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Why Shenzhen is Rivalling Silicon Valley

writer: Nikita Peer source:

In the last few years, hardware startup activity in Shenzhen has increased dramatically. It is now comparable to the software innovation system in Silicon Valley.

The city has several startup accelerators, including Hax. At Tech in Asia Tokyo 2015, Hax general partner Benjamin Joffe explains why Shenzhen is a good hardware innovator.

“Shenzhen is two times the size of Silicon Valley. It is the electronics capital of the world and more recently it is seeing a surge in startup activity,” says Benjamin. His accelerator receives most of the entries from the US and Canada and only one-tenth of them are from China.

Hax has a portfolio of 80 startups from sectors like smartphone devices, internet of things (IoT) tools, robotic kits, and medical devices. It’s keen in these areas because loT products are getting commoditized at a fast pace, Xiaomi has become a top cheap smartphone maker, and most consumer lifestyle products can be manufactured at scale and for a cheaper price in Shenzhen.

Benjamin says, “There is a Xiaomisation of consumer electronics. [Xiaomi] is not just a manufacturer of smartphones but has also invested in companies like Segway, a self-balancing scooter, among others to tap into other hardware device spaces.”

No rising sun in Japan

Hax hasn’t received any entries from Japan in the three years of its operations. According to Benjamin, Japan has great engineers but doesn’t churn enough startups. “It is a very small local market and lacks ambition,” he says.

“In contrast, China has a large domestic market, adequate venture capital, pool of entrepreneurs, but lacks employees because most of them aspire to be entrepreneurs,” Benjamin points out. He also says that the Chinese are quick at execution. “You can get done with one month worth of work in just a week in Shenzhen.”

Hax is aiming to combine the strength of any team with that of China’s hardware and supply chain capability.

Benjamin feels that the Japanese should leave Japan, check out what’s in countries like China, and absorb what they learn. “If you want to make a global company, you need to have a global understanding and knowledge,” he signs off.