Shanzhai Phones: The Great Socialist Experiment?

The world is learning chinese one word at a time, and the word for this month is certainly “Shanzhai.” It literally translates into “mountain village,” but nowadays it refers to Chinese pirated goods. Counterfeit goods are a massive market for China. According to Kunal Sinha:

Official estimates suggest that counterfeit products account for 15%-20% of products made in China, representing 8% of China’s US$2.6 trillion GDP.

In Western medias, shanzhai is typically used when referring to electronic goods, but in China, just about anything can be “shanzhai-ed.” Semi-proficient designers make shanzhai advertisements by photoshopping Barack Obama with a “Blockberry” (shanzhai overdose). Last week, one of our research analysts accidentally stumbled into a shanzhai restaurant, which except for several minor details (including price and quality of ingredients), exactly resembled a popular hotpot chain. A while back, Adam Schokora posted images of an obviously shanzhai Ferrari. The list goes on…

Mobile

Since the enovate office has dutifully been focusing its secondary research efforts on China’s mobile landscape, it’s only right that I steer this article back on track: shanzhai Mobile.

This story is not as simple as fake iPhones and Blackberries in shopping centers. Rather, it’s a complex issue that touches on a wide range of topics, one of which has recently received a lot of coverage: shanzhai innovation.

Much literature exists chronicling the shift from an imitation to innovation model. In short, mounting competition in the counterfeit market meant shanzhai producers were forced to give their product some additional market value. In the case of cell phones, that once meant adding a flashlight, colorful led lights, and extra-loud speakers that turned phones into portable boom boxes. Competition continued to heat up, so these phones continued to improve. Features like touch screens, translators, e-book capability, and projectors were added so that you now have wildly multi-function phones. If you look hard enough, you’ll find a mobile device that serves as phone, mp3 player, and electric shaver. In many cases, your average Chinese mobile user has a more advanced phone than their richer American counterpart.

Essentially, most new features that manufacturers like Nokia and Apple release will soon-there-after be replicated and combined with a multitude of other features. The shanzhai versions are not without problems of course. Low-end shanzhai mobiles (indeed, there’s a complete high to low end spectrum of shanzhai) will be glitchy and unreliable; yet, for the more than 90% of China that can’t afford a genuine iPhone, shanzhai might just be China’s great socialist equalizing force breaking down socioeconomic barriers to various technologies.

We are in the midst of a massive proliferation of advanced mobile culture in China. Keeping up with rudimentary cell phone usage here will soon be outdated — much more important is the penetration of “online mobile” (internet-ready mobile devices). As 3G technology matures in China, people are flocking to internet ready phones. Here’s yet another astounding China statistic: in 2009 users accessing the internet via mobile devices increased from 120 million to 233 million! When you consider that China has an approximate 384 million internet users, that means 60% of China’s internet users can connect from mobile devices. And as with any stat in China, expect this one to be outdated sooner rather than later.

The question is not whether Chinese consumers will make the transition to internet-ready phones. Taking into account the “equalizing force” of the shanzhai industry, we expect to see an astounding proliferation of these mobile devices throughout most of China’s socioeconomic segments. With that in mind, the question now becomes: will necessary infrastructure be able to keep up with the growth of mobile online use?

And since we’re posing all these questions, here’s another one:
How will your brand / agency take advantage of this new mobile network of internet users?