Tech Trend: Shanzhai

The shanzhai of China are a tech trend to keep an eye on. Typically dismissed by popular press as simply the “copycat barons from China”, I think they may have something in common with Hewlett and Packard or Jobs and Wozniak back when they were working out of garages. I’ve heard quite a few stories about the shanzhai while on my most recent trip to China, some of which I will share here.

First, let’s try to understand the cultural context of the word shanzhai. Shanzhai (山寨) comes from the Chinese words “mountain fortress”. The literal translation is a bit misleading. The English term “fortress” connotes a fortified structure or stronghold that is large, perhaps conjuring imagery of castle turrets and moats. On the other hand, the denotation simply states that it is simply a fortified place. This latter denotation is closer to the original meaning from Chinese; in fact, the fortress they are referring to is closer to a cave or guerrilla-style hideout. In its contemporary context, shanzhai is a historical allusion to the legends that dwelled within. One such legend is the 12th-century story of the 108 bandits of Song Jiang. It is still a popular tale today; my father recognized it instantly when I asked him about it. A friend of mine described Song Jiang as a sort of Robin Hood meets Che Guevara; Song Jiang was a rebel and a soldier of fortune, yet selfless and kind to those in need.

The contemporary shanzhai are rebellious, individualistic, underground, and self-empowered innovators. They are rebellious in the sense that the shanzhai are celebrated for their copycat products; they are the producers of the notorious knock-offs of the iPhone and so forth. They individualistic in the sense that they have a visceral dislike for the large companies; many of the shanzhai themselves used to be employees of large companies (both US and Asian) who departed because they were frustrated at the inefficiency of their former employers. They are underground in the sense that once a shanzhai “goes legit” and starts doing business through traditional retail channels, they are no longer considered to be in the fraternity of the shanzai. They are self-empowered in the sense that they are universally tiny operations, bootstrapped on minimal capital, and they run with the attitude of “if you can do it, then I can as well”.

An estimate I heard places 300 shanzhai organizations operating in Shenzhen. These shanzai consist of shops ranging from just a couple folks to a few hundred employees; some just specialize in things like tooling, PCB design, PCB assembly, cell phone skinning, while others are a little bit broader in capability. The shanzai are efficient: one shop of under 250 employees churns out over 200,000 mobile phones per month with a high mix of products (runs as short as a few hundred units is possible); collectively an estimate I heard places shanzhai in the Shenzhen area producing around 20 million phones per month. That’s an economy approaching a billion dollars a month. Most of these phones sell into third-world and emerging markets: India, Africa, Russia, and southeast Asia; I imagine if this model were extended to the PC space the shanzhai would easily accomplish what the OLPC failed to do. Significantly, the shanzai are almost universally bootstrapped on minimal capital with almost no additional financing — I heard that typical startup costs are under a few hundred thousand for an operation that may eventually scale to over 50 million revenue per year within a couple years.

Significantly, they do not just produce copycat phones. They make original design phones as well, as documented in this PDF (it is in Chinese, but the pictures are cool; the collage above is ganked from the PDF). These original phones integrate wacky features like 7.1 stereo sound, dual SIM cards, a functional cigarette holder, a high-zoom lens, or a built-in UV LED for counterfeit money detection. Their ability to not just copy, but to innovate and riff off of designs is very significant. They are doing to hardware what the web did for rip/mix/burn or mashup compilations. The Ferrari toy car meets mobile phone, or the watch mixed with a phone (complete with camera!) are good examples of mashup: they are not a copies of any single idea but they mix IP from multiple sources to create a new heterogeneous composition, such that the original source material is still distinctly recognizable in the final product. Also, like many web mashups, the final result might seem nonsensical to a mass-market (like the Ferrari phone) but extremely relevant to a select long-tail market. Interestingly, the shanzhai employ a concept called the “open BOM” — they share their bill of materials and other design materials with each other, and they share any improvements made; these rules are policed by community word-of-mouth, to the extent that if someone is found cheating they are ostracized by the shanzhai ecosystem.

To give a flavor of how this is viewed in China, I heard a local comment about how great it was that the shanzhai could not only make an iPhone clone, they could improve it by giving the clone a user-replaceable battery. US law would come down on the side of this activity being illegal and infringing, but given the fecundity of mashup on the web, I can’t help but wonder out loud if mashup in hardware is all that bad. I feel there is definitely a bias in the US that “if it’s strange and it happens in China it must be bad”, which casts a long shadow over objective evaluation of new cultural phenomenon that could eventually be very relevant to the US.

In a sense, I feel like the shanzhai are brethren of the classic western notion of hacker-entrepreneurs, but with a distinctly Chinese twist to them. My personal favorite shanzhai story is of the chap who owns a house that I’m extraordinarily envious of. His house has three floors: on the top, is his bedroom; on the middle floor is a complete SMT manufacturing line; on the bottom floor is a retail outlet, selling the products produced a floor above and designed two floors above. How cool would it be to have your very own SMT line right in your home! It would certainly be a disruptive change to the way I innovate to own infrastructure like that — not only would I save on production costs, reduce my prototyping time, and turn inventory aggressively (thereby reducing inventory capital requirements), I would be able to cut out the 20-50% minimum retail margin typically required by US retailers, assuming my retail store is in a high-traffic urban location.

