Peels and pans

Gadget entrepreneurs to launch mobile hard disk for iPhone

It was one of the cheekiest gadgets of its time and a device that made its inventors the Pan brothers - Pan Lei and Pan Yong - overnight heroes in a nation where Apple products still top the popularity charts.

Two years after rolling out the iconic Apple Peel 520, an iPod touch case with an embedded chip which enables users to transform an iPod Touch music player into an iPhone, the Pan brothers are now ready to wow the world with yet another iconic Apple gadget.

Yosion Technology, the company set up by the Pan brothers, will soon launch the Apple Pan, a mobile hard disk for the iPhone, to enable users to access their favorite downloaded movies and music without going through Apple's application store, iTunes.

The pronunciation of Yosion is similar to the company's Chinese name Yansheng, which means "derivative", and that indicates most of its products are derived from Apple gadgets.

Pan Lei, the chief executive of the company and an interior designer by profession, says in the short term, the company will further tweak its existing products to make them more appealing to customers and to attract external investment.

Work on the new product began in August last year with an investment of 500,000 yuan ($79,243, 61,458 euros) and the company is now testing it for a market launch. The device is likely to be priced at about 400 yuan, and there are preliminary orders for 3,000 units.

Though the Pan brothers wax eloquently about the future, it was not easy for them in the beginning as they lacked the professional and technological expertise required to make a difference in the highly competitive mobile device market. After launching their products, they also faced the thorny issue of rivals ruining their carefully built-up market with cheap imitations.

Shortly after the Pan brothers launched the Apple Peel 520, one of their contract manufacturers decided to end their association with the company. Soon the brothers found that the company had copied their idea and launched a similar product in the market.

Pan Lei says it was a bitter experience and since then Yosion always encrypts its products and ensures it outsources only the manufacturing of its device to third parties but not its sales.

One of the prime motivators for the company has been the strong demand for iPhones in China. He says that the iPhone is now perceived more as a necessity rather than a luxury in China. This has also led a plethora of demands being made on the handset and as such opened the doors for device makers like Yosion.

"Many Chinese consumers are not used to iTunes especially when it synchronizes their iPhone. Most of them find the application annoying as it rearranges icons and in some cases leads to data losses."

Pan promises that Apple Pan will solve most of these problems, but admits that he is yet to contact the US company for possible tie-ups.

When the Apple Peel was launched, many analysts had contended that it might infringe Apple's intellectual properties. No such action has been taken by Apple till date, and the US company did not want to make any comments on the Apple Pan when contacted.

Pan says that Yosion's business plan is quite simple. "Apple Peel 520 accounts for all of our sales. Priced at 400 yuan, the product has already sold some 20,000 units," he says.

But there have been blimps since last year after sales of iPhone 4 and iPhone 4S surged along with a 30 percent dip in Yosion sales.

Pegging its future only to Apple products is a big risk in the long run, Pan says. But, the company will stick to it for the next three years, as it still sees immense opportunities for further growth.

However, to mitigate some of the risks, Yosion is also launching its own range of smartphones and has already invested 1 million yuan to that effect.

"We think that big-screen smartphones are an irreversible trend much like five years ago when colored screen cell phones replaced the first generation of cell phones," he says.

Yosion's smartphone, named i7, comes with a 5.3-inch screen and has a red "Yosion" logo printed on the back of its white case. The cell phone is priced at 798 yuan for old users and 998 yuan for new users.

Pan says they are currently testing the product with their employees and using the feedback received to make further improvements.

"Yosion will be a company specializing in hardware and software R&D for communication products," Pan says.

It is essential to have this kind of mix as in China, he says pure hardware sellers can be easily copied while pure software developers often do not earn enough revenue.

More than 80 percent of Yosion's income finds its way into research and development. The company is also looking to launch several products this year, including Apple Pan and smartphones.

But as Pan admits, the biggest roadblock right now for Yosion is the lack of capital.

He says if they want to take their smartphone sector business to the next stage, the company will require financing to the tune of 10 million yuan.

Though the success of Apple Peel has brought several investors to Yosion doorsteps, Pan says he has to be extremely careful about the fund infusion. The real challenge is not getting funds, but to find investors who are willing to back their goals without asking for control, he says.

Many small and medium-sized companies treat Apple accessories as a way to make quick money. They rush into this business and get out after making a fortune. But some entrepreneurs like the Pan brothers are characterized by their remarkable perseverance and ambition to make it even bigger.

The Apple Peel enables users to transform an iPod Touch into an iPhone. [Wu Shaomin / for China Daily]

linjingcd@chinadaily.com.cn