Shenzhen, Not So Labor Intensive

By Sam Lin

In contrary to the general believe that China has only labor intensive factories, many factories in Shenzhen are not labor intensive at all. In many Chinese coastal cities, factories are starting to be relocated to more inland cities due to wage pressures. There is absolutely no sign of this in Shenzhen. The main reason is that Shenzhen has been traditionally a non-labor intensive technology manufacturing cluster.

The Silicon Valley of Hardware

“A 16-GB iPad priced at $499 contained $154 worth of materials but only $33 worldwide labor cost”

For instance, at the Foxconn factory in Shenzhen, thousands of iPads are being produced on a daily basis. Researchers of the University of California found out in 2010 that a 16-GB iPad priced at $499 contained $154 worth of materials but only $33 worldwide labor cost, of which China’s share of labor cost was only $8. The latter $8 is not only due to the relatively low labor cost, but also because of the labor efficient Shenzhen factories.

Figure 1: Slicing the Apple

Shenzhen has to offer 30 years of experience in producing electronics. It has a network of firms with sophisticated supply chains, multiple design and engineering skills, intimate knowledge of their production processes and the ability to scale up production flexibly. While Silicon Valley produces innovative software, there is no doubt that Shenzhen is the world’s largest production house for hardware.

The Logistics Hub

“The new Shenzhen International Airport will make logistical supply chains of companies in Shenzhen even more efficient”

Besides the production advantage built up through history, Shenzhen is an excellent logistics centre, right next to the Hong Kong border. Due to this, Chinavasion has been able send parcels cheaply by HK Post. In addition, we have been able to negotiate the best prices with partnering couriers. Somewhere next year, the new Shenzhen International Airport will be operational. The new Shenzhen International Airport will make logistical supply chains of companies in Shenzhen even more efficient. More pictures and updates about the airport coming in our future blog.

Figure 2: The Shenzhen International Airport