In 1979, the city of Shenzhen in southern China was little more than a fishing village. Today, however, it is a city of 17 million people, and the centre of the global electronics industry.
Sure, most software we use is written in the United States, and Silicon Valley is where the most important hardware is designed. But most of the actual production lines that turn blueprints, raw materials and components into finished devices are found in Shenzhen. In fact, there’s a good chance the phone or laptop you’re reading this on right now was made there.
If you want to read about this in detail, I strongly recommend the fantastic Apple in China by Patrick McGee. It is, of course, a book about Apple, but it also tells a broader story of how this one Chinese city came to dominate tech manufacturing.
It’s a story into which Apple is tightly woven – the smartphone boom that fuelled the city’s growth is all downstream of Tim Cook’s mastery of supply chains and outsourcing. But it’s also a story of how, by satiating the West’s desire for cheap, reliable manufacturing, China has steadily built up its own domestic giants. This is what enabled China to ascend from the bottom of the ‘value chain’, manufacturing basic widgets, to the top, as a home for extremely high-end manufacturers.
It’s why today China is the best country in the world at everything from drones to humanoid robots to electric cars, and the stereotype of the cheap Chinese knock-off is almost as out-of-date as when people used the same slur against Taiwan and Japan.
But how exactly did this transformation happen?
In one of the most striking passages in the book, McGee talks about how, ironically, despite the globalised nature of modern tech supply chains, agglomeration really is critical to Shenzhen’s success:
Indeed, China sports a level of technical sophistication that multiple experts struggle to even comprehend. The layperson often believes Foxconn could just open a factory in a different country; but the Foxconn hubs in China are surrounded by hundreds of sub-suppliers all ready to compete for the next major order. “For Apple to give that system up is tricky,” says Jay Goldberg, founder of D2D Advisory, a tech consultancy. If Foxconn, for example, needs to install sonic welders-a process to merge different metals or plastics with ultrasonic energy-it can call up any number of firms to run the line and hire the labor.
“There’s all these subcontracted, specialty niche firms, and nowhere else does that exist,” Goldberg says. What China offers, in other words, is not simply labor, but an entire ecosystem of processes developed over more than two decades.
This brings me to Britain – and Europe more broadly.
As much as we are beneficiaries of decades of cheap manufacturing in China, there has been an implicit trade-off. We have lost almost all of our ability to manufacture and build at home – a fact that has been made stark by the war in Ukraine, which was fought at the beginning with almost exclusively Chinese-made consumer drones. Even today, though Ukraine has rapidly developed a sophisticated domestic drone industry, many of the underlying components, like motors, control chips and magnets, are still sourced from China.
This, then, represents a huge strategic vulnerability. Which is why one recurring theme in our politics is the need to reindustrialise Britain, to protect ourselves from the more volatile global situation. And slowly the government is moving in this direction.
Just this week, Andy Burnham visited the motorsport company McLaren to trumpet the firm’s plans to invest in domestic manufacturing – as domestic manufacturing is not just good for high-minded security concerns, it’s good for creating vocational jobs too.
But even though he visited an F1 team, I’m worried that Burnham is not moving fast enough.
Don’t get me wrong – the noises being made are all of the right ones. Politicians from Burnham down clearly recognise the problem that if Russia invades a NATO ally, or if China moves on Taiwan,1 it’s not going to matter all that much that Britain is a global hub for TV production or corporate legal services.
However, I also think that if we take the geopolitical threats seriously, then we need to be more ambitious. Which is why today, I want to sketch out, on the back of a proverbial envelope, something bigger – a real attempt to get Britain manufacturing again.
Because though there is a lot of talk about the opportunity for a ‘knowledge corridor’ in the Oxford-Cambridge arc, which will provide new homes and graduate jobs in the London commuter belt, Europe also needs a powerful manufacturing ecosystem of its own.
And if we know this is something our continent needs, why can’t we build it ourselves? Which is why this week, I’m going to explain why – and how – we should turn East Anglia into Europe’s Shenzhen.