Mr. Song Shiqiang has released a series of videos titled "Song Shiqiang's Rostrum", sharing his years of learning, life, and work experiences and insights. During this period, he has been conducting a series of studies on Shenzhen Huaqiangbei. "Song Shiqiang's Rostrum" will be published on various short video platforms both domestically and internationally, such as Douyin, WeChat Video Account, Bilibili, Xiaohongshu, YouTube, and will also be compiled into text format to be shared on the SLKOR official website (www.slkoric.com) and the "Silicon Carbide Expert" public account. In the "Song Shiqiang's Rostrum" series, there are several aspects of Huaqiangbei that are worth delving into in more detail. Today's topic focuses on the shortage of electronic components and the advantages and disadvantages of Huaqiangbei.

Mr. Song Shiqiang's Douyin account content

What makes Shenzhen Huaqiangbei famous is the large number of millionaires it has produced. This began in 2019 when the shortage of goods led to the emergence of a large number of millionaires in Huaqiangbei. The main reasons for the shortage are as follows: First, the epidemic control measures led to a large number of white-collar workers working remotely from home, resulting in the need to purchase office equipment such as computers and printers, as well as increased demand for electronic smart terminal products for children's online classes, all of which require a large number of electronic components. The second reason is the U.S. preparation to sanction Huawei, which led to TSMC's production line rushing to stock up for Huawei, squeezing the capacity of other customers and disrupting the balance of the supply chain. The third reason is the explosive growth of fingerprint recognition chips led by "Goodix Technology", which are used in consumer markets such as smartphones and smart door locks, further increasing the pressure on wafer fab capacity. The construction and adjustment cycle of wafer fab capacity expansion is 3-4 years, becoming a bottleneck in the industry chain. The combination of these three factors led to midstream agents and Huaqiangbei merchants seizing the opportunity to hoard goods. Subsequently, downstream factories had to follow suit, leading to panic buying and hoarding, as well as instances of stampedes in the industry.

The shortage of goods in Huaqiangbei continued into the second half of 2022. Those who hoarded and speculated on goods early on made huge profits, while newcomers who entered at a later stage inherited stocks at high prices that have now plummeted, resulting in the loss of previously earned profits and even heavy debts. Downstream small factories went bankrupt and closed down because they were unable to start production due to the shortage of goods. Some purchased goods at high prices to fulfill orders but found it unprofitable, impacting the healthy development of their companies. This has caused serious damage to the industrial ecosystem and represents a severe backlash for Huaqiangbei, as these hardware small factories are the foundation of their survival. Without the foundation, how can the fur still attach to the skin?

Mr. Song Shiqiang's WeChat video content

Huaqiangbei Song Shiqiang introduced that at the time, many electronic components in Huaqiangbei experienced price increases of over 10 times, with some special models even exceeding 100 times. This is because the production of electronic products requires complementary components. For example, if a product needs 100 components and lacks one particular component, even if the price of that component doubles, it still needs to be purchased. Gambling on the right model can bring enormous wealth. Several of my brothers made a fortune from speculation. They changed their cars to Bentleys. They said the letter "B" in the center of the Bentley logo is flanked by wings, meaning "taking you to show off and taking everyone to soar," displaying the obvious characteristics of the nouveau riche in Huaqiangbei.

The official Bilibili account of SLKOR Semiconductor

As a globally renowned hub for electronic components, Shenzhen Huaqiangbei has gained international recognition for its advantages in terms of a large population, abundant goods, ample financial resources, extensive information, and abundant opportunities. In addition to these factors, Huaqiangbei also possesses the advantage of its spirit and culture.

Firstly, the bosses in Huaqiangbei are daring and innovative. The people who come to Huaqiangbei are ordinary folks, grassroots entrepreneurs who embody the spirit of daring to break through and innovate. They are not afraid of risks and are willing to try new things. This entrepreneurial spirit has become an inexhaustible driving force for the development of Huaqiangbei. Representatives of this spirit include Wang Laobao from Intelink, the Lin brothers from Zitaijing, Pan Licheng from Hengcheng Weiye, Song Shiqiang from Kinghelm (www.kinghelm.net), and SLKOR (www.slkoric.com).

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Secondly, the primary target of Huaqiangbei's services is small and medium-sized hardware enterprises from around the world. These customers are numerous, but their demands are mainly in small quantities. For example, an original manufacturer typically supplies in packages of 3000 units, but customers may only need a small batch of 500 or even a few dozen units, and they may require dozens of different brands. Distributors are unwilling to provide such services as it lacks efficiency, so the original manufacturers can only offer products under their own brand. This is where Huaqiangbei's small suppliers come in, providing services such as unpacking and customized packaging. Therefore, Huaqiangbei has demonstrated unique advantages in meeting the needs of these scattered, diverse, and small-scale demands, making it an important partner for small and medium-sized hardware production enterprises.

