Ask Ben: Is Shenzhen the best place for manufacturing for hardware startups in China?

Ask Ben

I am not certain if I can say Shenzhen is the best place for manufacturing all hardware startups because there are some many counter questions I can ask. For example, how advanced is the technology you’re trying to introduce and how many units do you plan to manufacture? Are the components and technologies readily available? How protected is your technology? I am asking these types of questions because I am alluding to the fact that when it comes to starting a hardware startup in Shenzhen, it’s a great place for components and tech that have been in the market for at least one generation – meaning someone has used/manufactured similar types of products and therefore you don’t have to start from scratch. If it’s too new, there are better locations outside of Shenzhen. However, even with new products you will eventually need to seek a place to scale your product and that’s when you start considering Shenzhen.

Shenzhen, China is such a hot topic for hardware startups worldwide in regards to manufacturing because of the sheer impact it makes in the electronics sector. Nearly 90% of the world’s electronics in fact is made in Shenzhen. Having worked with multiple hardware startups and building a hardware product myself, I would boil it down to the following on why Shenzhen is attractive to startups:

1.) Location – strategically located at the eastern end of the Pearl River Delta, next to Hong Kong, Shenzhen has access to a wide range of infrastructure. Logistically, it has two of the world’s busiest shipping ports in Shenzhen and Hong Kong. In addition, companies can access Hong Kong’s well-established air cargo services which moves nearly $390 billion worth of goods annually. Keep in mind, from Shenzhen’s port to the center of Hong Kong is only a 45-minute bus ride.

2.) Prototyping speed – if you have not heard about Huaqiangbei yet, go on Youtube and read up on articles regarding the largest electronics marketplace in the world. If you used to build computers back in the day, this is Newegg heaven, just offline. In Shenzhen, especially Huaqiangbei, you can prototype over and over again in just a matter of a week because there are hundreds of suppliers in the Huaqiangbei marketplace that can help you turnaround a working prototype in a couple of days. If it’s simple and you know the vendor well, a prototype can be done in even hours.

3.) Clustered supply chain management – manufacturing in Shenzhen is zoned. This means that in the city center of Shenzhen such as Futian, you won’t find factories. However, if you travel to Bao’an or Longgang, you’ll drive through endless roads of factories. What this means for hardware startups is that you’ll have access to tooling facilities, raw materials providers, production lines, packaging suppliers and even QC providers all in a radius of only a few miles.

4.) Sourcing hub in Hong Kong – every April and October, Hong Kong and Guangzhou’s hotels are completely booked out because buyers, distributors and retailers from all over the world source in these areas. As I mentioned earlier, 90% of the world’s electronics are made in Shenzhen, and most of them are originally sourced in Hong Kong or Guangzhou. Large electronic fairs are held during these months and while there are a lot of manufacturers exhibiting, we are starting to see global hardware startups making the trip to Hong Kong to also exhibit their products – because why not? They are manufacturing their products in Shenzhen and just a bus ride away, they’re exhibiting to buyers from all parts of the world hungry for new tech.

5.) Costs (but check back in a couple years) – Obviously cost savings is one of the largest factors when looking at manufacturing in Shenzhen. However, I will argue that costs savings in Shenzhen only begins when a startup can mass manufacture their products at a minimum of 5,000 units. If you’re looking to only manufacturer a few hundred units and in the meanwhile look for IP protection, I would look at other locations first. Taiwan is becoming a hot location for small batch manufacturing. I also say check back in a couple years because manufacturing in Shenzhen is becoming more expensive as a lot of the population in Shenzhen is moving up the value chain and demanding higher pay. This result has raised manufacturing prices to historic highs.

While all of these factors are great, there are also negatives in manufacturing in Shenzhen. Do reach out if you need more details!

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