The Internet of Things connects Silicon Valley to Shenzhen

Analysts predict that more than 20 billion ‘things’ other than personal computing devices will be connected to the Internet by 2020, representing a $3 trillion industry by some estimates.

What’s less obvious is how this is going to come to fruition. Most people have heard of connected devices in the areas of home automation, mobile health monitoring, virtual reality, connected cars, and robotics, but the true build-out of the Internet of Things (IoT) is going to involve a much broader array of devices than that. Things like manufacturing and transportation equipment, power plants and public infrastructure will all be Internet-enabled: and to bring them to market, companies will need an entire ecosystem of design, manufacturing, marketing and distribution capabilities.

China is where many IoT devices are being built, specifically Shenzhen which has become the world’s de facto capital of electronics manufacturing. Silicon Valley and other U.S. and European technology hubs are driving software innovation, product design and global marketing. This symbiotic relationship is already in place, with billions of dollars of IoT commerce flowing in both directions, and it is only going to grow over the coming years and decades.

U.S. venture capitalists have poured more than $1 billion into IoT startups since 2010. China recently announced its “Made in China 2025” initiative, which is aimed at systematically improving China’s high-end manufacturing, innovation and services in information technologies and other key sectors.

With China’s economy slowing and its stock exchanges experiencing extreme volatility, it’s really important to keep in mind that technology and innovation such as the IoT is going to drive a lot of China’s future growth. A conservative estimate from the Chinese government reports that China is already an $80 billion market for IoT products, with logistics companies, utilities and manufacturers leading the way.

Savvy tech industry players are already familiar with the role that Silicon Valley is playing in the maturation of the IoT, but may be less familiar with China’s role, and in particular, Shenzhen’s. Now a city of more than 15 million people on the border with Hong Kong, Shenzhen is home to thousands of hardware companies offering a full range of services including design and production of semiconductors, modules, subsystems and finished devices.

Shenzhen’s ecosystem also includes the suppliers of chemicals, wafers, manufacturing equipment and personnel – in short, everything needed to build and ship IoT products around the world.  Shenzhen is home to Chinese companies such as BYD, Konka, Skyworth, Tencent, Coolpad, ZTE, Gionee, TP-Link, DJI, Huawei and Foxconn.

Largely as a consequence of Shenzhen’s dominance, China now consumes 57% of the world’s output of semiconductors. China makes 81 percent of the world’s mobile phones, 63 percent of the world’s computers and 57 percent of the world’s colour TVs, with Shenzhen at the forefront of this growth.

With its powerhouse hardware ecosystem, China is the logical partner for Silicon Valley’s software and new product ecosystem. Not only can Silicon Valley count on this partner for raw manufacturing capabilities, but it can also rely on China for the type of hardware innovations that will be essential to the development of the IoT.

Here are three examples of the increasingly symbiotic relationship between China and Silicon Valley:

1. Movidius developed an innovative vision processing technology that allows sensors within connected devices to ‘see’ almost as well as humans, and counts Chinese companies as some of its largest investors and customers.  Movidius is based in Silicon Valley with R&D in Dublin, Ireland and a recently opened office in China.
2. VeriSilicon, which was founded in Silicon Valley and now has major operations in Shanghai, creates Silicon Platform-as-a-Service (SiPaaS) designs for IoT products. The company has R&D centres in three strategic locations outside China: Silicon Valley, Dallas (the home of Texas Instruments) and Oulu, Finland (the former home of Nokia).
3. China-based Ninebot is popularizing the next generation of personal transportation robots by innovating on top of the original Segway concept, which it acquired in 2015. While Ninebot is based in Beijing, it has significant R&D in the US and its products are manufactured in both geographies.

Perhaps the best thing about this budding partnership is that it is creating a cycle of innovation, one that advances the knowledge base on both sides of the Pacific. That means this partnership is likely to create many more breakthrough IoT products that enhance global connectivity.