This is a guest post by Jidi Guo (see end of article for About the Author).

If you ever run into an iPhone 4 for 1300 RMB in the streets of China you just have to keep on walking. If something seems too good to be true it usually is.

The devices look like the real thing at first glance but usually you’re dealing with a Shanzhai ji. Some of the devices are made so well that it hard to tell from the outside what you’re dealing with. With Shenzhen being the Shanzhai production capital, it was something worth looking into during my visit.

It’s not easy as an outsider to arrange a visit to one of the factories but if you ask the right questions to the right people everything can be done. After contacting some acquaintances they were able to pull some strings and arrange a visit to a small mobile phone factory around 30km outside of Shenzhen half way up a mountain. As promised I won’t mention any names or the location of the factory so it’s going to be factory Y run by Mister X from now on.

As I inspected the end products in factory hall I saw the brands were Motorola and Nokia. After taking a closer look I realized that these were Shanzhai phones, rip-offs named with a slight misspelling of the original brand, like Motoloba and Nokla. Shenzhen is infamous of these kinds of electronics and the term Shanzhai is used for these fake versions of international brands.

According to the dictionary Shanzhai can mean two things; a fenced place in the forest or villages in the mountain that have stockade houses. The use of the term comes from Cantonese slang in which ‘shanzhai factory’ means an ill-equipped, low-end factory. A large portion of the Shanzhai factories nowadays don’t deliver poor-quality products anymore but they still carry a bad reputation. A reason to go Shanzhai is to route around the governments difficult regulations to become an official cell phone manufacturer.

Gradually ‘Shenzhen products’ became ‘Shanzhai products’ because they sound the same when people speak Mandarin with a Cantonese accent. Although manufacturing Shanzhai products is not legal the government tends to tolerate it because it helps develop the economy. Inspections do happen, that’s why these kinds of business don’t operate too openly.

Mister X agreed to my visit to his factory and also invited me over for dinner to get a full experience of factory life. Unfortunately the appointment was in the evening, when most of the workers already returned to their dorms. Maybe Mister X planned it this way so that his workers wouldn’t be distracted by my presence. When arriving in the factory canteen the cook was asked to separately make a few dishes for us whereas most of the workers had already eaten. On the wall I noticed shelves that held everyone’s personal bowl and pair of chopsticks in happy colors. There was also a little corner shop that sold alcoholic and non-alcoholic beverages, snacks, instant noodles and basic daily products.

I learned that the factory had around 80 workers at the moment, both male and female ranging from age 20 until 25. The factory used to have up to 120 workers but due to the bad business climate Mister X had to let some of them go because there was no work. The workers earned around 2000 RMB a month, were given 3 meals per day and a dorm room. The workweek lasts from Monday until Saturday, Sunday’s and national holidays were off. Mister X explained that the current business climate for mobile phones wasn’t very good due to the competition from larger factories as well as sole proprietors.

After a tasty dinner one of the workers was called down to take me on a tour of the building. The guy was aged 23 and very friendly, he showed me around the different different areas in the factory also allowing me to take pictures. First he showed the manufacturing hall with long rows of tables, wooden chairs and fluorescent tubes. There were still a handful of workers busy with wrapping up the daily chores. All kinds of hardware parts were lying around from the smallest screws to displays and batteries. The tools used were mainly screwdrivers, soldering irons and a few computers to program software.

Next came the stockroom where different parts were neatly sorted and divided into boxes, including instruction booklets and packaging material. Although inside the building it was a little smelly the hygienic circumstances seemed not too bad. I was told that the floor was swept and mopped everyday to provide a hygienic work and living environment.

I asked if it was also possible to take a look inside the dorms and the guy took me down one level and showed me their living condition. Guys and girls had separate rooms on the same floor. The hallway was full of laundry and the floor was covered with food wrappings and empty bottles. My guide apologized for the messiness and asked me if he should let the workers tidy their rooms before I took a picture. I told him this wasn’t necessary because I wanted to get an idea of how the workers really lived.

The dorms were small and contained five bunk beds allowing maximum ten people. Most of the dorms had 9 people living in them leaving 1 bed as storage space. In the middle of the row of beds was a narrow walking space. Some of the girls’ rooms were decorated with colorful posters of Chinese celebrities and some girls were watching a movie on a laptop. The men dorms were pretty plain and stuffed with dirty laundry. I caught one girl lying in bed with a guy at the men’s dorm and when she saw me she giggled shyly and disappeared under the blanket.

An entrepreneur in Shenzhen, who just started his own Shanzhai mobile phone company explained the ins and outs of this market branch. The process of manufacturing a Shanzhai device starts with the choosing a design of the mobile phone from an image, this is a difficult job because you have to know what what models fit consumers’ taste. After picking the model molds have to be made for the production together with a dummy version that only shows the outside, this takes about a week. Then you take it to a factory to find out if it’s possible to fit all of your requirements into the device you designed.

The essential question is: can it be made? This can take up to 20 days because most of these tasks are outsourced. A returning element is negotiating the right price, it is hard to agree on a good price because everyone wants to make as much money as they can. If the production price in negotiated, the contracting party has to use his own investment money to pay for all the hardware and the production costs. First a small amount around 500 devices is ordered, if there are no defects found and the device sells well larger numbers are ordered. The total process from picking the design until receiving the end products takes up about two months.

Being in the Shanzhai business is all about speed, making the production time as short as possible. Where the international brands are focused on quality and service, Shanzhai is about selling as many devices as possible before the model goes out of fashion. A lot of the Shanzhai phones are sold in lower tier cities and less developed areas overseas.

It is hard to pinpoint which mobile phone will become successful because the popularity of features and appearance can vary per region or city. But overall it can be said that rural areas like devices with a high volume, good reception, bright screens and long battery life. It is hard to make a lot of money from Shanzhai phones. The entrepreneur explains that on an average he makes 8 RMB profit per device, which seems like little money for all the hassle and uncertainties of the business.

About the Author

Jidi Guo was born in China and left for the Netherlands at the age of 4. She is currently in the New Media MA program at the University of Amsterdam and for her thesis project is doing research in China on advanced mobile technology. She tries to study technology from a social perspective and focus on cultural elements of a specific area to gain a better understanding of the use and impact of mobile technology. She also writes at the Masters of Media blogEmail Jidi.

For a related story on the users of Shanzhai mobiles, see The Story of W&L: China’s Great Internet Divide

 

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  • Anonymous

    wow…

  • http://anonymousor.myopenid.com/ Anonymousor

    another foxconn?

  • Mr H

    Hi, great rare inside look in these small shops. What is your take, was the 8 RMB profit downplayed, and the real profit would be higher as it is indeed way too low for so small batch sizes to make any sense!

    • Jidi Guo

      Hi Mr H,

      I’m not sure if he downplayed the profit per device, the prices of Shanzhai phones are quite low in general. Although I think 8RMB is very little money these kind of companies usually sell larger amounts to wholesalers, if the amounts are reaching hundreds per order the profit will eventually add up. 

  • Sillythings

    more photos!

  • http://www.facebook.com/ayyada Wei David Zhou

    Hi Jidi, great article! It’s a very interesting read. Articles like this are what inspires me to move back to China. Have you read “Poorly Made In China”? It also raises some good points about shanzhai culture and how factory owner thinks!

  • Yuin

    Great work to publish about such productions, showing the hard competition, the possibilities and the risk of Chinese market.