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Rather than Copying, Chinese Manufacturers Focusing on Innovation

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Published on : May 20, 2015

There was a time when Chinese hi-tech manufacturers were notorious for copying the designs of Nokia, Motorola, Apple, and Samsung. Over the period of time, the manufacturers have evolved and are now focusing more on innovation and niche market adaptation to compete against the big brands in the global markets. China’s hi-tech manufacturing sector consists of a decentralized network of thousands of small factories and design houses as well as traditional manufacturers such as Lenovo and Huawei, along with the big international brands such as Samsung and Apple, who have started manufacturing a large quantity of their products in China. The large numbers of small factories work in a cooperative fashion to build the knock-off goods. China’s huge copycat industry that builds these knock off goods have been dubbed “shanzhai” which means “to copy” in contemporary slang.

During the rising global demand for cell phones in 2003-2004, shanzhai companies were able to build cheaper phones and sell at less than US$100 in retail which drastically affected the brands such as Motorola and Nokia, who were selling the phones in the range of US$800-1000. Shanzhai was able to do it owing to their cooperative and low cost system of manufacturing. It is estimated that about 20,000 to 25,000 shanzhai companies work in Shenzen alone and manufacture more than 300 million cell phones per year. Shanzhai companies focus on niche markets which are too small for the industry giants. The innovations are also suited to the niche markets such as phones with two SIM slots, phones with extra loud speakers, phones with built-in UV lights, phones with compasses, and other similar additions. 

Shanzhai ecosystem has led to the growth of multimillion dollar companies such as Tinno and Xiaomi and with the targeted innovations, shanzhai companies are expected to give tough competition to the biggest players of the global market.