Those who read this blog have probably seen my posts about the markets in Shenzhen. I always had a theory that at some point, the amount of knowledge and the scale of the markets in the area would reach a critical mass where the Chinese would stop being simply workers or copiers, and would take control of their own destiny and become creators and ultimately innovation leaders. I think it has begun — these stories I’m hearing of the shanzhai and the mashup they produce are just the beginning of a hockey stick that has the potential to change the way business is done, perhaps not in the US, but certainly in that massive, untapped market often referred to as the “rest of the world”.

98 Responses to “Tech Trend: Shanzhai”

  1. USTCer says:

    Just for your information: the correct pinyin for 山寨 is Shanzhai not Shanzai. It’s funny that the WSJ article in the first link used both Shanzhai and Shanzai.

  2. Brent Durbin says:

    That is great stuff. Must now learn Chinese…

  3. bunnie says:

    Thanks for the correction on the pingyin. I believe I fixed all instances.

  4. joe_bleau says:

    So, why not have your own SMT line? I’ll bet you could buy everything you need (copied from the original manufacturer’s designs, obviously) and have it shipped over. Would it be too labor-intensive to actually run it yourself?

    I am happy to hear that there is at least some (basic, almost cosmetic?) innovation taking place among the low-end copy shops.

  5. Mr.B0y says:

    Just wanted to let you know that I feel like I just got done reading an article in Wired, only better and more insightful. Thanks! :)

    • David Sutherland says:

      This is the way Wired used to be, but yes, even much better than the old Wired.

      kudos bunnie.

      Great mix of observation and personal expectations and philosophical outlook too.

  6. bunnie says:

    I did look into the prices of equipment in china and they are about 20-50% that of used equipment bought in the US. The problem is that shipping an SMT machine in one piece to the US would not be cheap; compound onto that the tariff I’d have to pay, the zoning issues of putting an SMT line in your house, and the 20-30x cost of labor to maintain and run the machines, and it’s not looking as attractive. The other important thing about that setup is the retail store on the bottom floor. Not only can that guy make stuff, he can move it — I imagine the equivalent would be getting a retail store in downtown San Francisco with this equipment in there. The rent would be astronomical, and the landlord probably wouldn’t allow (or be zoned for) mixed living, manufacturing, and selling.

    Also, the innovations aren’t simply cosmetic; while many are, stuff like the watch-phone, zoom lens and 7.1 sound required at least a redesign of the PCBs and custom tooling. Furthermore, the PDF slideshow has some screenshots of what looks like custom firmware to support these additions. A minor redesign of a phone PCB and opening custom tooling would be extremely expensive if done by a Western design shop…granted, these redesigns are not carrier-certified but there’s a fair bit of effort in there.

    • James Jones says:

      I must beat this drum again: This is what http://www.cubespawn.com hopes to address – I know, I know this is an old post (but a great one!) and I already commented below, but the idea is SO relevant to small manufacturers automating production – and, its an open source project! So everythings available to anyone who will invest the effort to build or buy the machines they need – in a few years anyone could be building open source phones on an open source SMT line, no IP issues at all!

  7. Bruce says:

    7.1 on a phone! And I thought my Android G1 was cool. DO WANT!

  8. Hmm. Apartment, factory, and retail all in the same place. No problem.

    Right now I’m in the middle of setting up my new 1100 sq ft apartment with the living room as a production studio, the “master bedroom” as a (steampunk themed) office, and the smaller but still large bedroom as a private mini-apartment, complete with minifridge, “sitting room”, etc.

    I’m a publisher, so my equipment is some big ol’ surplus tabloid laser printers, two binding machines (one from Goodwill, the other found dusty and abandoned in a local art space), a couple of laminators (one from Odd Job, the other from an elementary school teacher), and well, you get the idea.

    If you’re willing to put in the time to find and learn how to use surplus equipment, willing to live in a not so cool neighborhood in a not-so-cool city to get enough space at a cheap rent, you can do all of the things you’re talking about right here in America. Lathes, grinders, welding equipment, soldering stations, and all the rest can be found in Craigslist business listings or at surplus places. Parts can be salvaged if , like the guys in the article, you’re willing to accept only being able to get a few hundred of a part and then have to redesign.

    You want to do this? Move the f*ck out of Silicon Valley/New York/Boston/Whatever, and do it. Put all your equipment on wheeled racks so you can fit more in less space and even shove it all into the bedrooms for the occasional party. Find alternatives to organic solvents and loud equipment or, as I once did, build sound baffles under your machine tools (I used a floor of plywood shelves laid on three layers of blankets). This way your neighbors won’t complain and the police won’t get pissed at you.

    All of this is possible. You just need to let go of how you’re used to doing things.

  9. Btw, sorry to sound so snippy. You did write a great piece. i just wanted to point out that it’s not exclusive to China.

  10. visor says:

    Bunnie my ol’ fren… GREAT ARTICLE!

    btw… why don’t you have a 2nd home at ShenZhen? You won’t be out of place there… : )

  11. JohnR says:

    I wonder if anyone on here can tell the difference between money from Taiwan and money from the mainland. The picture of the person holding the money to the UV light on the phone is clearly Taiwan money.

    It makes me wonder if these products were not created in Taiwan. Definitely looks like they are sold there from looking at the pictures from the linked to PDF.

