Silicon Markets: Smart Hardware from The Streets

This essay was published in The Good Life in Asia’s Digital 21st Century. Hacked Matter looked at the smart hardware on display in the Shenzhen Maker Faire and on the Street of Shenzhen in 2015. 

The street finds its own uses for things.
--- William Gibson (Burning Chrome) 

In June 2015, Shenzhen hosted its second featured Maker Faire, bringing DIY (do it yourself) makers from all over the world to the manufacturing hub in the South of China. On display were an assortment of enticing gadgets showcasing the latest experiments in the Internet of Things: drones the size of one’s hand  ew above the heads of tens of thousands of visitors, while transformer-like robots marched through the rows of booths sponsored by Intel, Microsoft, Qualcomm, Foxconn, Arduino, and many more. At the opening ceremony, two key  gures of the global maker movement Dale Dougherty, founder of the Maker Faire, and Eric Pan, CEO of Seeed Studio (“Seeed Studio,” 2015), shook hands with the Shenzhen mayor, who announced Shenzhen’s commitment to play a central role in what China’s national government calls “mass making” 众创, (a national government policy that promotes entrepreneurship and innovation by funding makerspaces in universities, middle schools, factories, and corporations). The Shenzhen Maker Faire in June symbolized a unique moment for the young city. Until recently, most people knew Shenzhen (if they knew it at all) as a place, where ideas generated elsewhere are simply executed. Today, Shenzhen is celebrated as the “Silicon Valley for Hardware” (Stevens, 2015) and large corporations, investors, and hobbyist makers  ock to the city to follow its hype and promise: ‘if you can imagine it, you can make it in Shenzhen.’ (Stevens, 2015)

Yet, despite its ambitions to insert itself into the glossy world of high-end design, Shenzhen is a cyberpunk city. Alongside the slick formality of corporate events, there is a thriving, vibrant, culture of the street. This is especially vivid in the city’s famous chen zhong cun (urban villages) - informal neighborhoods where open air restaurants,  sh and fruit vendors share their narrow spaces with pool halls, repair workshops, and mahjong rooms that spill out onto open lanes. Shenzhen’s animated street culture seeps its way to every corner of the metropolis, as seen, for example in the jiaozi (dumpling) stands that are set up on weekday mornings just outside the slick glass surface of Shenzhen’s expanding landscape of luxury hotels, corporate buildings, and exhibition centers.

Street life and street markets are also key to Shenzhen’s emerging identity as the “Hollywood or Silicon Valley of Hardware,” epitaphs favored by the city’s boosters - from local government o cials to entrepreneurs and makers from all over the world. Central to this new urban imaginary are the electronic markets of Huaqiangbei, a 15-by-15 city block area, where an enormous array of electronic components and devices are sold, recycled, and assembled. Though the markets are housed in a cluster of multi-story malls, they come from - and belong to - the streets. The Huaqiangbei markets are part of an open source ecosystem of manufacturing (known as shanzhai) that has emerged in China’s Pearl River Delta in the shadows of large contract manufacturing. This open innovation model of technology production has evolved over the last 30 years, feeding o  of low barriers of entry, an outlaw spirit, and a corresponding high-speed mode of copy-and-mutate design and production. In the markets, versions of the products on display at the Shenzhen industrial design fair are available at a fraction of the price. Smart watches, wearable bands, and personal drones all can be found for a few hundred renminbi.

The world of consumer electronics is at a strange phase, evoking a peculiar mix of fevered excitement and ennui. On the one hand, the plummeting costs of hardware and digital fabrication have resulted in an explosion of new tools and devices (e.g. 3D printers, household robotics, drones, wearables, and the wide variety of devices that make up the Internet of Things). Yet, exhilaration at the proliferation of ‘smart’ objects is tempered by the sense that, at least so far, no one is really sure what any of this stu  is for. High pro le failures of celebrated gadgets like the Nike FuelBand and Google Glass make plain that the current wave of global technological production is still very much unsettled.

At the Maker Faire none of this ambivalence was on show. Instead, makers and corporates from around the world skillfully wrapped their seductive machines and tools in a change-the-world rhetoric. Behind the hype lurks a familiar business model. Today’s emerging hardware companies look to the existing giants - Facebook, Google, and Twitter - and see their money and success coming from the speculative drives of the Internet economy. What matters, here, is not the hardware itself but the abstraction through software,advertising, and big data analytics. As DIY makers morph into entrepreneurs, many begin caring less about the careful crafting of an object (in contrast to what the maker movement might have us believe), and begin focusing instead on the potential network e ects of devices that have the capacity to extract data from a user’s behavior. Mis t founder Sridhar Iyengar, for instance, has spoken openly about this approach. Trained as a data scientist, Iyengar views the value of wearables in the data they collect. The company’s goal is to create a device so appealing that customers will be compelled to wear them all the time, keeping their monitoring powers close to the skin, day and night. Tuned sharply to the promise of VC funding, this vision sees market domination as the mark of a truly successful wearable device.

