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BIZCHINA> Top Biz News
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Imitation to innovation
By Erik Nilsson (China Daily)
Updated: 2009-07-14 10:14 Yao Feng, business operation specialist of China Mobile, explains shanzhaiji often charge users hidden, illegal operating fees. "It has some negative impacts on operators and on normal users," he says. "When users press the buttons, nobody knows what's behind those buttons,." Director of Shenzhen Communications Association Tang Ruijin believes, "quality is not the main problem that shanzhai mobile firms have to face during their development; the key point is standardized management". Weaver believes the best shanzhaiji companies could become legitimate firms. "We are witnessing the rise of the hacker-entrepreneurs; it's a classic Silicon Valley legend brought to the back alleys of Shenzhen," he says. "Today's shanzhai handset vendors have a real chance to move from back alleys to boardrooms - the possibility exists to create a global brand." The most famous example of such a firm has been Tianyu, a shanzhaiji maker that leads domestic manufacturers, holding 16 percent of the market in Q4 2008, according to CCID consulting. Beijing taxi driver Liu Xiaoan says he only buys Tianyu mobiles. He bought his A93 for 600 yuan ($87.8). "It looks good and the quality's good," he says. Nokia's head of brand protection Lucy Nichols explains the company is able to contend with licensed shanzhai firms, such as Tianyu, or those who make whimsical non-brand machines. Nokia dominates China's handset market, holding 38.9 percent of it in Q4 2008. "Nokia doesn't object to legitimate competition," Nichols says. "Nokia's fortunate in that we have such a wide range of products, including reasonably priced ones." She says the shanzhaiji variety that hurts her company and consumers comes in the form of convincing counterfeits that dupe buyers. "They think they're buying a brand promise in terms of quality and reliability until they take it home," Nichols says. "If they're not aware they've got a counterfeit, that does do damage to the brand." Nichols declines to comment on the Shenzhen quality tests, saying she wasn't familiar with the report and needed more information. She explains the shanzhaiji boom hasn't changed the way Nokia prices or innovates. Nokia combats counterfeiters through an intellectual property rights enforcement program. It also cooperates with government agencies, including Customs, quality control watchdogs and public security bureaus, at various levels. "We get very good results," she says. "China's enforcement agencies are some of the most successful and effective." Still, places such as Zhongguancun and Beijing's Yashow market are rife with Nokia knockoffs. Pan Zhibin, manager of Yashow's stall No 4124, explains it's the most popular counterfeit brand among Chinese customers. "Most like the N95, because it looks like it's the real expensive phone, and then the Nokia 6301, because it's small and easy to use," she says. The real N95 retails for $396 on Nokia's US website, while Pan's go for 680 yuan on first offer. She sells her version of the Nokia 6301, which Nokia doesn't price online, for 500 yuan. A vendor at booth 4120, who refuses to give her name, says the shanzhai versions of French luxury brand Vertu are her most popular models. Real Vertus cost up to 150,000 yuan, and are adorned with precious metals, such as gold and platinum, and gemstones, such as rubies and diamonds. Hers go for 600 yuan. She says she sells about 50 per day to a roughly equal number of foreigners and Chinese. "People like that it looks like the world's most expensive phone," she says. Weaver says Tier 1 companies are still trying to figure out how to deal with the flourishing of shanzhaiji. Motorola, Sony Ericsson, Apple and Samsung decline to be interviewed. While it might be a thorn in the sides of Tier 1 and top domestic handset makers, it seems unlikely shanzhaiji will disappear anytime soon, Meng says. "And if I couldn't find these funky mobiles in the market, I'd be kind of disappointed," she says. "I think the shanzhai spirit is sometimes a spirit of rebellion but also a spirit that the Chinese people are capable of creating anything."
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