  12. RPW says:

    That’s a great article. In some way the future has arrived faster than I had hoped for.

    A rather practical question: are any of them selling enhanced G1 knock-offs already? ;)

  13. Faried Nawaz says:

    I heard that typical startup costs are under a few hundred thousand for an operation

    Is that in CNY?

  14. scottjg says:

    I’m curious what exactly does an “smt line” entail? is it just the pick&place machine + a reflow oven?

    I would imagine that you could get a small reflow oven and a pick&place for like a few grand (is this way off?), and it would be reasonable to have the equipment in a small apartment. Probably the worst part would be etching the pcbs, but you could just outsource that to china :)

    now having a storefront in a residential location… that’s problematic.

  15. Kurt says:

    This is completely like the chinese electronics workshop in Neal Stephenson’s novel The Diamond Age.

  16. [...] bunnie writes… The shanzai of China are a tech trend to keep an eye on. Typically dismissed by popular press as simply the “copycat barons from China”, I think they may have something in common with Hewlett and Packard or Jobs and Wozniak back when they were working out of garages. I’ve heard quite a few stories about the shanzai while on my most recent trip to China, some of which I will share here. [...]

  17. George T says:

    So when somebody clones an iPhone, Apple gets $0, right? How much did they spend to develop the software in there, do you think? Mash-ups are great, but it’s not exactly like these guys buy an iPhone and strip it.

  18. LanderX says:

    Honey… We are moving to China!!!

  19. This is beautiful. Yet another example of how IP laws are stunting innovation.
    A few years back, I was planning to study product design with a focus on electronics, combining my original ideas with features I loved.

    And then, coming to realize that all these features, even the most simplistic and obvious ones were patented and that I wouldn’t have a chance to realize the devices I’d dreamed up, my plan lost all it’s glory.

    Thanks for the article, and I hope you’ll write a followup article with more details on this, your blog has been added to my subscription list.

  20. George T says:

    Shoot at the same time, I’m torn. Thinking up new stuff requires grey areas. It requires saying, “screw it, let’s just do it”, and that’s what these guys are doing.

    At the same time, due above has a point. I live in Philadelphia, and frankly, if you drive around or take the train around north Philly, there’s acres and acres and acres of factory space that you can do whatever you want with. Some of it in crappy neighborhoods, but some of it in so-so neighborhoods with retail frontage. The real meal deal here is several:

    1) You like San Francisco/that area, and frankly, that’s way way more expensive than anywhere else in the country.
    2) How many people do you think you really need to do what these guys are doing, and do you really need to pay them $1200/year? These guys are selling into markets where folks don’t have so much cash. In somewhere like north Philly, people are po, sure, but make 20x more than the average Chinese anyway, so just maybe you could make the economics work.
    3) Lawlessness–You’re right that someone would go after you here as IP laws are enforced by the many lawyers in the US vs. China where the whole culture is different. Zoning, same thing, though I think you might be able to get away with that differently in a less affluent area.

    Part of the issue in the US is that the affluent areas have separated themselves so much from everyone else that someone in your position would never really consider a different place/way of living.

    Number 3 is still the top ticket item.

  21. Now we wait untill that day Apple/Nokia will copy Shanzhai’s innovations!

    great story

  22. Hugo says:

    This is already happening, mexico is full of chinese hiphones and knockoff mp3, and mp4 players. People can’t get enough of these cellphones with integrated tv tuner are the latest thing, or devices that have mp4, ebook and tv, for mere 100 dlls. There are no official figures but my estimate is that these are sold 20 to 1 to the likes of ipods and other “brand” products.

  23. James Jarvis says:

    scottjg: A SMT line would typically be: stencil printer, pick and place machine, reflow oven, water wash and drying oven, automatic visual inspection, possibly x-ray inspection, and rework equipment. Your support equipment would be a lot of power available (12kW for the reflow) and an air compressor. Used prices in the US a mid 90′s vintage, but functional, line might be $100k to $200k. A old pick and place and a small reflow oven alone might be obtainable for $10k to $20k.

    • chad oliver says:

      Hmmm. But that’s for high-volume production, surely? I mean, sure, there’s a large difference between hobby and professional electronics, but a basic smt reflow oven can cost $500. Sure, it’ll only do roughly 5 boards at once, and take 20min instead of 5sec, but it works.
      There’s a difference between mass-market-manufacturing and small-scale manufacturing, but sometimes it’s a good thing.
      Let go of your preconceptions . . .

  24. George T says:

    The other issue here is that because we’ve moved the whole ecosystem out of the U.S. except for the very top end, there is no longer the large mass of people doing this stuff from which to draw a movement of people trying new things. There has to be a surplus of people and money and freedom of action.

  25. George T says:

    The whole thing makes me think of the “hamsterdam” drug-selling zones that the police commander sets up in the HBO show The Wire. It’s the right thing to do, and it can be made to work, but it’s politically impossible to do. Same thing with this stuff in the US right now; it’s politically impossible to let people run with things, cutting corners and whatnot, to spark this.

    Also, I’ll bet you $10 that the folks working in these shops (in the SMT lines and whatnot) are in no way able to form a union. What are the wages and benefits that these folks get? It’s sort-of like the US in the mid-to-late 1800′s with all the folks walking into the cities off the farms. With a surplus of labor, the proprietor has a lot more freedom of action and cash flow.