In contrast, the shanzhai goods sold in the stalls of Huaqiangbei do not come with end-user license agreements or service models, and are not accompanied with big data analytics or advertising plans. Neither do they have expensive marketing campaigns or rely on the funding of venture capitalists. Instead, capital is borrowed through informal networks, and companies operate primarily with the conventional rules of trade that emerge spontaneously in highly competitive markets. Shanzhai companies do not drift far from  nancial fundamentals. Unlike VC funds, which choose technology companies in the hope of betting on the next monopoly, shanzhai investors are concerned only that they are repaid with the interest that was promised. This tends to encourage a culture of  erce entrepreneurialism characterized by breakneck agility, micro-experimentation, and the use of the market itself as a product testing ground. The result is a kind of low-end, “folk art” style of its own - a bracelet that is also a USB cable; a power bank modeled on an anime cat; a whole range of adaptations on the electronic unicycle; a  ashlight that is also charger, a host of other creative gadgets. This is not the sleek, high-tech design of a global elite that tends towards uniformity; it’s the cheap, multifaceted, and niche technology of a vast population that lives predominantly outside the cherished high-end markets of the West.

Shanzhai production constitutes an alternate global market in electronics, which has more in common with the street food hawker than it does with chain restaurants in shopping malls. Though less visible than well-known global brands, Shenzhen’s open ecosystem is enormous in scale, producing 300 million phones and 100 millions tablets per year. For instance, in 2014 alone, it released 2 million smart bracelets and 1 million smartwatches to the market as white-labeled products (about 1/5 of global shipment) (Liu, 2014). The intensity of this mode of cutting-edge technology production has already disrupted companies like Nokia and Motorola, which cater primarily to high- paying customers. Devices created and made in Shenzhen are distributed in Africa, India, South America, Europe, and the United States. They are sold as no-name devices in Walmart and Target, and are also behind new disruptive brands, such as Wiko (“Wiko Mobile,” 2015) in France or Tecno Mobile (“Techno Mobile,” 2015) in Africa.

This distinction between branded high-end technology and cheaper, mutant o shoots receives abstract articulation by historian Fernand Braudel. His three- volume exploration “Civilization and Capitalism” takes pain to distinguish the capitalism of large monopoly-driven corporations from the trade of markets, which always exist in a “layer beneath” (Braudel, 1984). Drawing on Braudel, theorist Manuel de Landa (Delanda, 1996) reinforces this di erentiation (or even opposition) between the capitalism of large corporations (which he names anti-markets) and the self-organizing, decentralized realm of small businesses and small shops that constitute the markets of the street. Throughout his historical analysis, Braudel shows that these two economic realms - a capitalist order consisting of monopolistic corporations and a substratum of market activity - have both been at work for centuries. In addition to the monopolistic dealings of the East Indian Company, for example, there was always a vast hybrid tra c of smaller ‘pirate’ trade. Yet, while this more centralized and organized economic order has always been more visible, its secret is the strength it draws from the markets, which continually exist underneath and alongside it. Braudel repeatedly draws attention to "the enormous creative powers of the market” of this “lower story of exchange...” (Braudel, 1984)

In Shenzhen, as elsewhere, these two economic models - capitalism and street markets - are often intertwined. Aspects of shanzhai production feed into the glossy companies on show at the design fair just as elements of high end corporate capitalism - VC funding, advertising, data analytics - seep into the markets of Huaqiangbei. In Shenzhen today, however, the interplay of these two systems is especially vivid. As designers and makers from around the world  ock to the metropolis, the question of a how a global technological elite interacts with, and are in uenced by, the culture of the street will shape not only the future of the city but also the way in which technology’s latest wave - wearables, robotics, IoT, and ubiquitous computing - gets made.

The essay was originally published in "Digital Asia Hub. (2016). The Good Life in Asia’s Digital 21st Century. Hong Kong."

References / Links / Resources

Braudel, F. (1984). The Perspective of the World: Civilization & Capitalism 15th-18th Century. Harper & Row.

Delanda, M. (1996). Manuel, Markets, Antimarkets and Network Economics, Paper presented at Virtual Futures, Coventry, England.

Hacked Matter. (2015). Retrieved from

Liu, H. (2014, November). [Personal interview by Huaqiang Research Group].

