No Matter Whether You Call It 山寨, Shanzhai or Bandit Phone, This Is A Chinese Consumer Trend Worth Keeping An Eye On
Chinese television programming is generally pretty terrible. Apart from a few exceptions, like Fendou, an addictive drama from last year and tuning into an occasional episode of Duihua, a great business program I rarely watch TV. When it comes to video entertainment I typically stick to Youtube or its Chinese cousins Youku and Tudou. Nevertheless every week I dedicate a portion of time to watching television specifically to observe the advertisements. I like to see how companies market their products, especially how foreign brands localize their marketing strategies to target the Chinese consumer. Yesterday evening I flipped on the television and saw an infomercial for what I thought at first was an iPhone. A male and female host went through the different functions of the phone that looked identical to the iPhone, but when they flipped the phone over to the backside I noticed that the Apple logo looked slightly different from what I recalled. Upon closer examination I found that it was not an Apple “iPhone,” but instead a Golden Apple “Star Phone”.
Golden Apple Star Phone is just one example of a massive number of 山寨机 shanzhaiji also known as ‘bandit phones’ or just simply counterfeit phones. Shanzhai is an adjective that is attached to any number of counterfeit products. While this phenomenon has existed for many years it did not catch the general public’s attention until recently when CCTV broadcasted a special report on the shanzhaiji phenomenon. Surprisingly the news didn’t hurt the manufacturers, but rather is spreading their popularity further.
Shanzhai cell phones look exactly like the original branded products. When a new cell phone model is released, the copy hits the market soon after. The cost of production for shanzhai phones is much lower than for the actual products. Since they are technically illegal, the shanzhai producers do not pay any taxes. Since they steal intellectual property from other companies there are no research and development costs. The end result is a really good knock-off at 1/2-1/3 of the price of the branded product. An iPhone in China goes for around 4,000 RMB compared to a little over 1,000 RMB for the Star Phone.
I went to the BBS online message boards to see what Chinese netizens see as the reasons for buying name brand phones versus shanzhai phones:
Why buy a shanzhaiji?
“They are inexpensive”
“Do not need to worry about if it gets lost or stolen”
“Looks the same as the brand-name phone”
“Often have more functions than more expensive phones”
Why buy name brand phones?
“They are better quality”
“They last longer than shanzhaiji”
“Name brand phones come with a warranty and post-sale service”
“It is worth paying more, because name brand phones can demonstrate one’s status”
There are over 550 million cell phone users in China. On average Chinese youth upgrade to a new mobile phone every 9-12 months in comparison to every 18-24 months in other countries (according to China Market Research Group (CMR) findings). Even though the bbs quotations above show that there are good reasons for why consumers choose to buy the real deal or shanzhai, given how quickly many upgrade to a new phone it is no surprise why shanzhai phones are so popular. It is hard to say to what extent shanzhai phones will continue to overtake MNC market share. All I know is that from a practical perspective if I were a young Chinese consumer with limited discretionary income, instead of buying a real iPhone I would head to Beijing’s Zhonguancun computer market to buy a shanzhai iPhone and then use the leftover money to help pay for a shanzhai Macbook to go with it.