  26. Roland says:

    You can’t do this sort of thing in the US anymore because if you really innovate you are likely to get sued over some BS “submarine patent” that you had no idea ever existed. One example: rambus. They can do this in China because they aren’t hampered by bad law which has been purchased by the big guys. That’s why innovation in the US has no future.

  27. peter says:

    Everyone should calm down about the IP/copy/sue subject. The history of the USA is exactly the same. Starting in the 1700s they copied all of Britain & Europe’s IP, and when they were on an equal footing, they started to play by the rules.
    China will go the same route. When they own enough of their own IP, they’ll also play by the rules.

    • David Sutherland says:

      I think people aren’t so upset that China has an advantage because the ignore IP, it’s that people are upset that as Westerners we are at some disadvantage because the IP laws are too stringent.

      Hoping that China will go the same route isn’t hoping for much.

      Leveling the playing field so we are all equally disadvantaged isn’t a win, it’s a lose-lose.

      Some wise people need to figure out what just the minimum of IP protection should be and scale it back so an entrepreneurial spirit can return instead expecting only mega tech companies to innovate.

      • James Jones says:

        As the population rises at 75 million net gain per year, (75 million new consumers!!) –(http://www.census.gov/ipc/www/popclockworld.html)

        the likelihood that IP laws will remain relevant continue to diminish – it is an antiquated model that favors the privileged. It is probable it will lose traction just like it has for music and other media increased enforcement, lawsuits, etc. have had a minimal concrete impact. So as hardware design opens up, the future does not look like the past, except superficially – when the carrying capacity threshold is crossed, things like IP laws will be a little to esoteric in the face of the likely series of crisis’s coming up – remember the (pseudo) Chinese curse: may you live in interesting times!! http://en.wikipedia.org/wiki/May_you_live_in_interesting_times

    • osef says:

      FUCK YOU SON OF A BITCH

  28. bunnie says:

    The comment about having the shop in San Francisco isn’t because I live in San Francisco (although I like San Fran, I don’t live there because it’s too expensive for me). The comment is that if you have a retail outlet, in order for it to be effective, you need to be near a population center that can generate traffic from a market that would go for home-crafted electronics goods. Silicon valley / San Fran is that place.

    Thus, the retail shop on the bottom floor in these electronic market districts of China enables goods to actually flow; your neighbor is selling parts to you, the guy across the street sells your production tools, and the entire block is focused on electronics production, consumption or distribution in some way. The turnover of goods is high so that your SMT and design shop on the floors above can turn a profit.

    More significantly, if you own your own retail shop, you’re not paying a distributor’s and retailer’s margin. So the actual innovator is retaining a bigger slice of the pie that they create. US retailers pocket around 20-50% of the sticker price. Being able to create *and* sell your own goods direct in a lively local market is a big cost advantage. Again, opening a shop in the rust belt of the US doesn’t give you that advantage!

  29. cmholm says:

    George T, I think the mass will be there if enough of the US engineering & CS (and hell, ITT) grads look at what’s out there and decide it’s worth the risk to give the shanzhai way a shot, rather than immediately slotting themselves into Burr-Brown, etc.

    Keep in mind, as my haole nephew in Guangzhou does, that the ersatz cyberpunk economy you see in China is a result of people having to really scramble to make ends meet, never mind get ahead. It’s a reminder to me that even as I tinker at my garage workbench and dream, actually living in the world of the Neuromancer could really suck.

    • JG says:

      Minor detail: Burr-Brown was bought by and fully integrated into Texas Instrument back in 2000 (!).

      I realize that now that nearly no semiconductor work (or other manufacturing) is actually done in the US that awareness of major changes in these industries is prone fade out of general public awareness into oblivion.

      TI btw has shutdown their digital fabs and now uses Taiwanese foundries (TSMC IIRC). They did open a new analog fab (it’s dicey to do advanced analog with a foundry) but they also announced a stellar hire of 200 people total for that fab (including all technician and facilities jobs).

  30. Anonymous says:

    Bunnie, what are your thoughts on the future of the US vs China. Are we going to end up like England when manufacturing/textiles was brought here to the US(due to cheaper costs/labor/ ie: slaves) in the 1700/1800′s? And will China end up being the next US?

  31. bunnie says:

    That’s a loaded question…

    I think the answer does not lie in social policy or technology or law or lawlessness. I think the answer lies in the attitudes of the children of each society; ultimately an economy is driven by the aspirations and habits of the people upon which it grows.

    That being said, I can’t get a new college grad in the US to solder fifty switches together if it isn’t in their job description, even if the pay is substantially above minimum wage. In fact, the higher the starting salary, the harder I imagine it would be for me to convince that new hire to do a little bit of soldering when we’re in a production pinch. Enrollment in engineering is dropping precipitously in the US; see this post: http://www.bunniestudios.com/blog/?p=157 . There are more overseas applicants to the engineering school mentioned in the blog post with the surname “Lee” than there are domestic applications overall. However, I do think that US colleges are turning out very creative people with a lot of talent for content and service-related industries (and thanks to our protectionist visa policies, we are also educating lots of overseas talent and sending them back home — making more jobs here in the short term but more competition in the long term).

