Last year, a group of Media Lab students visited Shenzhen with, bunnie, an old friend and my hardware guru. He's probably best known for hacking the Xbox, the chumby, an open source networked hardware appliance, and for helping so many people with their hardware, firmware and software designs. bunnie is "our man in Shenzhen" and understands the ecosystem of suppliers and factories in China better than anyone I know.

With his help, my students saw and experienced a ecosystem that we all benefit from, but mostly don't see or even realize exists. I have been living vicariously through the stories and reports of my students until last week, when I finally got my own tour of Shenzhen with bunnie.

bunnie insisted that we keep the group size very small because we would be going to places that couldn't fit many people and we wanted to be nimble. As chance would have it, Reid Hoffman, my old friend and founder of LinkedIn and the provost of MIT, Marty Schmidt, both were interested and available so this formed our odd little tour group.

The first stop on the tour was of a small factory run by AQS -- a manufacturer with operations in Fremont, California as well as Shenzhen. They mostly focus on putting chips on circuit boards. The factory was full of Surface-Mount Technology (SMT) machines which use computer programmed pneumatics to pick and place chips and other components onto circuit boards. In addition to the rows of SMT machines, there were lots of factory workers setting up the lines, programming the equipment, testing the results using x-rays, computers and eye balls and doing parts of the process that made more sense economically or technically to do by hand. AQS is the factory that is manufacturing the circuit stickers designed by Media Lab student Jie Qi and Media Lab grad, Ayah Bdeir's, littleBits. What's great about AQS is that, with the help of bunnie, they have started working closely with startups and other projects that previously would have had a very hard time finding a partner in China because of the small volume, high risk and usually unconventional requests that go hand-in-hand with working with entrepreneurs and our creative students.

What was more impressive to me even than the technology were the people that bunnie introduced us to, such as the factory boss, John, and the project managers and engineers. They were clearly hard-working, very experienced, trustworthy and excited about working with bunnie and our friends. They were willing and able to design and try all kinds of new processes to produce things that have never been manufactured before. Their work ethic and their energy reminded me very much of what I imagined many of the founding entrepreneurs and engineers in Japan must have been like who built the Japanese manufacturing industry after the war.

In all of the small factories that we visited, including AQS, the factory workers lived in dorms surrounding the factory and ate together and lived together. All of their living expenses were supported by the factory and their salaries went entirely to savings or disposable income. Also, all of the managers and even the boss lived together with the workers. I'm sure we were picking good factories to visit, but everyone seemed happy, open and very close.

After AQS, we visited King Credie, which made the actual printed circuit boards (PCBs). The PCB manufacturing process is a sophisticated process involving adding layers while also etching and printing all kind of materials such as solder, gold, and various chemicals involving many steps and complex controls. They were working on some very sophisticated hybrid PCBs that included ceramic layers and flexible layers -- processes that are very difficult and considered exotic anywhere else in the world, but directly accessible to us thanks to a close working relationship with the factory.

We also visited an injection molding plant. bunnie has been helping me with a project that requires some relatively complicated injection molding. Most of the plastic parts for everything from cellphones to baby car seats are made using an injection molding process. The process involves creating "tools" which are the huge steel molds that the plastic is injected into. The process is difficult because if you want a mirror finish, the mold has to have a mirror finish. If you need 1/1000th of an inch tolerance in production, you have to cut the steel molds at that precision. Also, you have to understand how the plastic is going to flow into the mold through multiple holes in the mold and make sure that it enters evenly and cools properly without warping or breaking.

The factory we visited had a precision machine shop and the engineering expertise to design and machine our injection molding tools, but our initial production volume was too low for them to be interested in the business. They wanted orders of millions of units and we only needed thousands.

In an interesting twist, the factory boss suggested that we could build the precision molding tools in China and then send these tools to a US shop for running production. Due to our requirement for clean-room processing, he thought it would be cheaper to run production in the US -- but the US shops didn't have the expertise or capability that his shop in China had to produce the tools; and even if they did, they couldn't touch his cost for such value-added services.

This role reversal is an indicator of how the technology, trade, and know-how for injection molding has shifted to Shenzhen. Even if US has the manufacturing capacity, key parts of the knowledge ecosystem currently exist only in Shenzhen.

bunnie then took us to the market. We spent half of a day there and only saw a very small part of the huge network of buildings, stalls and marketplaces. The market was several large city blocks full of 5-10 story buildings with stalls packed into each floor. Each building had a theme or themes ranging from LEDs to cellphone hacking and repair. I realize it's cliché to say this, but it REALLY felt like blade runner in a way that even Akihabara never did. I think it had a lot to do with the fact that many of vendors were selling to factories so were focused on wholesale and not retail and the volumes were huge and the interfaces were rough.

We started in the section of the market where people were taking broken or trashed cellphones and stripping them down for all of the parts. Any phone part that conceivably retained functionality was stripped off and packaged for sale in big plastic bags. Another source of components seemed to be rejected parts from the factory lines that were then repaired, or sheets of PCBs in which only one of the components had failed a test. iPhone home buttons, wifi chipsets, Samsung screens, Nokia motherboards, everything. bunnie pointed to a bag of chips that he said would have a street value of $50,000 in the US selling for about $500. These chips were sold, not individually, but by the pound. Who buys chips by the pound? Small factories that make all of the cellphones that we all buy "new" will often be short on parts and they will run to the market to buy bags of that part so that they can keep the line running. It's very likely that the "new" phone that you just bought from ATT has "recycled" Shenzhen parts somewhere inside.

