NYT: iPhone knockoffs big business in China

Knockoff models of popular cellphones such as the iPhone are selling well in China, suggesting Apple may have a more difficult time penetrating the market than expected. The New York Times reports that knockoff, known as shanzhai, phones account for more than 20 percent of sales in China, while the government has done little to stop the proliferation of the fakes. Part of the problem, the report suggests, is the lower price of the knockoffs, made possible by technological advancements that make the fakes very cheap to produce, and by the manufacturers’ evasion of taxes, regulatory fees, and safety checks. “We’re being severely hurt by shanzhai phones,” says Chen Zhao, a sales director at Konka, a Chinese cellphone maker. “Legal cellphone makers should pay 17 percent of their revenue as value-added tax, but shanzhai makers, of course, won’t pay it.” China’s Ministry of Industry and Information Technology recently warned consumers about the hazards of shanzhai phones, saying “their radiation usually exceeds the limit.”

Fake iPhones—like the Meizu M8—are particularly popular, partially due to the fact that the phone isn’t officially available in China, except in Hong Kong, pushing the street price of imports out of reach for many. “I saw iPhone pictures on the Web; it’s so cool. But it costs over $500 — too expensive,” said Yang Guibin, 30, an office worker from Chongqing. “So I decided to buy a shanzhai iPhone. I bought it in a digital market here; it looked exactly like the iPhone.” Interestingly, even the manufacturers admit their business is less than reputable. “We are a kind of illegal producer,” said Zhang Feiyang, whose company, Yuanyang, makes an iPhone clone. “In Shenzhen there are many small mills, hidden. Basically, we can make any type of cellphone.” Apple has been linked to both China Mobile and China Unicom as potential partners for an iPhone launch in China, however, no official announcement has been made by either company.

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