China's Shenzhen province is known as one of the country's biggest manufacturing hub. However, due to the recent rise in manufacturing costs, some small Shenzhen-based factories have been forced to partner with startup tech companies to lessen their operational costs.

Two of the biggest reasons why Shenzhen is slowly shifting its main business away from manufacturing is the rise of real estate prices and labor costs. A report released by the Bureau of Statistics revealed that annual wages for Chinese workers in the manufacturing industry rose by 66 percent from about $4,650 in 2010 to $7,727 in 2014. Due to this, large manufacturers such as Foxconn and TCL have shifted their interests to other markets like India and Vietnam.

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While large factories can pump out thousands of units of the same design a day, smaller factories offer a more flexible kind of business. Although smaller in scale, these factories can give their clients custom solutions for their needs, as well as produce smaller batch quantities, making them a good for startup companies that do not have the capital to go with major manufacturing companies.

In a statement acquired by Tech Node, HAX general partner Benjamin Joffe said, "[Big factories] don't really pay attention to you that much. You need to find factories where you can actually talk to the owner to make sure you have their attention."

Joffe added that regular factory visits are crucial for small startup companies that are into creating unique and non-standard products. By working with small-scale manufacturers, startup companies can have a sense of security that their products are handled with care and that they can regularly check on the status of a certain product.

TagsShenzhen, Shenzhen news, Shenzhen manufacturing hub, china, Manufacturing, tech startup