Blade Runner Markets of Shenzhen

I really should read Joi Ito’s blog more. He has a fascinating post about a recent trip to Shenzhen where he visited the back alley electronic component markets and observes an ecosystem teeming with activity, rapidly iterating on designs in a way that I’m sure makes Silicon Valley rate of evolution feel glacial.

However, the more interesting phones were the phones that weren’t like anything that existed anywhere else. Keychains, boom boxes, little cars, shiny ones, blinky ones – it was an explosion of every possible iteration on phones that you could imagine. Many were designed by the so-called Shanzhai pirates who started by mostly making knockoffs of existing phones, but had become agile innovation shops for all kind of new ideas because of the proximity to the manufacturing ecosystem. They had access to the factories, but more importantly, they had access to the trade skills (and secrets) of all of the big brand phone manufacturers whose schematics could be found for sale in shops. These schematics and the engineers in the factories knew the state of the art and could apply this know-how to their own scrappy designs that could be more experimental and crazy. In fact many new technologies had been invented by these “pirates” such as the dual sim card phone.

The other amazing thing was the cost. There is a very low cost chipset that bunnie talks about that seems to be driving these phones which is not available outside of China, but they appear to do quad-band GSM, bluetooth, SMS, etc. on a chip that costs about $2. The retail price of the cheapest full featured phone is about $9. Yes. $9. This could not be designed in the US – this could only be designed by engineers with tooling grease under their fingernails who knew the manufacturing equipment inside and out, as well as the state of the art of high-end mobile phones.

While intellectual property seems to be mostly ignored, tradecraft and trade secrets seem to be shared selectively in a complex network of family, friends and trusted colleagues. This feels a lot like open source, but it’s not. The pivot from piracy to staking out intellectual property rights isn’t a new thing. The United States blatantly stole book copyright until it developed it’s own publishing very early in US history. The Japanese copied US auto companies until it found itself in a leadership position. It feels like Shenzhen is also at this critical point where a country/ecosystem goes from follower to leader.

Read the whole post. It’s an amazing romp through the rough edges of capitalism which makes a nice counter-point to the slick marketing videos out of Cupertino.

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