Saturday, 08 October 2011 17:40
Los Angeles Times
BEIJING—Xiong
Mingjian is often crushed into a corner during his tedious subway
commutes, but passing the time has been easy since he bought a nifty new
cell phone.
The
27-year-old store clerk surfs the Internet and taps away at games on
his Motorola Defy, one of an increasing number of popular high-end
mobile phones that are helping China shed its label as a knockoff haven.
For years, copycat
cell phones have thrived in a country famed for counterfeiting many
things, such as Gucci handbags, Hollywood DVDs and, most recently, Apple
retail stores. It’s a market fed by shadowy factories turning out
low-cost models bearing names such as BlockBerry and HiPhone 4.
But Chinese bootleggers are now losing ground to the iPhones and other high-end gadgets they once copied.
“People
want the real thing,” said Guo Feilong, a vendor at a massive
electronics market in northwest Beijing where hundreds of closet-size
stalls sell genuine and pirated phones. “Prices have gone down so much,
why would anyone need to buy a fake?”
Falling prices for brand-name models are just one reason crude clones are becoming passe.
Chinese
consumers increasingly want devices that allow them to surf the Web,
play games and download apps, a level of sophistication that’s tough for
some low-rent producers to deliver. Some upwardly mobile city dwellers
wouldn’t dare risk losing face by carrying a knockoff phone.
Factory
orders for unlicensed phones, better known in China as shanzhai, or
outlawed, phones, have been declining rapidly over the last few years,
according to market researcher IHS iSuppli.
Slightly
more than 24 million shanzhai phones were ordered in China last year;
that’s down about half from the peak in 2007 when the devices accounted
for 20 percent of all shipments. Today, shanzhai handsets represent just
7 percent of new factory orders for phones and could be half that
within a few years.
Meanwhile,
smartphone sales are soaring. More than 131 million are in use in
China, up from 52 million in 2009, according to Analysys International, a
Beijing research firm. The average price has dropped below $300,
putting them within reach of white-collar workers.
“After
playing with my friends’ smartphones, I had to get one of my own,” said
Xiong, gripping a $275 touchscreen Motorola handset outside a Beijing
subway station. “I would never buy a fake one because it wouldn’t be
able to do the same things.”
The
trend bodes well for brands such as Apple, Finland’s Nokia and South
Korea’s Samsung, which are battling Chinese makers to capture a greater
share of the world’s largest cell-phone market.
“We’re
looking at a billion [Chinese] cell-phone users in the next couple of
years,” said David Wolf, chief executive of Wolf Group Asia, a Beijing
consulting firm. “As important as North America and Europe has been for
mobile devices, soon we’ll see the tail wagging the dog. Chinese
consumers will eventually dictate what the rest of the world will use.”
Indeed,
major parts manufacturers are developing their own smartphones for the
Chinese market that will be significantly cheaper than current
offerings. Apple reportedly is working on a lower-cost, mass-market
Chinese iPhone; the company did not respond to requests for comment.
It
all spells trouble for cell-phone counterfeiters, whose hub is the
southern industrial city of Shenzhen. Aided by China’s weak protection
of intellectual property and an abundant supply of low-cost
semiconductors, hundreds of factories sprouted in the past decade,
churning out knockoff handsets. These manufacturers found buyers not
only in China but also in emerging markets in Africa and the Middle
East.
International
pressure led to periodic crackdowns by Chinese authorities. Bad press
about exploding batteries and high radiation in some flimsy phones
scared off some customers, as well.
Declining
profits spurred some counterfeiters to turn to making knockoff tablet
computers instead. But others have decided to go legitimate by
developing their own high-end cell phones.
Wanxiang,
a Shenzhen company that makes and sells shanzhai handsets such as the
iPhome A8, is planning to release a trademarked 3G smartphone this year
that sells for $230. The manufacturer has gone so far as to develop an
online app store, hoping that users will get hooked on the firm’s
software.
“Everyone
can use the same hardware and offer the same prices, but to stay
competitive you need your own applications and R&D,” said Nuo Long, a
Wanxiang manager. “So we decided to invest. This year alone, at least
60 or 70 phone makers registered new brands and trademarks.”
Nuo
said the company was inspired by two upstart Chinese phone makers
generating buzz for their surprisingly capable devices. Meizu and Xiaomi
have both developed phones aimed to compete with Apple.
The
Xiaomi phone, which is priced at $312 and uses Google Android software,
is half the price of an iPhone sold in China and boasts the most
powerful processor ever installed on a mobile handset.
Oded
Shenkar, a China specialist at Ohio State University and author of
Copycats: How Smart Companies Use Imitation to Gain a Strategic Edge,
said none of this is especially odd. Chinese manufacturers are now
poised to begin innovating after years of replicating foreign products
and business models, he said.
“Chinese
phone makers are learning to play the game by putting a twist on
existing technology and putting a patent on it,” Shenkar said.
“Being
able to take a blueprint and turn it into a product in a very quick
time will serve you very well when you eventually have your own
concept,” he said. “China is not the first or only imitator, but it’s
the first imitator that has tremendous capability.”
Still,
demand for shanzhai phones remains strong in rural areas and among
migrant workers earning only a few hundred dollars a month.
“People
in China are practical,” said CK Lu, an analyst with research firm
Gartner Inc. “It’s not shameful to use fake phones any more than it is
to carry a fake Louis Vuitton bag.”
(Los Angeles Times)
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