David Pierson wrote in the Los Angeles Times, The trend away from fake phones “spells trouble for cellphone 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 over the last decade, churning out knockoff handsets. These manufacturers found buyers not only in China but also in emerging markets in Africa and the Middle East. [Source: David Pierson, Los Angeles Times, October 4, 2011]
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 cellphones. 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."