Seeed Studio. (2015). Retrieved from

Stevens, A. (Editor). (2015, September 22). Inside China’s Silicon Valley. Retrieved from http://money.cnn. com/video/technology/2015/09/22/shenzen-china-silicon-valley-tech-incubator.cnnmoney/index.html

Techno Mobile. (2015). Retrieved from Wiko Mobile. (2015). Retrieved from 


State of Shanzhai

A state of the art of Shanzhai: "Open Innovation with Chinese Characteristics!" 

by David Li

The term shanzhai was originally used to describe the clusters of companies producing "counterfeit" mobile phones starting from 2005. These are companies who brought us the amazing brands of “Nakia” and“Anycoll." Noted that the counterfeits is quoted because only the skin (look) of the phone is pirated and internal structures and electronics are developed locally. This Shanzhai system has amazing growth from 2005 through 2009 and created and produced feature phones for developing countries in South East Asia, Africa, Middle-East, South American and India where $10 phones doesn't meet the market plan of major brands like Motorola, Nokia, Ericsson, Samsung and etc. The business has grown rapidly in the past decades and now Shanzhai phone accounts for 25% of the global mobile phones shipment. On the back of Shanzhai, new company like MediaTek and other are founded to supply this market. 

MediaTek on the Forbes World’s Most Innovative Companies List

This has recently been noted in Eric Schmidt and Jared Cohen's new book "The New Digital Age" and here is the quote:

And the developing world will not be left out of the advances in gadgetry and other high-tech machinery. Even if the prices for sophisticated smart phones and robots to perform household tasks like vacuuming remain high, illicit markets like China’s expansive “shanzhai” network for knock-off consumer electronics will produce and distribute imitations that bridge the gap. And technologies that emerged in first-world contexts will find renewed purpose in developing countries.

Read an excerpt from the book Glenn Beck will be discussing with Google’s Eric Schmidt and Google Ideas’ Jared Cohen on this evening’s program

There has been serious and in-depth look into Shanzhai since 2010. Chipchase's "Shanzai!" piece on Wired is a great read. 

The 40-year-old Briton, a former Nokia researcher who has spent the past decade documenting the way technology is used around the world, has whiled away countless hours in similar places. Unlike the hundreds of shoppers crowding the gangways, he's not here to buy a new device or avoid the heat. Instead, Chipchase -- dressed in a dark T-shirt and military trousers -- is feeding one of his obsessions: the esoteric world of counterfeit, or "shanzhai", phones.
"Every time I go out, I want to see something that challenges my perception of what I know," Chipchase says. "I like to live somewhere that shapes the way that you see the world."

Shanzai!  (Wired UK)

And early notice about the potential to innovate by Shanzhai by Econemist

A second area where the Chinese excel is in “bandit” or “guerrilla” innovation, known asshanzhai. The original bandits lived in isolated villages and carried out raids on upright citizens. Today's bandits live at the margins of official society but are much in evidence: in Shanghai's People's Square you will be offered a cheap watch or phone at every step.
These bandits are parasites who profit from China's weak property rights, but they are also talented innovators, quickly producing copies of high-tech gadgets that are cheap enough for migrant workers to be able to afford them but also fashionable enough for young professionals to covet them. Some of the more exotic phones are designed to look like watches or packets of cigarettes (they even have room for a few real ones) and often have striking new features, such as solar chargers, superloud speakers, telephoto lenses or ultraviolet lights that make it easier to detect forged currency. In their own way the bandits deploy as much innovation and ingenuity as their legitimate counterparts.

First break all the rules

The rapidly growing Maker Movement and Open Source hardware have a lot in common with Shanzhai in term of how companies in the ecosystem are collaborating building a repository of sharable hardware designs. We have a very interesting discussion on the topic back in 2011 hosted by Lyn Jeffery of IFTF based in San Francisco.

Over a few months in early 2011, in the course of doing research for an IFTF Tech Horizons Program’s study on the future of “open fabrication,” I convened what turned out to be a remarkable, free-wheeling conversation among a set of pioneering thinker/makers in China, Singapore, and the U.S. What started out as a set of distinct one-on-one research emails turned into a group discussion on the nature of Chinese manufacturing, global open innovation, and the burgeoning, disruptive potential of the growing connections between (mostly) Western-based hackers and agile Chinese manufacturing networks. As David Li wrote: Shanzhai and Open Source Hardware are twins separated at birth and if we can join them, it will create some very interesting opportunities.

Twins separated at birth - Shanzhai and Open Source Hardware

Lyn Jeffery gave a great panel in last's year's SXSW on the subject:

From watches, bags and shoes to touchscreen tablets, fast food and electric cars -- you can find thousands of knockoff brands in China. Large, highly coordinated networks of innovative companies take the products and services we love in the U.S., alter them relentlessly and make them … better. Then they speed them to one of the world’s largest consumer markets and sell them at devastatingly low margins. 
The problem with U.S. innovation? Our broken business models. American companies were built to be predictable, not adaptable. Trends like mobile, social and the cloud are major disruptive forces and businesses are struggling to keep up. Instead of fearing the Shanzhai, we can look at their 4 core tenets to reorganize the way we do business: 
-Build nothing from scratch 
-Innovate process at small scales 
-Share as much as you can 
-Act responsibly in the network
By adopting the philosophy of the Shanzhai “copycat culture,” companies can innovate faster and remain competitive.