Thirdly, Huaqiangbei's electronic products are highly standardized, making them easy to store and transport, and they have high value. This allows Huaqiangbei's products to not only cover domestic regions such as the Pearl River Delta and Yangtze River Delta, but also be exported overseas. The high degree of standardization and strong circulation capability have become attributes and advantages of Huaqiangbei's products.

Official YouTube Account of SLKOR

Huaqiangbei has its advantages and characteristics, but it also faces micro and macro disadvantages. These disadvantages not only affect the development of Huaqiangbei enterprises themselves but are also closely related to the overall economic situation.

Micro disadvantages of Huaqiangbei include severe homogeneity among its enterprises, similar business strategies and pricing methods, prominent internal competition, frequent price wars, and vicious competition. This leads to continuous squeezing of profit margins for small businesses. For example, in the mobile phone accessories market in Huaqiangbei, many merchants sell the same brand and model of phone cases, chargers, Bluetooth headsets, and other supporting products. In order to attract more customers and secure orders, they constantly lower prices to gain a competitive advantage.

Slkor and Kinghel's advertisement in Huaqiangbei Electronic World.

Huaqiangbei electronic market has a large number of small booths and traders, operating on a smaller scale. Due to limitations in talent, funding, and technology, they lack sufficient competitiveness. In the past, many small businesses relied on low costs and high efficiency to generate certain profits due to favorable market conditions. However, with the changes in the market and increased competition, small shops in Huaqiangbei often face the dilemma of squeezed profit margins. Being smaller in scale, they are unable to enjoy the economies of scale advantages that larger enterprises have, making it difficult to reduce costs. Additionally, they struggle to withstand price wars and vicious competition from other competitors, resulting in continuously decreasing profits or even losses. This makes it challenging for them to sustain a healthy operation or even stay in the market.

Furthermore, the order placement and trading business models in Huaqiangbei electronic market are simple and have low entry barriers, allowing inexperienced individuals to easily enter the market. Without innovation spirit and core competitiveness, they tend to blindly follow trends and imitate others. We call this phenomenon "wearing the boss's shoes and walking the boss's path, eventually leaving everyone without shoes to wear and roads to walk on." However, due to insufficient understanding and accumulation of products and industries, many entrepreneurs find themselves in difficulties during market downturns. In the long run, the sustainable development of the industry is threatened, which represents the micro-level disadvantages currently faced by Huaqiangbei.

SLKOR Semiconductor Official Account on Xiaohongshu

At the macro level, overall economic growth is weak. Inadequate economic growth means insufficient market demand, leading to decreased sales volume, which affects the development of businesses in Huaqiangbei. Enterprises are facing problems such as inventory backlog, unsalable products, and difficulties in capital turnover. The fourth international industrial shift has led to the transfer of domestic manufacturing to overseas locations, causing a chain reaction in the supply chain. For example, the shift of the Apple iPhone supply chain to Vietnam, India, and the transfer of the new energy vehicle industry chain to Mexico directly impacts the original service targets and market shares of merchants in Huaqiangbei, exacerbating an already challenging situation. Against this backdrop, enterprises in Huaqiangbei need to actively undergo transformation and upgrade, enhance their internationalization and service levels, and find new markets to achieve sustainable development.

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Author's Bio:

Mr. Song Shiqiang is the General Manager of SLKOR Semiconductor and Kinghelm Electronics. He is a member of the Chinese Institute of Electronics' expert database, a research expert in Huaqiangbei, and a popular science columnist. Mr. Song started as a grassroots technician and has served as CEO of an international real estate listed company. He has rich experience in technical management and enterprise operations, combining macroeconomic theory with practical management to lead the company's rapid development! SLKOR Semiconductor and Kinghelm Electronics, in which Mr. Song Shiqiang has invested, are both national high-tech enterprises headquartered in Shenzhen, China. "SLKOR" (www.slkoric.com) and "Kinghelm" (www.kinghelm.net) brands enjoy international recognition and reputation. Shenzhen SLKOR Micro Semicon Co., Ltd. focuses on research and development of new materials, new processes, and new products. Its technical team comes from Yonsei University in South Korea and Tsinghua University, mastering the international leading production technology of silicon carbide MOSFETs. SLKOR Semiconductor has developed from a FABLESS design company to a company that integrates design and development, manufacturing, product sales, and technical services. It is a member of the "Shenzhen Electronic Chamber of Commerce".

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Mr. Song Shiqiang has always been focused on Huaqiangbei, studying its development model and extracting the culture of Huaqiangbei. His articles about Huaqiangbei, such as "Research on Huaqiangbei," "Transformation and Development of Huaqiangbei," and "Refutation of Bloomberg's News on Huaqiangbei," have been reprinted by major domestic and foreign media outlets such as People's Daily client, Xinhua News Agency, Associated Press, Yahoo News, and The Wall Street Journal. Short videos like "Song Shiqiang's Views on Huaqiangbei" have gone viral on platforms like YouTube and TikTok! Mr. Song Shiqiang has been working hard to purify the business environment of Huaqiangbei and promote the concept of Huaqiangbei as the "Number One Electronic Street in China" worldwide.