Shenzhen Huaqiangbei is a world-class electronic information hardware distribution center formed due to demographic dividend, market dividend, policy dividend, geographic advantage and other economic factors when mainland China undertook the world's third major industrial transfer. Huaqiangbei Museum defines Huaqiangbei as "No.1 Electronic Street in China; the Land of Global Technology & Fashion". Huaqiangbei is a business center with many people, money, companies, goods, information, resources, opportunities and efficiency, and is the symbol of the achievements of China's reform and opening-up and Shenzhen's economic development.

What people take delight in talking about Huaqiangbei is the "billionaires" spawned in Huaqiangbei. During the period from 2020 to 2022, the shortage of goods and price increases gave birth to many more of them. Huawei Hisilicon Hi series, ST and GigaDevice’s MCU, Texas Instruments’ analogue components, Xilinx’s FPGA chips, Slkor’s SiC MOS tubes and Kinghelm’s signal connectors were in short supply and their prices increased significantly during this period. The reasons for the shortage are as follows: firstly, due to the lockdown during COVID-19 pandemic, the demands for smart phone and tablet PC erupted because adults worked at home and children took classes online, these products all need electronic components; secondly, the demands for some smart terminals and electronic parts and components increased significantly, e.g., the demand for smart door locks surged at the time, like smart phones, they all need the under-screen fingerprint lock chips, all of a sudden, a lot of capacity of the fabs was taken up; thirdly, due to the U.S. sanctions, Huawei’s orders took up a lot of capacity of TSMC for stocking, squeezing the space of other chip manufacturers; fourthly, the rapid growth of new energy vehicles, which need more chips than fuel cars, seriously impacting the industry chain. These situations in combination caused the serious shortage of goods and a big price hike as a result. The distributors and traders in the circulation links were reluctant to sell and hoarded goods, and terminal manufacturers stocked goods, which, in turn, fueled price increases. Many bosses at Huaqiangbei seized the opportunity to earn a lot of money. Many of my friends became billionaire, they bought luxury cars and house and often invited me to Huaqiangbei to drink to celebrate their success.

Slkor Shiqiang Song on Huaqiangbei’s Next Decade

But the price increases hurt some of small terminal manufacturers. A factory specializing in R&D and production of photovoltaic energy storage inverters owned by one of my fellows from Sichuan located in Bao'an District Fuyong Sub-district, went to bankruptcy due to this wave of price increases. It also caused damage to the industrial ecology, shaking the customer base which the small businesses at Huaqiangbei rely on. After all, “With the skin gone,to what can the hair attach itself?”

After more than three decades of rapid development, the business model at Huaqiangbei made not much progress, but China's economic development model and social patterns have quietly changed significantly. During rapid economic growth, we have no sense of crisis. Huaqiangbei has low barriers to entry, no pricing power, no competitive barriers, low efficiency, no bargaining power in upstream and downstream, bosses usually make ends meet and wait for opportunity for speculation to make quick money. The opportunity for speculation is over, they encountered ever low tide this year, the goods hoarded by huge investment in the past several years now can only be sold by luck. Bosses are thinking about changing jobs, frictional unemployment occurs. Some bosses have been out of the game completely, and structural unemployment occurs. The bosses showing off their luxury cars, houses and watches in the past two years went to Singapore for sunshine because their companies have no business. Some other bosses, who used to work at daytime to make money and take training courses at night to learn, went to the Hongfa Temple to pray for blessings because of the depressed market.

Desolate Huaqiangbei at 8:00 pm on 8 August, 2023

So Huaqiangbei still have a future? Where should Huaqiangbei go from here? I think that as long as the SMEs at Huaqiangbei think diligently, analyze rationally, and keep pace with the historical development trend and comply with the laws of economics, they still have chance.

1. The industry still in the ascendant

The disruptive new technologies that drive the Kondratieff Waves have not yet emerged, and existing technologies and markets are still developing. In recent years, the development of AI, meta-universe, Microsoft ChatGPT and Huawei Pangu language model is still in the ascendant. Electrification, informatization and digitization need electronic components. Ranging from warships and missiles to smart door locks and Bluetooth headsets, from smart Apple phones to Kinghelm Beidou GPS navigation and positioning parts, they all need chips. According to the data from China's General Administration of Customs, chip import in H1 2023 amounted to USD 162,609 million. According to incomplete statistics, the value of the electronic components imported, produced, processed, consumed and exported in mainland China each year is about USD 400 billion, the market capacity is large, product varieties is rich and industrial penetration rate is high, so there are still opportunities in the industry.

Huaqiangbei is a distribution center for electronic components and intelligent hardware, with annual sales of more than RMB 240 billion. With the support of the huge domestic market, and the geographical advantages thanks to Hong Kong and Southeast Asia, there is a lot of room for survival and transformation adjustment time. Huaqiangbei also has resources accumulated for many years. Professor Akita from Kanazawa University is my friend. He came to Huaqiangbei every time when he came to China to understand the industry trends and to have a look at the new products. He rented a house at Guanlong Village, Xili because there is a direct bus to Huaqiangbei!

Huaqiangbei Museum positioning Huaqiangbei as "No.1 Electronic Street in China; the Land of Global Technology & Fashion"

To be continued...