Shenzhen's famed electronics mecca on the line as the internet's rise puts the squeeze on hard-pressed traders

They call it by a mash of names, such as "China's Silicon Valley" or the "Paradise of Hardware".

That's Huaqiangbei, or Huaqiang North - housing a sprawling marketplace tucked away in Shenzhen's Futian district that's famous for its wheeling and dealing in all sorts of electronic gadgets under the sun - and which, in its heyday, was the darling hub of small and medium-sized hardware traders boasting raking in millions without further ado.

But, it seems, the tide has turned.

Last Friday's opening of Shenzhen's Metro Line 7 after three years of construction, offering greater access to Huaqiangbei from all parts of the city, may not be able to give it a new lease of life either.

Industry insiders say the iconic marketplace - said to be the largest of its kind in the country and, probably, the world, and notorious for electronic components and shanzhai (imitation and trademark infringing brands and goods) - needs more than just convenient transportation to pull through, with many vendors having been driven to the wall, as the rapid advent of the internet unceasingly takes its toll on brick-and-mortar businesses.

At the height of its operations, Huaqiangbei was home to some two dozen shopping malls, with yearly sales hitting 10-digit figures. Hardware retailers and wholesalers plying their stuff from minuscule one-square-meter counters stood to rake in hundreds of thousands of yuan each month. But, that's history and their profits have taken a big tumble.

According to a recent survey by Shenzhen University, up to 40 percent of 238 traders in Huaqiangbei interviewed said their profits were virtually zero last year, with just 39 percent saying they had the good fortune of earning just 100,000 yuan to 200,000 yuan ($14,800 to $29,500) annually - a far cry from, or only one-tenth of what they used to earn monthly in the past.

Adding insult to injury, nearly 90 percent of those polled claimed they were at the end of the road and had been forced to call it quits, leaving rows and rows of counters left to gather dust and stores shuttered for good.

Disgruntled trader Lian Huanran, who has been dealing in electronic components in Huaqiangbei for the past decade, complained that the unstoppable proliferation of chips, smartphones, televisions and other electronic devices online has "strangled" many smaller suppliers although upstream component suppliers have been left relatively unscathed.

The Shenzhen authorities, at the same time, are pulling out all the stops to stamp out shanzhai products, forcing many stores to pull down the shutters since last year.

The harsh reality is that traders in the marketplace haven't much of a choice - either calling it a day or opting for a new business strategy.

Qu Lijun, co-founder and operating director of SegMaker, believes that the future of the Huaqiangbei hub rests on the continued development of innovative makers and startups.

But, lacking core technology, he says, the market has to follow others instead of innovating and upgrading although such an antique business model renders profits hard to come by.

Lian, a former retailer himself, had to bite the bullet by taking the initiative to embrace the change last year when he closed down his store and joined a startup incubator called Huaqiangbei International Maker Center. The startup was founded in 2015 by Shenzhen Huaqiang Holdings Ltd, which runs several shopping malls in the district, dealing in electronic products.

Huaqiangbei may be known to most people as the infamous "capital of shanzhai", but its true value is its great variety of electronic components, noted Lian, resting in his garden-style office, which is within a stone's throw from his old store and stacked up with electronic gadgets.

His job now is to coach startups and help them find suppliers. The materials that startups need in their infancy are complicated, Lian said. "Some don't even know what they want. But, my experience could help them."

Despite its withering status, he believes there's still no place like Huaqiangbei, where traders could simply go downstairs to find all the components they could think of.

Snaking through the maze of counters in the hub, buyers can find dozens of categories of smartphone cameras, screens and other gadgets. The products do keep pace with the market's development, covering a wide spectrum of wearable devices, drones and other trendy electronic devices.

And, more importantly, the vendors here can give market-oriented advice on how to improve and upgrade their products, Lian stressed.

Maker Center is one of three key maker innovative carriers operating in the district, the others being SegMaker of major local marketplace developer SEG Electronics Market, and the world's largest hardware incubator HAX Accelerator (formerly Haxlr8r).

French Tech Hub also joined the club by setting up its first mainland branch in the area last month.

But not all the innovative operations are a smooth sailing. Zeng Long, an investment manager of Huaqiangbei International Maker Center, cited the case of a young entrepreneur in his team, who used to be an apprentice in a smartphone repairing shop in the district, but is now trying to move the same business online.

There are many such apprentices in Huaqiangbei who may not possess sound academic qualifications, but are learning the ropes with more practice, Zeng said. They could find all the smartphone components in the market with ease and have them assembled within 20 minutes, according to media reports.

But, combining their techniques and experience with the internet, or adhering to the so-called O2O (online-to-offline) business model is not that simple, he warned. Competition is gaining ferocity, and making money would require a long time and strong capital support to accumulate enough internet traffic in order to gain profit.

However, there have been success stories, and Trouble Maker is one of them. With a team of about 40 international makers, it has helped overseas companies and makers turn their ideas into smart hardware prototypes, thanks to the diverse hardware resources in Huaqiangbei.

The road ahead is long and arduous indeed, warned Zeng. Taking the best advantage of Huaqiangbei's resources and forming a sustainable business model remain the key for businesses to keep their heads above the water.

grace@chinadailyhk.com

(HK Edition 11/02/2016 page9)