Maker Movement in China

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David Li on the New Shanzhai movement

David Li:

"Hacked Matter (Our think tank studying Chinese copycat industry and culture) noticed something interesting when studying and trying to understand the impact of Maker and crowdfunding on China.

After a round of research in cities including Shenzhen and Shanghai, we discovered what compared them to the evolution of the Maker Movement in Western countries. China has already formed a much larger and better down-top ecosystem, manifesting the ultimate goal of the Maker Movement – democratizing innovation. We call it the New Shanzhai.

The Chinese word for Shanzhai can be traced back to year 1999-2000, representing the act of copying and duplicating brand products. In recent years, Shanzhai has seen some changes in its meaning. The early concept of Shanzhai cell phones refers to mimicking Nokia, Samsung and Ericsson phones, whereas rising production volume and simple mechanical duplication later took a crimp on the profit margin. Presumably, some products later were introduced to the market with some “magic” functions and an incredibly low price. Copying international brands no longer looked so lucrative and was soon replaced by mutual copy. This trend helped build an open ecosystem and imminent supply chain, known as the New Shanzhai, avoiding problems related to IPR.

Take a visit to any mobile phone market in Shenzhen and you will find many vendors sitting behind small booths doing business. However, there’s no way you can just buy one or two sets of phones from these vendors. They are only interested in wholesale, not retail. They sell in bulk – phones of any type, look or function. Phone vendors in other countries will stress the identical functions their phone has to an iPhone6. As for their peers in Shenzhen, their selling point is things you can’t do with an iPhone6.

There is an obvious difference in target market between these phones and brand name phones. Phones designed with a special purpose for a distinctive group of people or a certain environment suit better for the Niche Market, which developing countries and rural areas belong to. Each year 400 million customized phones are sold, accounting for a quarter of the total global shipment. These products are designed to serve cultural customs and living styles. For instance, phones for Muslims can remind users of the time and places to pray; those for construction site workers carry seven speakers. Markets with special needs have been overlooked despite huge potential.

What’s interesting is that this new ecosystem is reshaping the whole phone industry. People would have found it absurd if someone predicted the downfall of Nokia or Motorola ten years ago. However the fact is, Nokia phones no longer enjoy the market position they used to. And who actually remembers Ericsson? Nokia released a phone costing $800 a decade ago. Meanwhile, what we believed were “Shangzhai” phones made in China actually triumphed where Nokia failed by offering a phone for $200. Phone makers continued to roll out new models and improvements to make ends meet, rather than to live up to noble ideas. It took little time for people to discover that similar products could be found on Taobao three years before Google released Chromecast in 2013.

Today, with an investment of $300,000, you can develop smart phones under your own brand – simply follow these steps: Bring your design to Shenzhen; find a factory to produce it; sign an order for 10,000 sets of phones at a price of $30 per set. Wiko, a smartphone brand born in France, only took two years to attain a market share of 18% in the French smartphone market. Now Wiko has grown from a co-production by a French sales team and a Shenzhen phone-making factory to one of the most popular smartphone brands among young French people, ranking it right after Apple and Samsung.

For companies like Wiko and Xiaomi, the key to success lies in localization. The conventional telecommunication industry thinks little of setting up a specific brand for a small amount of needs. However in the past few years, brands featured with more local consumer experience and functions are gaining more popularity. Product customization is a common service seen almost everywhere." (