Silvia also presented "Made with China" in this year's SXSW. 

China is often portrayed as an enormous factory that pumps out products invented elsewhere. But as global "maker culture" is transitioning from a hobby into a profession, China is playing a significant role in changes to industrial production and hardware innovation. It might surprise you; China’s image contrasts with contemporary maker culture, celebrated for its creativity and roots in 1960s U.S. counterculture. But China’s rapid growth in open source hardware and maker communities challenges our assumptions. They show an alternative version of innovation, built on a home-grown version of open source that has developed in China's small-scale factories over the last 20 years. Makers in China show that this history of open manufacturing will change not only what we understand by making, but also where we locate innovation. As China's DIY makers are coming together with manufacturers, they are spurring a shift in industrial production, from "made in China" to "made with China."

The Shanzhai has made Shenzhen a hotbed for global hardware startups and accelerators. Haxlr8r has been one of the leading hardware accelerator based in Shenzhen. 

- The art of the Shanzhai. There is some serious brilliance hidden in the cheap solar lamp or fake iPhone! Tap some of that genius and apply it towards other objectives.

Program - HACK WHAT? - HAXLR8R

PCH a major manufacture based in Shenzhen has recently launch an accelerator programHighway1 in San Francisco and here is how the CEO's take on Shanzhai:

WSJ: Why is Shenzhen still attractive for PCH?
Casey: The “shanzhai” culture is really important (Shanzhai literally means “mountain fortress.” Once a term used to suggest something cheap or inferior, shanzhai now suggests to many a certain Chinese cleverness and ingenuity.) It has this disruptive culture of wanting to be different, of wanting to be fast, wanting to show what’s possible.

Q&A: PCH International Chief Sees Edge in Having Base in Shenzhen - Digits - WSJ

The Economist has also published several articles on how Shanzhai will be relevant to the innovation in China and the potential to change now new hardware are created. 

What gives these young Chinese firms a potential edge is their close connections with the so-called shanzhaiproduction networks centred on Shenzhen, China’s high-tech manufacturing hub. The term shanzhai is often used pejoratively to refer to Chinese copycat producers of mobile phones and other electronic devices, based on copied designs and knock-off brand names. But its literal meaning is “mountain village”, and it refers to bandits who opposed corrupt rulers and hid in the countryside—much like Robin Hood in English folklore. David Li, co-founder of XinCheJian, Shanghai’s first “maker space” (essentially, an open-access workshop), says the Robin Hood spirit is inspiring legitimate and often quite innovative products, as the socially progressive maker movement teams up with hard-nosed manufacturers.

Made in China

Silvia Lindtner of the University of California, Irvine, and Fudan University in Shanghai, who follows the startup scene in China, is not surprised. The two sides complement each other, she says. The founders of hardware startups, often steeped in the open-source culture, partner with factories rooted in the Chinese culture of shanzhai, which translates as “mountain stronghold”. It used to mean pirated electronic goods but now stands for open-source manufacturing.

Hacking Shenzhen

And Wall Street Journal also has noticed this disruptive force of change:

Some observers see China's maker movement as yet another instance of the country's tendency to produce shanzhai, or copycat goods. But Mr. Pan advises patience. "China is just on the way," he said. "The first time you learn to write, you cannot write novels. You have to copy from the textbook to learn to write A, B, C, D."

China's maker movement is shaking up innovation.



Atlantic Article

Check out Hacked Matter's take on Smart Watches & the Shanzhai Ecosystem in Shenzhen, featured in the Atlantic: 

Shanzhai: China’s Collaborative Electronics-Design Ecosystem

In Shenzhen, there are hundreds of smart watches, not just design prototypes. Here's why.

Gongban 公办 and gongmo 公模 - public board and public casing: key elements of Shenzhen's open source manufacturing.

Gongban 公办 and gongmo 公模 - public board and public casing: key elements of Shenzhen's open source manufacturing.

Cyberspace, both as word and as vision, entered the popular lexicon through William Gibson’s 1984 cyberpunk novel Neuromancer. But as it turns out, Gibson wasn’t interested in the Internet until he started buying watches on Ebay. In a 1999 Wired article, he details his compulsive addiction to bidding for vintage mechanical watches—what Gibson calls “fine fossils of a predigital age.” Little did Gibson know that thirty years after Neuromancer, watches and cyberspace would fuse—not only because it is now commonplace to buy watches online, but also thanks to “smart watches” set to become the latest portal into cyberspace.... [keep reading here].