Tech Stream

Shanzhai Phones

28 April 2009

Listen and download: MP3

Counterfeit mobile phones are big business in China, with research firm Gartner suggesting they already account for more than 20 percent of sales in the world’s biggest mobile phone market. The New York Times reports today on the boom in blackmarket “Shanzhai” phones, which often sell for as little as US$35 each, far less than the devices they are ripping off. And while these devices have been available for years, the drop in price for components and the ability to tap into the supply chains of the bigger brands has made it possible for a small company to mimic anything from an iPhone to the latest Nokia or Motorola.

The New York Times also reports that many of the Shanzhai phones have added features not available in famous brand phones:

While the phones may look like famous brands, companies actually add special features like bigger screens, dual-mode SIM cards (which allow two phone numbers) and even a telescopic lens attachment for the phone’s camera.  The competition is already forcing global brands to lower their 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.” Full article at New York Times.

According to China Today the term Shanzhai is used in relation to a range of counterfeit products from handbags to cosmetics and electronic devices. It directly translates as “mountain camp”, in reference to a novel about a band of outlaws living in the mountains and since being coined in 2008 has come to mean:

“escape from authority; rising against social injustice; developing a set of rules parallel to those of the government; or submitting to a government amnesty and returning to the established order.”

And producing shanzhai products like mobile phones is an attractive prospect:

“There are many advantages to shanzhai production: no license fee, no 17 percent added-value tax, no RMB 30-40 per set checking fee to the relevant government departments, and no sales and receipt tax. Shanzhai running costs are further minimized by the absence of marketing and after-sales service. It would otherwise be impossible to buy cell phones at such unbelievably low prices.” Full article at China Today.

Connect Asia‘s Kanaha Sabapathy reports on the growing grey cellphone market of China, and spoke with Sandy Shen, research director of technology research and advisory company Gartner. You can hear Kanaha’s report from the MP3 link above.

What are your thoughts, would you buy a counterfeit phone? Do you own one now that you are happy with? Are these smaller companies driving innovation or disrupting it by eating into the bottom line of legitimate companies who spend millions on R&D?