EMSNOW Executive Interview: Chadwick Xu, Shenzhen Valley Ventures (SVV)

SVV (Shenzhen Valley Ventures) is an engineering, venture capital, and manufacturing company, supporting startups and corporate innovation. SVV’s Co-founder and CEO Chadwick Xu is also Co-founder of one of China’s largest manufacturing companies (IPO in 2010). Chadwick came to Shenzhen in 1992, right after Deng Xiaoping’s speech inspiring the country to open up. He worked for a state owned electronics manufacturer for 12 years, leading its US sales company for the last five years of his tenure. In 2004 he co-founded Zowee, an electronics manufacturer (IPO in 2010) and Co-founded SVV in 2015. He’s been in the hardware industry most of his career. We caught up with Chadwick Xu to get an update on the Southern China Greater Bay Area, post COVID-19.

 

EMSNOW: The Southern China Greater Bay Area has evolved dramatically as a manufacturing center for innovation. Please tell us about the history of your company and how you represent a different type of electronics manufacturing model.

Shenzhen has been producing electronics for the past two decades, especially high volume consumer electronics.  When a deep tech startup comes to Shenzhen looking for engineering or production resources for their initial small order, they will usually find that larger manufacturers don’t take small orders, and smaller size manufacturers don’t have enough engineering capability to support them.

On the other hand, innovation almost always starts from small companies, and most of them will eventually fail before the few lucky ones can make it. If there are resources to help these innovators when they are small and fragile, the success rate may be increased and in the long run, it can generate more value, both for business and for society.

SVV’s goal is to fulfill this demand by building a shared engineering platform, to satisfy the need for high quality, low volume, high risk innovation projects.

 

EMSNOW: What exactly are the capabilities of your company, how many manufacturing lines, facilities, etc.

The core capabilities of SVV are engineering design: after an innovative product proves to be working, we re-design it so that it can be commercially delivered, with reliable quality and optimized costs. We can support small-scale production (dozens to thousands) of complex products (very hard to find in China).

This company is not designed as a contract manufacturer; we don’t emphasize production lines, but more of a complete end-to-end development environment, from prototyping, engineering infrastructure, testing labs, safety certification, production (3 SMT lines, 12 assembly lines), and a mechanical workshop (laser cutting, welding, bending, sawing, milling, drilling, CNC machines)

 

EMSNOW: What industries do you serve, and how many customers do you have approximately?

Our approach is by technical expertise and modules, rather than by industry. In many cases, similar technology expertise can cover multiple industries. e.g., a medical surgery robot has most technology modules similar to a manufacturing assembly robot, but in a totally different industry. In principle, we serve B2B solutions, to explore how to use AI and IoT technology to improve work efficiency in traditional industries.

Now we are working with about a dozen startup and corporate innovation projects in parallel.

 

EMSNOW: What is happening now with COVID19 and your employees? Are most people still in quarantine in your area?

Shenzhen is in relatively good control, except for entertainment, travel, dining and several other service industries; most businesses were back to work by the middle of Feb and have now got around 80% of their workforce and capacity back to normal. There were only two cases in the past two weeks, both are international travelers. The situation is getting back on track and restaurants are gradually receiving the green light to have in-house diners again.

 

EMSNOW: How is that impacting forecasts and operations?

If it’s only China, the impact is only 2-3 months, which would hurt, but with no major damage. Virus related supplies have even generated unexpected business opportunities, e.g., thermometers, masks, sanitization, online education, entertainment, and gaming, etc..

If the virus eventually becomes global and gets out of control, it will be a big issue worldwide; the recent plunge of oil and Dow Jones indicate that risk.

 

EMSNOW: What do you see the long term impact of this crisis on the industry? How long do you expect there to be disruptions?

China has been quite efficient and now it’s already under control; US and EU are still unknown.

The long term impact may not be the direct effect of the virus, instead, the virus may be the trigger of bigger hidden economic problems and eventually lead to a global economic crisis.

Since the trade war started, globalization has been gradually moving to nationalism, and in some aspects, there are already signs of one world, two systems between the top two economic bodies, on supply chain, financial systems and technology. This trend may have a huge impact in the longer term. The virus may expedite this process since business travel and some of the logistics are getting restricted.

 

EMSNOW: What other challenges do you see in the global electronic manufacturing industry in the new decade?

The biggest challenge is the potentiality of a one world, two systems structure; this is a fundamental change for electronics supply chain.

The other one is that sales of smartphones are becoming ‘flat.’ So far there is not another mass volume product that could replace the smartphone and drive growth and growth is the lifeblood of electronics. There has been continuous growth driving product innovation in the past 2-3 decades. If that driving power is lost, there will be a tough time for most players.

 

EMSNOW: What are the opportunities for the global industry?

There are several major gating issues for the commercial growth of IoT, AI – battery, wireless bandwidth, and computing power. Breakthroughs in these areas will create huge opportunities in these technologies themselves, and also in other applications that deploy these new types of tech. EV car is definitely a big opportunity; AR/VR may have a chance too

 

EMSNOW: Is there anything else you would like to talk about?

When talking about AI and robotics, many discussions focus on the bad side, especially surrounding the topic of job loss, but if we look back through history, the growth of technology has always been the path of creating tools to replace or help humans. Technology helps productivity, so that more goods can be made at a lower cost. The result is that even though some jobs are taken away, and new jobs are created, the general living standard improves. AI and IoT may change the game to the level that many more jobs are taken away, but, also  new jobs are created, but the production efficiency is so greatly improved, that for the first time in human history, people can be supported by goods and services, without as many humans needing to work. In this case, the problem is not making a living for jobless people, but more of the social problem of well-fed people with nothing to do.

Fortune 500 are now dominated by virtual industries, and most entity enterprises are declining. The success of Apple, Tesla and Xiaomi are demonstrating a new virtual + physical model. More and more companies could learn from them.

If this virus gets worse, more and more countries may realize that production of basic physical goods are important for the nation’s security, e.g., face masks, protective suits, thermometers; a national or global crisis can easily create a severe shortage of supply and that can end up in big social problem.