    On the other hand, young college grads in China are lined up outside factories to work hard for $0.60 an hour, and being an engineer in China is hot right now; everyone wants their kids to go into something related to manufacturing and production. They also have four times the population, which is a huge natural advantage for labor-intensive industries.

    To be clear, I don’t think the US is doomed — we still have a vibrant economy and plenty of smart, hard working people, and I enjoy living here (although the broken housing and credit markets along with rising taxes are starting to make other places look more attractive). We’ll always have high value-add local manufacturing; our challenge is to keep on innovating. Things will just be different, and if our world leaders learn to cooperate (like the US and the UK eventually did), I think things will actually be better for everyone. Competition is a good thing: it drives innovation.

  32. The Snob says:

    Shenzhen is a gritty, grimy industrial town–it’s more Cleveland than San Francisco. Hong Kong or Shanghai are probably better comparison points.

    The US is a pretty big and mostly empty place if you head out beyond the radius of Starbucks/Banana Republic/etc. Land prices go down, labor gets cheap, and your neighbors don’t complain about you storing an old bulldozer in your front yard so long as you let them use it once in a while.

    As for retail, UPS will get your product anywhere in the US in a few days pretty cheap, all things considered.

  33. The Snob says:

    Also–it will be interesting to watch as I bet engineering enrollment will improve over the next few years. Finance has been the place to be for a large chunk of the brightest kids (you can’t blame them for chasing the brass ring) but that is going to be down in numbers and out of fashion for a while.

    For all the @#$! people talk about engineering as a career path long-term, in my circles I’ve never heard of a BS Civ/Mech/EE/ChemE having a hard time getting a job after graduating or staying employed for the first 5-10 years after.

    • JG says:

      I agree for the most part.

      When I was in high school it was a toss up between becoming a doctor, becoming an engineer (EE, ChemE or ME) or becoming a scientist (physics or chemistry).

      The statistic that pretty much cinched getting an EE was research my parents had dug up somewhere that showed that people who went into pre-med with the intention of going to medical school and then becoming MDs had a post-pre-med admission rate of ~30% of applications, while the post-engineering school med school admission rate was >90%. This meant going to engineering school would both keep all options open in a very strong way, prep me better than pre-med and allow me to delay deciding anyway.

      Engineering is a far superior training for any other professional pursuit than even the standard corresponding undergrad pre-professional majors. It instills a self-discipline, rigor and brutal honesty that makes other professions pretty easy.

      The only caveat is if you make the mistake of working for a Fortune 100 company as an engineer. Odds are you’ll be laid off on or around your 40th birthday because you’ve become too expensive to keep and not obviously enough in value (gray hair is ugly and an obvious proof you don’t know anything new – actually heard that from a manager once – sure I could have sued but better to take their lunch away from them working for a smaller competitor). Avoid the Fortune 100 from the start or be prepared to jump to a start-up or smaller company and you’ll be golden.

  34. Anonymous says:

    Perhaps I am a bit jaded in my perspective, but I just cannot see how in the long run, we can still compete with China. We lack in highly educated engineers, we lack in a population that is willing to do the hard, menial work, all for at least 1/10th the cost. Nearly everyone I know in the semiconductor industry has already migrated to China to do their business there, whether it’s to set up a factory, or lead a team, and none of them are/have taken significant pay cuts as they are considered expats. . . All our experience and knowledge is getting transferred in a one way direction. And once the Chinese gets the knowledge, they can easily build upon it and innovate from there, and surpass all technologies we have here. . . The Japanese did it, and we’ve never been able to make great TV’s, cars etc after that . . . . . . The Asians took over the LCD market, and other than the Intel/AMD, it’s asia who produces all our chips. There is not much left in the US other than being sort of a think-tank/research-based country. But you need manufacturing here in order to succeed to drive an economy. The way I view it, the US is like Bell Labs.. . Great place for innovation, but it got stuck in it’s own bureacray and inability to execute. Although every important technology that drives our world today was invented there, the majority of it was developed by another company, and hence someone else got the revenue. Sure, we’ll be ok in the short term. . . but it’s the long term that worries me.

  35. Alan says:

    Great article. I’m envious of the 3 floor home/production/retail space.

  36. [...] bunnie’s blog » Blog Archive » Tech Trend: Shanzhai (tags: electronics technology economics opensource hack china innovation) [...]

  37. Wesley Parish says:

    Bunnie, FWLIW, I suggest the best translation of “Shenzhai” would be “mountain fortification”, because a fortification can be anything from a fort to a spur of rock with a cave behind it and a small wall of rocks for the inevitable armed men to fight from.

    As far as it being a source of innovation and lightning-fast development, well, that stands to reason if – as the businesspeople are continually whining – bureaucracy stifles innovation, inventiveness and development. They never go far enough, though – a private (company) bureaucrat is just as poisonous as a public )government) bureaucrat, to anything such as development. So if the inevitable bureaucrats did what Hausbotcher and crew were told to do by Pepper in Strugatsky Brothers’s “Snail on the Slope”, things would be hunky dory.

