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山寨机 - Trends without Brands. Bandit Mobile Phones Big Buzz in China

By GCB_China ⋅ Juli 11, 2008 ⋅

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While many consumers in China are all over brand names, there is an emerging sub-culture trend in the world’s largest cell phone market that goes into the opposite direction. While international mobile phone brands fight for their valuable position in the market, there are consumers who favor a new category of cell phones that not only offer more features and are priced lower but also create a buzz in the Chinese blogosphere – enter: “The Bandit Phones” or “Shan Zhai Ji”….

The phenomenon is called Shan Zhai Ji, which could be translated as “Bandit Cell Phone”. It refers to white box cell phones manufactured by unauthorized or small-scale factories on the South East coast of China.

Though the popularity of Shan Zhai Ji has been building up for some time, the buzz only surfaced after recent news coverage from China Central Television. Shan Zhai Ji has since generated tons of discussions in the Chinese blogosphere. It wouldn’t come as a surprise if someday it’s cooler to carry a Shan Zhai Ji than an iPhone. Shan Zhai Ji is apparently becoming a unique sub-culture with dedicated websites promoting it.

Competition is fierce stirred by mainly global brands like Nokia and Motorola. Most Chinese brand name cell phones have seen better days. So how does Shan Zhai Ji manage to survive and even acquire 25% of China’s handset market?

Shan Zhai Ji copies the designs of popular products such as iPhone and BlackBerry. At the same time, they throw in a lot of other useful functions that mainstream companies do not. For example, extra-long stand-by time of up to one month, dual SIM card support, quadruple cameras and speakers, radio, GPS, touch screen, extra large screen, handwriting recognition, and compatibility with all types of media files.

Shan Zhai Ji even has a lot of functions that you never dream of, such as analogue TV reception tuner, taser, ultraviolet laser for testing counterfeit bank notes and even fortune telling programs. These highly localized functions with Chinese characteristics are not usually on the radar screen of a multinational company’s design teams.

Li Jing from Pacific Epoch analyzes how these companies define their business models. Here is what Jing says: “These Shanzhaiji makers have come up with some very creative ways to sell and profit from their handsets. Shanzhaiji cost control measures:

1. The current development of cell-phone chip modules make designing a new phone similar to a jigsaw puzzle. Many independent design houses (IDH), mostly from Hong Kong or Taiwan, can design a new phone in one month for RMB 10,000 to RMB 30,000 RMB. These guys can churn out copies of the newest phone designs with amazing speed.

2. The low price of hardware: Due to the specialization of manufacturing, keyboards, chips, and screens are widely available and cheap—individual parts can be had for as low as RMB 3. Lower-quality components are even cheaper and hard to identify as substandard.

3. The low cost of assembly: There are thousands of small electronics factories scattered throughout China that can easily switch to making cell phones. The production quality may not be at the level of Motorola, but they are more than capable of assembling a low-end cell phone.

4. The low cost of sales and distribution: Shanzhaiji obviously do not spend the time or money getting licenses for the phones. They do not have their own stores, sales staff or logistics networks; and they don’t do promotions. They do, however, have very localized sales channels that get them into the stores and small shops in towns and villages.

These measures allow Shanzhaiji to keep their costs more than 30 percent lower than those of a brand name cell phone maker. Next, how do Shanzhaiji attract buyers, and what interesting revenue models have they come up with?

1. Pre-installed wireless value-added services, such as monthly downloads of the newest pop songs (which the cell phone company themselves can download for free online), for which the user is charged without his knowledge. Many of the target customers have never touched a computer, but with his Shanzhaiji he can impress his friends with the newest pop songs blaring from his eight-speaker phone! Sometimes, phones will include subscription services that a typical low-end user has little use for, such as daily stock updates sent by SMS.

2. Other preinstalled content give the phones “added value” and even let Shanzhaiji makers sell their phones for a premium to name brands. For example, a “Nokla” phone may cost RMB 50 more than a similar Nokia. Why? The salesman will show you that the Nokla comes with a free set of photos from the Edison Chen scandal! For a hard laborer who has not had time to dig up the photos online, this is a strong selling point. Customers are more than willing to pay an extra RMB 50 for this extra, especially since it is from a “grand brand” such as Nokla.

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