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Betting on Shenzhen over Silicon Valley

Huaqiangbei electronics market in Shenzhen, south China’s Guangdong province, Friday, August 08, 2025.

Feature China | Future Publishing | Getty Images

Hello, I’m Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection, a snapshot of what I see and hear from local businesses.

U.S. buyers are engaging in far more dialogue with Chinese firms than geopolitics would suggest. What is the bond that holds it all together?

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MIT graduate Joshua Woodard lives a bold faith. He is so confident that his Shenzhen factories will sell technology to the world in the next decade that he left Apple He will run supply chain management company The Sparrows in the coastal Chinese city.

“Most of our customers come from America,” Woodard said. “We’re hearing all the excitement: new form factors for smartphones, new ways to interact with AI.”

“We won’t see India and Vietnam fighting anytime soon,” he said. “Outside of geopolitics, people want to build real things. There are no other options other than China.”

Thanks to the supplier FoxconnApple has achieved significant success Production base in Shenzhen more than twenty years ago. Consumer electronics companies from DJI to Huawei are all based in the region, which is also home to electric car giant BYD.

“The entire supply chain is around you, probably a two-hour drive away,” said Even Realties CEO Will Wang, another former Apple employee who returned to Shenzhen to launch the smart glasses startup.

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

Trade data reinforces how much Silicon Valley needs these hardware makers.

Chinese Largest source of California’s imports Last year, the state’s chamber of commerce said that was despite a sharp year-over-year decline due to rising U.S. tariffs. Vietnam ranked fourth, followed by Taiwan and Mexico. About 36% of California’s imports were computer and electronic products, the top category.

Meanwhile, Shenzhen, China’s second-largest city in terms of overall exports, accounted for about 19% of China’s high-tech exports last year, according to CNBC calculations of official data accessed through Wind Information.

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

He said the hardware behind humanoid robotics is dominated by Chinese suppliers. But Su noted that traditional robot manufacturers still rely more on parts from Japan, Germany, Switzerland, South Korea and the United States.

find an advantage

There is a lot at stake for innovation.

Sparrows’ Woodard said working in Shenzhen instead of the U.S. cut costs by about two-thirds and reduced prototyping time from weeks to days. He added that developers also benefit from working with suppliers who, for example, have been producing display panels for years and have deep industry expertise.

This allows startups to iterate quickly and go to market.

But not everyone is convinced. The counterargument to manufacturing in China is that it is more important to be closer to end users, as well as reduce geopolitical and customs risks.

“You want to start with what the use case is, especially in robotics,” said Fady Saad, Boston-based general partner at Cybernetix Ventures. He said the firm’s portfolio consists of 20 companies in North America and Europe.

While businesses use parts from China, “we have advised all of our portfolio companies to have multiple supply chain plans,” he said.

US robotics company Agility said 75 percent of its components come from America and 1 percent from China. Figure and Boston Dynamics did not immediately respond to requests for comment.

But last month Nvidia announced it was working with: China’s Unitree as part of the transition to physical AI. As AI improves, investors expect hardware will need transformative upgrades.

Conclusion?

“Supply chain diversification away from China is slowing,” said Annabelle Yu Long, founding and managing partner of BAI Capital in Beijing. “People trust China to deliver efficiencies in innovation.”

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