  38. [...] That was interesting but thanks to my fabulous Slashdot RSS subscription, I found a truly fascinating is new post at Huang’s blog about small hardware mashup firms. They form a subculture called SShanzhai that can produce small-run knock-off and innovated electronics with feature swaps and other modifications (iPhones with user-replaceable batteries, anyone?). They work cooperatively with each other through an open BOM system, and remain tightly knit until a firm goes legit and is thus out of the fold. [...]

  39. Bode says:

    Ahh the joys of living without certification! IMHO the biggest liberating factor in the success of Shanzhai electronics is the complete absence of certification requirements, electrical, shielding, EMC, rf power emissions. That is not to say that these electronics are unsafe, however most will fail any form of EU/USA certification. I’ve tried bringing up some of these devices for legitimate sale in the “West” and it has eradicated all the cost benefits compared to mainstream China or Taiwan manufacturing houses. Best way to make a product lighter/smaller/cheaper? Leave out the rf shielding. Whack in a bigger antenna, up the power! If the pesky customer demands RoHS and EMC report just bribe the local certification house. Who cares, it’s cheap, everyone’s still making money.

  40. hwertz says:

    Sounds like the “open source hardware” movement that was a bit popular a while back. It is still around, they have some FPGAs etc. and “Make Magazine” was kind of an offshoot of it. Sounds like the shanzhai are taking it further though. I think I read about something almost exactly like this in one of the old William Gibson books — they had people riffing off each other’s designs, improving on them, etc. “in the shadows” and outdoing the big corps.

  41. bunnie says:

    Bode — that’s an excellent point that I didn’t put into the original post for the sake of brevity. EMC certifications are excellent (i.e., strong and politically safe) trade barriers. EMC and carrier certs are not entirely superfluous, but they are extremely conservative to the point of being burdensome. Ownership of spectrum in particular gives carriers an inherent monopoly on gadgets that service their networks. It’s a seemingly minor point at first but my suspicion is that this will play a non-trivial role in shaping the geopolitical future of consumer electronics. A forward-looking Secretary of State would be demanding all emerging markets to enforce EMC certification so as to make sure that all imported products sold into those markets face the same high design barrier as US-designed products, otherwise folks like the shanzhai will have an advantage in time to market and development cost. Again, this is a politically safe demand because you would demand it under the guise of helping developing nations to create EMC guidelines that allow for interoperability, and never mention the fact that it’s also a trade barrier.

    That will probably never happen, so I’m waiting for the point at which the developing nations have better gadgets in their markets before the first-world nations do because the barrier for innovators to sell into them is so much lower. EMC certs can take months, and being able to perform cost-recovery on your products that much sooner could be compelling enough for some gadget makers to sell first into those markets. The language barrier between some emerging markets and US markets is also pretty high, so second-tier players probably wouldn’t sacrifice marketing buzz for doing that, if you were careful about changing the naming of the product between markets.

  42. Rudi says:

    Any idea where I could contact some of these guys?

  43. [...] Bunnie has written an extensive and illuminating post about the Shanzhai – a group of Chinese hackers that make all kinds of beautiful and strange devices – and that are making good money doing it. (The photos here are stolen from the PDF he posted. Yup, that’s an apparently working cigarette-pack-cum-phone.) [...]

  44. Bode says:

    I think that enforcing EMC is a good idea, the message on RoHS (Restriction of Hazardous Substances Directive, principally lead) has certainly been heard in Shanzhai and nearly all components are RoHS compliant now. I think this has been a trickle down effect from the main consumers of parts, the bigger fab houses, and innovators simply pick up these parts as they have always done.

    I also think the engineering attitude is subtly different than that in the west, or we engineers in the west self censor a lot better, and that will make EMC adoption harder. Like all engineers we try to improve what we do, we keep working, tinkering making it better constantly, but in the west we are focused on shipping product to a deadline. Shanzhai engineers just keep tinkering, constantly improving the device, revisioning through all the components to drive costs down, or improve the product regardless of where in the product cycle they are. They do seem unaware that changing an antenna for example invalidates months of EMC certs. Moldings and dies are also a problem. Rapid fab plants tend to eat up the dies and the dies themselves are not as solid as more “conventional/professional” fab houses. It allows them to make running changes, continually improving and innovating in the product. Second sourcing to cheaper screens and other high BOM cost parts on subsequent runs is another great way to save cash. ;)

    • JG says:

      The leading edge is always evolutionary in process. By definition it’s going to be more wasteful with dead-ends and failures. Top-down (corporate) is “more efficient” in a superficial way but more incapable of actual innovation at all.

      Don’t get me started about RoHS! Airborne, nanometer tin whiskers!! No, not solved, only hidden by disconnecting field failure from manufacturing due to outsourcing just like CDO financial instruments disconnected bad debt failure from origination commissions by legally separating the two functions with market insulator.

  45. [...] See also: Tech Trend: Shanzhai « That song you just played… play it again!   Presented without comment » [...]

  46. Here are some 360 panoramas from some places like this in Shenzhen, taken just a few days ago (inspired by this article, actually)

    http://www.360cities.net/image/crazy_cellphone_from_shenzhen_made07

    http://www.360cities.net/image/crazy_cellphone_from_shenzhen_made08

    :-)

  47. Bode says:

    Also on Boing Boing, Tom Igoe’s Geeky phototour of Shenzhen

    http://www.boingboing.net/2009/03/01/geeky-phototour-of-s.html

  48. [...] Shanzhai, guerrila hardware hackers of China Published March 3, 2009 Uncategorized Great article at Bunnie Studio on Chinese hardware hackers, who are doing for hardware what mashups did for music. [...]

