In China, Knockoff Cell Phones Are a Hit (2)
Technological advances have allowed hundreds of small Chinese companies, some with as few as 10 employees, to churn out what are known here as shanzhai, or black market, cellphones, often for as little as $35 apiece. This fake Louis Vuitto-branded phone was available at a mobile phone market in Shenzhen, China.
Last month, the Ministry of Industry and Information Technology did warn consumers about the hazards of shanzhai phones, saying “their radiation usually exceeds the limit.” China’s consumer protection agency says faulty mobile phones were the No. 1 consumer complaint last year.
A few weeks ago, a 45-year-old man in south China was severely burned after his cellphone exploded in his shirt pocket, according to state-run news media.
But that hasn’t seemed to affect sales of black market phones, which typically sell at retail for $100 to $150. In the spirit of what is called “shanzhai” — which suggests rebels or bandits and which applies to counterfeit products of all kinds — many consumers are willing to take a risk on a cheap item that looks stylish.
“I saw iPhone pictures on the Web; it’s so cool. But it costs over $500 — too expensive,” says Yang Guibin, 30, an office worker from Chongqing. “So I decided to buy a shanzhai iPhone. I bought it in a digital market here; it looked exactly like the iPhone.”
Some experts say they believe the shanzhai phenomena is about being creative, Chinese style.
“Chinese grass-roots companies are actually very innovative,” says Yu Zhou, a professor at Vassar College. “It’s not so much technology as how they form supply chains and how rapidly they react to new trends.”
While the phones may look like famous brands, companies actually add special features like bigger screens, dual SIM cards (which allow two phone numbers) and even a telescopic lens attachment for the phone’s camera.
Since it is the SIM card that makes a phone run in China, as in most places other than the United States, all you have to do is insert a valid SIM card into a shanzhai phone and it works.
All this innovation comes from an industry that only took off in 2005, after Mediatek, a semiconductor design company from Taiwan, helped significantly reduce the cost and complexity of producing a mobile phone.
Using what experts call a turnkey solution, Mediatek developed a circuit board that could inexpensively integrate the functions of multiple chips, offering start-ups a platform to produce a low-cost mobile phone.
The industry got another boost in 2007, when regulators said companies no longer needed a license to manufacture a cellphone.
That set off a scramble by entrepreneurs in this electronics manufacturing center. Counterfeiting and off-brand knockoffs flourished. Tiny companies would buy a Mediatek chip loaded with software, source other components and ask a factory to assemble them.
Marketing strategies were simple: steal. Designs and brand names were copied identically or simply mimicked. (Sumsung for Samsung or Nckia for Nokia.)
Tapping into the supply chains of big brands is easy, producers say. “It’s really common for factories to do a night shift for other companies,” says Zhang Haizhen, who recently ran a shanzhai company here. “No one will refuse an order if it is over 5,000 mobile phones.”
The people who make fake iPhones admit it’s a shady business.
“We are a kind of illegal producer,” says Zhang Feiyang, whose company, Yuanyang, makes an iPhone clone. “In Shenzhen there are many small mills, hidden. Basically, we can make any type of cellphone.”
The competition is already forcing global brands to lower prices, analysts say. And new Chinese brands are emerging, like Meizu, a would-be Apple that has opened stylish stores here.
“Our phone is even better than the iPhone,” says Liu Zeyu, a Meizu salesman in Shenzhen. “Our goal is to create a phone that makes Chinese proud.”
