The common perception that China is incapable of innovation needs re-examining. According to a widely quoted study published earlier this decade, the value added on the mainland to Apple’s iPods (nearly all of which are assembled there) represents less than 5% of the total, reinforcing the stereotype of Chinese factories as low-end sweatshops. However, a more recent study by Britain’s University of Sussex and others for the European Commission concludes that the iPod example “is far from representative”. These researchers calculate that the average value China adds to its exports is 76% (the EU’s is 87%). The World Bank reaches similar conclusions.
The low level of value add for the Apple iPod is the exception compared to the many other products produced and exported from China.
Foxconn, a Taiwanese contract manufacturer which employs over 1m workers on the mainland, is sometimes represented as a low-tech sweatshop; in fact, it holds international patents in areas ranging from electrical machinery to computing to audio-video technology. It is expanding its Shenzhen facility to support rapid prototyping by Apple’s new R and D centre in the city. Its joint venture with Japan’s Sharp is investing $8.8bn in Guangzhou to make advanced liquid-crystal displays. It is also developing industrial robotics in Shenzhen.
BGI, formerly known as the Beijing Genomics Institute, moved to Shenzhen to get away from northern bureaucrats. Seven years ago it was declared a “DNA superpower” by Nature, a science journal, after it bought so many genome-sequencing machines that it ended up owning more than half the world’s total. It is due to go public shortly.
Mindray, a devices firm with $1bn in global sales, is developing new technologies for ventilators, digital operating rooms and surgical robots.
One of Shenzhen’s most daring startups, Royole, is expanding its output of an extraordinary product: the world’s thinnest foldable full-colour touchscreen display. Liu Zihong, a mainlander, earned his doctorate in electrical engineering at Stanford University, where he dreamt of radical new ways for machines and humans to interact.
With $280 million in venture-capital investment, Royole is valued at $3 billion. It is investing $1.8 billion to build a heavily automated factory and integrated R&D complex which should propel sales past $3 billion. But Mr Liu has even grander ambitions. He thinks his screens could be deployed more widely, in places such as cups, clothes, desks, even walls. “Last year the display industry was worth $150 billion,” he says, “but flexible displays will double that.”