AI Superpowers: China, Silicon Valley, and the New World Order

by Kai-Fu Lee

Today, the greatest advantage of manufacturing in China isn’t the cheap labor—countries like Indonesia and Vietnam offer lower wages. Instead, it’s the unparalleled flexibility of the supply chains and the armies of skilled industrial engineers who can make prototypes of new devices and build them at scale. These are the secret ingredients powering Shenzhen, whose talented workers have transformed it from a dirt-cheap factory town to a go-to city for entrepreneurs who want to build new drones, robots, wearables, or intelligent machines. In Shenzhen, those entrepreneurs have direct access to thousands of factories and hundreds of thousands of engineers who help them iterate faster and produce goods cheaper than anywhere else. At the city’s dizzying electronics markets, they can choose from thousands of different variations of circuit boards, sensors, microphones, and miniature cameras. Once a prototype is assembled, the builders can go door to door at hundreds of factories to find one capable of producing their product in small batches or at large scale. That geographic density of parts suppliers and product manufacturers accelerates the innovation process. Hardware entrepreneurs say that a week spent working in Shenzhen is equivalent to a month in the United States. As perception AI transforms our lived environment, the ease of experimentation and the production of smart devices gives Chinese startups an edge. Shenzhen is open to international hardware startups, but locals...