How Shenzhen is challenging Silicon Valley

Editor’s note: Just four decades ago Shenzhen was a poor fishing village. Today, the south Chinese city is home to up to 20 million people and some of the world’s leading technology companies and most innovative tech startups. A new e-book by freelancing China correspondent Johan Nylander, titled “Shenzhen Superstars — How China’s smartest city is challenging Silicon Valley”, explains why the world better listen up.

Below is an excerpt from the introduction to the book.

When Silicon Valley veteran Scotty Allen first came to the southern Chinese city of Shenzhen a few years ago as part of an organized tour for American tech geeks, and witnessed the city’s noisy hardware and electronics markets, its buzzing tech startup scene and countless glittering skyscrapers, his spontaneous reaction was not: “Wow, this is cool.” It was: “Wow, we are fucked”.

That was in 2015, and it was a visit that turned out to be a life-changing experience. He realized that something unique was happening in this Chinese city – a city that he, along with most of his colleagues and friends in the US, was not aware of. To put it starkly, he knew that China was about to outsmart the West in terms of technology. 

 “Coming to Shenzhen is like visiting the future. But it’s this crazy Blade Runner-esque future”, says Allen, his bearded, somewhat wild-looking face beaming with a broad smile. “There’s this incredible energy here. There’s a sort of feeling that like all boats are rising. People are just really smart and really innovative and really creative.”

 We meet in a coffee shop in the downtown area. It’s Tuesday evening, and outside on the noisy street puddles reflect the light from small noodle bars’ neon signage. Well-dressed office workers and young students hasten for the metro station, their faces illuminated by the screens on their mobile phones, to which their eyes are glued. A garbage man is swiping up electronic waste from the sidewalk, and I can see an old woman dismantling an air conditioner for scrap parts. Some buildings are modern and futuristic while others look ready to be torn down. Small hole-in-the-wall shops display everything from mobile phones and mini-drones to pets and handbags. The subtropical summer heat is sticky.

 Thirty-eight-year-old Allen is originally from southern California and calls himself a software engineer by training and an entrepreneur by personality. He spent several years as a software engineer at Google, specializing in search infrastructure and user experience, then bounced around at a number of prominent startups in the Valley, and started his own big-data firm, Appmonsta. He, however, was still struggling to find his place and meaning in the corporate environment. “We were writing a whole bunch of code and sold contracts to Fortune 500 companies and did large-scale enterprise sales. And I hated it”, he tells me. “So I fired myself.”

 He ended up in Shenzhen via the above-mentioned hacker trip to China, which was organized by a friend he’d met through the Noisebridge hackerspace in San Francisco. Some two dozens tech enthusiasts participated in that trip, which also took in Hong Kong, Shanghai, and Beijing. In Shenzhen, the group visited several open-source hardware companies (including Seeed Studio and Dangerous Prototypes) and hackerspaces (Chaihuo Makerspace and SZDIY), and they were also shown around town by local tech buffs.

What made the most profound impression on Allen was the city’s exhilaratingly buzzy, noisy Huaqiangbei electronics market. The largest hub in the world for electronic components, it offers everything from circuit boards to LED lights, drones, and computer-controlled cutting machines – all at remarkably low prices. Tech Radar once called Shenzhen “the global gadget capital”, and I’m pretty sure they were referring to the Mecca that is Huaqiangbei. The area is basically a one-mile strip with ten-story buildings on both sides of the boulevard filled to the brim with electrical stuff, both legal and illegal. It’s any tech nerd’s candy store.

 Scotty Allen was sold.

“I came to Shenzhen and totally fell in love with it. When we were done in Beijing I immediately bought a train ticket back here to Shenzhen. And I’ve been coming and going ever since,” he says.

Today, Allen has become a specialist on the southern Chinese city’s electronics-manufacturing scene – the industrial markets, factories and back alleys where the world’s electronics are made. You might actually already have heard about him. Allen is that guy who built his own iPhone from the ground up by using only recycled and spare parts that he found at the local electronics markets. The project whetted his appetite and on his Youtube channel Strange Parts you can watch even geekier DIY adventures from the streets of Shenzhen.

“This is unique. I think this is one of the first places where it really feels like just about anything is possible.”

However, if Scotty Allen had stood in the same place and said the things he told me for this book 40 years ago, people would probably have laughed and written him off as the local fool.

The transformation Shenzhen has undergone is unique – truly unique – in history. Our remarkable story starts in a backwater area, populated by subsistence fishermen and rice farmers, on the border of Hong Kong, then still a British colony, by the Pearl River Delta in south China. Its population was poor and uneducated.

Today, according to official government numbers, 12 million people call Shenzhen home. Local officials often claim the real number is in fact over 20 million.

It has the fourth largest local economy in the country. Its Nanshan district, home to about 125 listed firms with a combined market value of nearly $400bn, has a higher income per person than Hong Kong. Almost half of China’s international patent applications are filed by Shenzhen companies, according to the Economist. In fact, firms in Shenzhen file more international patents – which are mostly of a higher quality than other Chinese ones – than companies in either France or Britain.

 No other city better symbolizes the rise of modern China. And no other city challenges Silicon Valley more aggressively as the global hub for innovation and technology startups. In many ways, the Chinese city has already outsmarted the Valley – especially in hardware.

“In terms of hardware plus software innovation, Shenzhen is ahead of the curve,” Jeffrey Towson, a private equity investor and Peking University professor, says in an interview for the book.  

“Silicon Valley innovates mostly in software. But China can do both and they tend to be better in smart devices, drones and other combinations of manufacturing and software.” 

 The e-book “Shenzhen Superstars” is written for anyone who wants to be part of this raging growth story – no matter if you’re a tech buff, investor or just someone curious about knowing what’s driving the future.

 For Scotty Allen, however, what’s important is not whether Shenzhen or Silicon Valley is ahead of which. It’s more about both are doing great, and rather exist in symbiosis, than as rivals, of each other. He no longer sees it as the US versus China, but rather a situation where all advances together, he explains. He does, however, encourage more Westerners to come to Shenzhen and experience the amazing development and opportunities.

 “Shenzhen has an energy of growth – the same energy I felt when I first came to Silicon Valley ten years ago,” he says. “And it’s not just in technology. It’s this idea that whoever you are, whatever you’re into, you can come to China, and especially Shenzhen, and do it!”

Johan Nylander is an award-winning author and freelance China and Asia correspondent. He is frequently published by CNN, Forbes and Sweden’s leading business daily Dagens Industri. “Shenzhen Superstars – – How China’s smartest city is challenging Silicon Valley” is the first in a series of short Kindle e-books. Download on Amazon. Sign up to get notified of the next book.