Betting on Shenzhen over Silicon Valley

Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a snapshot of what I’m seeing and hearing from local businesses.

U.S. buyers pop up in conversation with Chinese firms far more than geopolitics suggests. What’s the thread holding it all together?

MIT graduate Joshua Woodard is living a bold belief. He’s so sure that Shenzhen’s factories will sell tech to the world for the next decade that he left Apple to run supply chain management company The Sparrows in the coastal Chinese city.

“A lot of our clients come from the States,” Woodard said. “We get to hear about all the excitement: new form factors for smartphones, new ways of interacting with AI.”

“We’re not really going to see India, Vietnam challenge anytime soon,” he said. “Outside the geopolitical sphere, people want to build actual things. There is no other option outside China.”

Thanks to supplier Foxconn, Apple built a significant manufacturing base in Shenzhen over two decades ago. Consumer electronics companies from DJI to Huawei are all based in the region, which is also home to electric car giant BYD.

“You have all the supply chain around you within probably a two-hour drive,” said Even Realties CEO Will Wang, another former Apple employee who returned to Shenzhen to launch his smart-glasses startup.

“If we wanted to create a future around consumer electronics — if we wanted to really build possibly the next Apple — we need to be at the center of hardware, which is Shenzhen,” he said on CNBC’s “The China Connection.”

Trade data reinforce how much Silicon Valley needs those hardware manufacturers.

China was the largest source of California’s imports last year, the state’s chamber of commerce said, despite a sharp year-on-year decline due to escalating U.S. tariffs. Taiwan and Mexico followed, with Vietnam in fourth place. Around 36% of California’s imports were computer and electronic products, the top category.

Meanwhile, Shenzhen, the second-largest Chinese city by overall exports, accounted for nearly 19% of China’s advanced tech exports last year, according to CNBC calculations of official data accessed via Wind Information.

“Chinese vendors are becoming more important in niche technologies,” said Lian Jye Su, a chief analyst at Omdia.

The hardware behind humanoid robotics is dominated by Chinese suppliers, he said. But Su noted that traditional robot makers still rely more on parts from Japan, Germany, Switzerland, South Korea and the U.S.