The other consumer of these parts are the people who repair phones. Phone repair starts with simple stuff like replacing the screen to full-on rebuilds. You can even buy whole phones built from scrap parts -- "I lost my phone, can you repair it for me?"

After this market where phones were "recycled" we saw equivalent markets for laptops, TVs, everything.

Next we went to another kind of market. When we walked in, bunnie whispered to me, "EVERYTHING here is fake." There were "SVMSMUG" phones and things that looked like all kinds of phones we know. However, the more interesting phones were the phones that weren't like anything that existed anywhere else. Keychains, boom boxes, little cars, shiny ones, blinky ones -- it was an explosion of every possible iteration on phones that you could imagine. Many were designed by the so-called Shanzhai pirates who started by mostly making knockoffs of existing phones, but had become agile innovation shops for all kind of new ideas because of the proximity to the manufacturing ecosystem. They had access to the factories, but more importantly, they had access to the trade skills (and secrets) of all of the big brand phone manufacturers whose schematics could be found for sale in shops. These schematics and the engineers in the factories knew the state of the art and could apply this know-how to their own scrappy designs that could be more experimental and crazy. In fact many new technologies had been invented by these "pirates" such as the dual sim card phone.

The other amazing thing was the cost. There is a very low cost chipset that bunnie talks about that seems to be driving these phones which is not available outside of China, but they appear to do quad-band GSM, bluetooth, SMS, etc. on a chip that costs about $2. The retail price of the cheapest full featured phone is about $9. Yes. $9. This could not be designed in the US -- this could only be designed by engineers with tooling grease under their fingernails who knew the manufacturing equipment inside and out, as well as the state of the art of high-end mobile phones.

While intellectual property seems to be mostly ignored, tradecraft and trade secrets seem to be shared selectively in a complex network of family, friends and trusted colleagues. This feels a lot like open source, but it's not. The pivot from piracy to staking out intellectual property rights isn't a new thing. The United States blatantly stole book copyright until it developed it's own publishing very early in US history. The Japanese copied US auto companies until it found itself in a leadership position. It feels like Shenzhen is also at this critical point where a country/ecosystem goes from follower to leader.

When we visited DJI which makes the Phantom Aerial UAV Drone Quadcopter we saw a company that was ahead. They are a startup that is growing at 5X / year. They have one of the most popular drones ever designed for the consumer market. They are one of the top 10 patent holders in China. They were clearly benefiting from the tradecraft of the factories but also very aware of the importance of being clean (and aggressive) from an IP perspective. DJI had the feel of a Silicon Valley startup mashed together with the work ethic and tradecraft of the factories we had been visiting.

We also visited a very high-end, top-tier mobile phone factory that made millions of phones. All of the parts were delivered by robots from a warehouse that was completely automated. The processes and the equipment were the top of the line and probably as sophisticated any factory in the world.

We also visited a tiny shop that could assemble very sophisticated boards in single-unit volumes for a price comparable to a typical monthly cable TV bill, because they would make them by hand. They place barely visible chips onto boards by hand and had a soldering technique that Americans will tell you can only be done by a $50,000 machine. What amazed me was that they used no assisted vision. No microscopes, magnifying lenses, etc. - workers in the US can do some of what they do, but they need assisted vision. bunnie posits that they do it mostly by feel and muscle memory. It was amazing and beautiful to watch.

We visited PCH International where we saw supplies coming in just in time to be assembled, boxed, tagged and shipped. What used to take companies three months from factory to store, now only took three days -- to anywhere in the world.

We visited the HAXLR8R, a hardware incubator in the middle of the market district run by a pair of French entrepreneurs.

What we experienced was an entire ecosystem. From the bespoke little shop making 50 blinking computer controlled burning man badges to the guy rebuilding a phone while eating a Big Mac to the cleanroom with robots scurrying around delivering parts to rows and rows of SMTs -- the low cost of labor was the driving force to pull most of the world sophisticated manufacturing here, but it was the ecosystem that developed the network of factories and the tradecraft that allows this ecosystem to produce just about anything at any scale.

Just like it is impossible to make another Silicon Valley somewhere else, although everyone tries -- after spending four days in Shenzhen, I'm convinced that it's impossible to reproduce this ecosystem anywhere else. What Marty, Reid, bunnie and I talked a lot about was what could we learn from Shenzhen to help the Boston and Silicon Valley (and more broadly the US) ecosystems and how can we connect more deeply with Shenzhen.

Both Shenzhen and Silicon Valley have a "critical mass" that attracts more and more people, resources and knowledge, but also they are both living ecosystems full of diversity and a work ethic and experience base that any region will have difficulty bootstrapping.

I do believe that other regions have regional advantages - Boston might be able to compete with Silicon Valley on hardware and bioengineering. Latin America and regions of Africa may be able compete with Shenzhen on access to certain resources and markets. However, I believe that Shenzhen, like Silicon Valley, has become such a "complete" ecosystem that we're more likely to be successful building networks to connect with Shenzhen than to compete with it head on.

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I recently did a TED Talk where I provide a higher level context for my trip to and observations about Shenzhen.