  49. Steve says:

    Very poignant article. I like the idea that China’s critical mass will eventually let its people break free of the US/Wal-Mart slavers. If you find the time, please write more articles like this – I think you have a gift of insight into this area.

  50. Shan Zai says:

    We are actualy situatet in HongKong adn Shenzen and tracking the trend…if you like to get more Infos about the rising trend here in china join us

  51. [...] Thanks to peijinc on twitter for pointing out this story. It seems that Shanzhai is spreading outside China’s borders these days. Some inventive car enthusiast has taken aspects of 4 different cars, and mashed them into 1 way awesomer super-car. Judging by the license plate in one of the photos, I can only guess that this was built in California. You but gotta admit that whoever built this has some Chinese/Shanzhai spirit in ‘em for sure. [...]

  52. [...] Speaking of Shanzhai (as I was yesterday), here’s a wacky Sony PSP mod that I came across on a Chinese website. Or maybe it’s just a skin… Well, to be honest, I don’t want to spend too much time trying to figure out what the hell this is. [...]

  53. [...] Take a look at this article from Bunnie Hwang, reporting on the copycat industries in China. [...]

  54. jhsl says:

    bunnie – first off, great article.

    i was wondering where you got some of the statistics for it (e.g. how many shanzhai phones are produced a year)? I am looking into writing an article, but can’t seem to get any good numbers…

    also, what do you think of the business implications for foreign companies of the massive growth in popularity of shanzhai? do you think more shanzhai makers are using the hip/folksy image of shanzhai now to make more straight-up counterfeit products? that is, shanzhai that is not a clever parody of the original, but simply a fake?

  55. [...] desdeTech Trend: Shanzhai « bunnie’s blog. [...]

  56. anon says:

    sdefsdfsdsdgsdg

  57. [...] to stir up the heat that took over the comments of my last post on the topic, but the crafty Chinese shanzai crew are at it again. Loathed to wait for an official release of an Apple-branded Netbook, a [...]

  58. [...] the shan zhai on a recent trip to Shenzen, China, hosted by PCH International and Bunnie Huang (Bunnie’s got a good blog post describing the shan zhai). The popular image of these companies in the US is that they’re producing cheap knockoff goods [...]

  59. [...] the shan zhai on a recent trip to Shenzen, China, hosted by PCH International and Bunnie Huang (Bunnie’s got a good blog post describing the shan zhai). The popular image of these companies in the US is that they’re producing cheap knockoff goods [...]

  60. dbm says:

    Good article BH, that I bookmarked you for reference .
    I keep looking at trends , and I foresee that the U.S. will have to adopt a more cooperative stance ( geopolitical/economic/technological/social ) and less of one as a prime mover…….. interesting times indeed.

  61. bre says:

    Great article, very inspiring. I want to come visit sometime!

  62. [...] the shan zhai on a recent trip to Shenzen, China, hosted by PCH International and Bunnie Huang (Bunnie’s got a good blog post describing the shan zhai). The popular image of these companies in the US is that they’re producing cheap knockoff goods [...]

  63. [...] part of the “open” repository of hardware knowledge I previously mentioned in my post about the Shanzhai [...]

  64. Kevin Carson says:

    I’m a latecomer to the thread, but this is beautiful. Your description of the shanzhai sounds a lot like the household “shadow factories” that emerged in postwar Japan, and the small factories and machine shops of the Third Italy (with the shop on the first floor, and the workers’ apartments upstairs) as described by Piore and Sabel.

    As Peak Oil levies a prohibitive tariff on the “warehouses in container ships” economic model, we can probably expect China’s sweatshops and distributed manufacturers to reorient themselves to the domestic market and treat the old TNC headquarters as redundant nodes to be bypassed. At some point they’ll figure out that all the actual productive activity is outsourced to the distributed manufacturing network, and the corporation is just a bunch of useless eaters living off the rents from branding and IP. At that point, they may decide to just make the products themselves and ignore the patent and trademark “rights,” eliminate the brand name markup, and simultaneously cut prices and raise wages by several hundred percent.

    This may be the answer to all the safety and quality problems currently afflicting Chinese goods imported into the U.S. Most of these problems result from all the game-theory implications of producing stuff for people who have no effective feedback mechanism or leverage. When you’re producing for your neighbors and they can take their business elsewhere and tell everyone else to do the same, reputational mechanisms are a lot more important.

  65. Alex Rollin says:

    I lived in Shanghai for a bit. My interaction with the young workers at our company was not as extensive as I would have liked, but, ours was an OpenSource software initiative and we had the opportunity to fuel some community participation and to extend the reach of the employees into that community and the larger business community while providing services to our main clients.

    I found that the employees were very interested in innovating and creating and that they had, much like the engineers from the US, Canada, and Europe that I have worked with, that they were interested in innovating for their own reasons.

    It’s important to note that the depressed value of the yuan serves to enable a great deal of access to production equipment in China. At the same time, my experience tells me that it’s also important to remember the value of a distributed manufacturing base that doesn’t use exploitative practices. Those practices stymie innovation in China just like they do everywhere else.

