Tips for startups to expand into Shenzhen, a leading DX city.



The Tokyo Metropolitan Government’s X-HUB TOKYO, which supports global expansion of startups in Tokyo, held the first seminar “Tips for startups to expand Shenzhen, the leading DX city” on September 4th. We delivered what’s happening in the advanced DX (Digital Transformation) city in light of the impact of COVID-19 as well as hints for startups to know about the current situation in Shenzhen.

Following the speech titled “Ecosystem of Shenzhen”, this event featured a lecture on the current situation in Shenzhen and the tips for expansion globally as well as how to draw up a business strategy that startups aiming to expand globally should know. We shared the latest information that would be useful not only for startups but also for organizations such as VCs and universities offering various supports to startups.

Shenzhen’s History and Ecosystem Development

Shenzhen Economic and Trade Representative Office Deputy Director Ms.Baika Hiyaoka

ーWe would like to start this event with the overview and ecosystem of Shenzhen by Ms. Hiyaoka from Shenzhen Economic and Trade Representative Office about overview and ecosystem in Shenzhen.

Shenzhen, next city to Hong Kong, is one of the four largest cities in mainland China along with Beijing, Shanghai and Guangzhou. About 13 million people live there and its land area size is roughly the same as Tokyo. Originally being a small fishing village, Shenzhen has achieved rapid economic growth in recent years mainly in the high tech and financial industries and it has become to attract attention from the world as a leading city for innovation.

The number of Japanese companies having branches in Shenzhen surpassed 400 in 2017. Exchange between Japan and Shenzhen is also active as Kyocera opened an innovation center and Toyota Motor Corporation established a joint venture with Chinese EV giant “BYD” for the purpose of EV research and development.

Shenzhen was designated as the Chinese first special economic zone in 1980 and its population increased by 40 times in the past 40 years. Average age of its citizens is so young, 33 years old, and 90% of the population is made up of immigrants. As the phrase “Come and you will be a Shenzhen people” suggests, the city where it gives equal opportunities for everyone has attracted many young people with various dreams and strong entrepreneurial aspirations.

ーWhy has Shenzhen developed as a leading innovation city?

I think Shenzhen’s greatest strength is the fact that the base for innovation is in place. In addition to the ecosystem that attracts investors and VCs in the city, the Chinese government has provided generous support to improve the liquidity and place of human and financial resources. For example, in order to attract talented Chinese students who have studied abroad to Shenzhen, we are offering tax incentives and an enhanced housing allowance.

In addition to promoting innovation, Shenzhen has also taken environmental issues into consideration. In 2017, it achieved 100% electrification of public buses running in the city, and it’s ranked as the lowest energy consumption city in China. Furthermore, in 2019, a complete legal system for a protection of intellectual property rights was enacted. It has also taken a number of measures to protect intellectual property rights.

More and more companies are now developing in the fields of robotics, wearable devices, and artificial intelligence (AI), and the 5G high-speed communication standard is being developed. Shenzhen is a city where it seeks efficiency and emphasizes speed of development. By combining this speed with Japanese high technology, we believe that better services and products can be developed here.

Tips for startups to expand into Shenzhen, a leading DX city

JENESIS LTD. CEO Mr. Junichi Fujioka

ーNext, we will ask Mr. Fujioka of JENESIS Corporation, an EMS company in Shenzhen, about the current situation and features of Shenzhen.

Currently, the situation is slowly calming down compared to the early stage of COVID-19 outbreak. The economy is on the road to recovery. Shenzhen has developed mainly in the field of manufacturing. Companies can try development of affordable products and also do cutting edge research. There are many startups taking the stance of “trying out the market first”, and I think the accumulation of past challenges and failures has formed the city of Shenzhen.

One of the features of Shenzhen is its ability to provide a one-stop manufacturing service, from procurement of components to design, making prototype and getting certification. Another advantage is that we can manufacture products at low cost with speed because we have an established supply chain that allows us to procure parts in small lots within one-hour -drive vicinity.

ーWhat do you think is important for Japanese startups to keep in mind when looking to expand globally?

aving spent a long time in China, I think there are three important points in mindset for Japanese companies to compete globally. The first point is an attitude of questioning common sense. In Japan, business and economy are often based on trust. In China and other countries, however, the situation is different. In order to meet a good business partner, it is important to talk with them at trade shows and other venues to identify whether you can trust them.

The second point is to understand diversities of workforce. In China, it is common that the difference in monthly income is as big as ten times within the same company. I think we should never forget this aspect of workforce diversity. I think we should never forget the aspect of the service that is made possible not only by the distinction between blue-collar and white-collar workers, but also by the various layers of the workforce.

The third point is to be clear about visions and goals you want to achieve. A migrant city like Shenzhen attracts a lot of young people who have clear desires to study and work hard and buy a luxury apartment or car. Therefore, if you don’t have a clear direction for your desire, you may miss your own way in the midst of this greedy environment.

We believe that services that link hardware and software aiming to solve social issues will attract attention in the future. Fintech which combines finance and technology and DX which aims to transform people’s lives for the better through a power of digital technology, are representative examples. If we can take advantage of the Shenzhen ecosystem and turn trial and error at high speed, we can create new businesses and products that will update society.

How to draw up a business strategy for startups aiming to overseas.

Plug and Play Japan Head Japan Mr. Zak Murase

ーLastly, we would like to learn from Mr. Murase, working at several Silicon Valley companies and now at Plug and Play Japan, Inc., about how to draw a business strategy that startups aiming to expand globally should know.

There are four key factors that startups should consider when expanding globally: timing, localization, capital and human resources.

When a startup plans a business strategy for global expansion, there are different things to focus on depending on timing and stage of company. If you’re looking to expand globally from the beginning, service excellence will be a key. If you would like to build connections with investors, I recommend to participate in a local accelerator program.

Currently it is difficult to obtain new visas in the U.S. due to the impact of COVID-19 and government policies. However, there are other ways to expand, such as finding an American co-founder, so we encourage you to approach.

ーWhat is a key strategy if we would like to expand globally after developing services domestically?

If you would like to establish your business firmly in domestic market and then expand globally, make sure that you focus on your services and localize them thoroughly. If your company expands globally just because your competitors are doing, you won’t succeed. For example, Uber Technologies, a giant ridesharing company in the U.S., did not localize their services in Southeast Asia. That is why they ended up selling its business to Grab, another major player in the same industry.

Similarly when a company goes public in Japan and then aims to expand globally, there are many cases where similar services are already launched locally. However, if you take differences between Japanese and foreign markets and marketing methods into account, you can make a significant impact. As you look around the world, there are many startups offering successful models globally in their home country as “time-machine-management”.

The U.S. is like a “major league” place for startups, but once you succeed in the U.S., I think the future will be much brighter. We hope that you will develop a firm strategy and aim to expand your business globally.

ーThe event delivered what’s happening in the advanced DX city in the wake of COVID-19, as well as what startups need to know about the current situation in Shenzhen and tips for expansion. Through various upcoming events, X-HUB TOKYO will continue to provide useful information for startups looking to expand globally as well as the latest trends in open innovation.