part of Guangdong province (where Shenzhen is located) an economically liberalized zone. Today the city contributes $35 billion in net exports to the Chinese economy. Huawei (founded in 1987) and Seeed Studio (founded in 2008) became the cornerstone of Shenzhen. Over 20,000 employees work in the Huawei company headquarters in Shenzhen. And, the biggest work segment in the company is engineers, who work in the development labs. They are paid far above the average Chinese wages, but far below incomes than in Europe or U.S.A. Many of the strict limitations and ludicrous rules that apply to average Chinese are not imposed upon them.

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However, behind the success story of Huawei comes Shenzhen’s dozens of small technological equipment factories, which are trying to make quick money by creating the replicas of iPhones, iPads, BlackBerries and Samsung Galaxy. Although, selling them in other parts of world are illegal, these phones somehow find their ways into Europe, USA and many easily obtain it through eBay. These innovative counterfeiting knock-off phones this innovation comes from an industry flourished only in 2005, after Mediatek, a semiconductor design company from Taiwan, helped significantly reduce the cost and complexity of producing a mobile phone. Small companies bought these Mediatek chip along with the software and buys other components, finally assembling them in a factory.

A man testing a knock-off phone at a mobile market in Shenzhen

A man testing a knock-off phone at a mobile market in Shenzhen

The other important company in Shenzhen that goes along with innovation rather than imitation is the Seeed Studio. Bearing the label “Innovate with China” Seeed is today’s global leader in open hardware innovation. What started off as a two-person company now generates $10 million revenue per year. Eric Pan, the founder of Seeed, doesn’t hold any kind of business degree. He finished electrical engineering and started his company in an apartment. At the present moment, the Shenzhen Seeed offices provide hardware kits, microcontroller platforms, and custom-made printed circuit boards to makers. Eric’s company also encourages entrepreneurs to form hardware startups in areas like robotics, smart homes, and other cutting-edge areas.

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Eric Pan

The Shenzhen SEZ (Special Economic Zone) is now serving as the inspiration for SEZ’s, being planned in many other countries like India, Russia. But, countries shouldn’t overlook the other side of SEZ’s – the land acquisition and abusive real-estate speculations. The Shenzhen SEZ was built on acquired land, where local and provincial governments are fully empowered to create their own land regulations. Many Guangdong officials have immensely profited from shady land dealings, which has now paved way for violent protests against the official corruption. So, before blindly following the Silicon Valley and SEZ model, a country must also pay some attention to the diverse effects of rapid industrial expansion.

 

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