  66. ben says:

    reminds me of Hasan-ibn-Sabah and the Hashashin and the mountain fortress Alamut …

    Only difference is these guys don’t assassinate high-ranking military officers … they assassinate corporations.

    mwa ha ha

    more power imo

  67. [...] This is what happens when hardware goes open source. Thanks Adam! The contemporary shanzhai are rebellious, individualistic, underground, and self-empowered innovators. They are rebellious in the sense that the shanzhai are celebrated for their copycat products; they are the producers of the notorious knock-offs of the iPhone and so forth. They individualistic in the sense that they have a visceral dislike for the large companies; many of the shanzhai themselves used to be employees of large companies (both US and Asian) who departed because they were frustrated at the inefficiency of their former employers. They are underground in the sense that once a shanzhai “goes legit” and starts doing business through traditional retail channels, they are no longer considered to be in the fraternity of the shanzai. They are self-empowered in the sense that they are universally tiny operations, bootstrapped on minimal capital, and they run with the attitude of “if you can do it, then I can as well”. [...]

  68. [...] Chinese shanzhai phenomenon was featured recently in posts by Andrew “Bunnie” Huang and Tom Igoe.   To me it’s striking reminiscent of the flexible manufacturing networks of [...]

  69. James Jones says:

    looks like I’m rather late to the party… ;-)
    I have started an open source project to build FMS cells – its very preliminary, but I AM making progress… then I run across this post, good to see its a popular idea!!- take a look http://www.cubespawn.com and robotsshallrule.blogspot.com (if you please…)
    thanks,
    James

  70. [...] A couple of fascinating posts on Shenzen small manufacturing. Significantly, they do not just produce copycat phones. They make original design phones as well, as documented in this PDF (it is in Chinese, but the pictures are cool; the collage above is ganked from the PDF). These original phones integrate wacky features like 7.1 stereo sound, dual SIM cards, a functional cigarette holder, a high-zoom lens, or a built-in UV LED for counterfeit money detection. Their ability to not just copy, but to innovate and riff off of designs is very significant. They are doing to hardware what the web did for rip/mix/burn or mashup compilations. The Ferrari toy car meets mobile phone, or the watch mixed with a phone (complete with camera!) are good examples of mashup: they are not a copies of any single idea but they mix IP from multiple sources to create a new heterogeneous composition, such that the original source material is still distinctly recognizable in the final product. Also, like many web mashups, the final result might seem nonsensical to a mass-market (like the Ferrari phone) but extremely relevant to a select long-tail market. Interestingly, the shanzhai employ a concept called the “open BOM” — they share their bill of materials and other design materials with each other, and they share any improvements made; these rules are policed by community word-of-mouth, to the extent that if someone is found cheating they are ostracized by the shanzhai ecosystem. [...]

  71. The success of Shanzhai is the combination of consumer demand and business owners who serve it. At the core of the growing Shanzhai market is the fact that sales are growing. Until sales level off this totally capitalist unrestricted industry will continue to grow as well.

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  75. Issac Maez says:

    Good point, many thanks for the write-up.

  76. Dear Bunnie,
    My name is Arya Schellemberg and I am SortFix’s MarCom Manager. I contacted you in the past and now I am doing so to keep you updated on our latest improvements, I believe you and your readers will find it very interesting and useful.
    Recently SortFix has expanded the search results not only to those retrieved by Google Search, but also to Twitter Search, Bing, Youtube and Bing Images and are currently working on doing the same for other search engines. On top of this, even though the search engine is partly based on flash technology, we are developing a non-flash application to make it possible to use it also on mobile devices such as iPhone or iPad.
    You’re more than welcome to visit our website:
    http://www.sortfix.com
    We are always delighted to get some feedback.
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  77. [...] Chinese experience already shows the productivity of open and distributed manufacturing, though their shared designs are often the [...]

  78. [...] bunnie : studios, Tech Trend: Shanzhai. The contemporary shanzhai are rebellious, individualistic, underground, and self-empowered [...]

  79. tissit says:

    This makes me want to move there. They might not have use for me, though.

  80. [...] such as the HiPhone or iPed, and it literally means “mountain fortress” but it refers to a cave or hide-out, being an allusion to the legend of Song Jiang, a sort of Chinese Robin [...]

  81. pp says:

    Any idea where to buy these in Hong Kong?

  82. Meg Propp says:

    3d technology is coming to cell phones soon. pretty crazy stuff. wont need to use glasses or anything.

  83. Shanzhai enthusiast says:

    Hi Bunnie,

    I’ve been very fascinated by this culture, and is proposing to work on a project about shanzhai for my Fulbright grant. I think there are definitely things to be learned from this incredible culture, and could bring a new way of approaches, from design to distribution, for the US. Your blog have given me helpful information for my research. I really appreciate you putting this up!

    I will most likely be in Shenzhen or Guangzhou next year. Can I possibly have your email or skype to ask you a few questions about shanzhai and your experience?

    Thanks!
    Jia
    http://www.fromjia.com

  84. [...] go read here, here and here. The point is? Well I could go various directions like a diverge point in the BBC [...]

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  86. [...] financing: Mitchell Tseng reported that 10.000 € are enough to start such a company, and it may eventually scale to over 50 million € revenue per year within a couple [...]