China – Perspectives

From iPods to the latest Nokia phones - Copies.

Before coming to China I had many friends ask me to figure out what products we could sell to the fast growing consumer population in China. Much to my dismay and everyone else’s, my answer as I started to report back was; nothing! absolutely nothing!.. they have everything, every brand , every product, even in the poorest of neighborhoods!

Well, at least a copy of everything!

It is absolutely true that the Chinese government is trying very hard to control and implement systems to monitor the infringement of design and utility patents, copyrights and intellectual property, but it is also true that it is an uphill battle. The “copy” manufacturers  are not selectively focused on American brands, in fact they copy one another all the time. I have looked at many innovative products in China which are not copied from the Japanese or the USA or European manufacturers, but from their own neighbors in Dongguan or Shanghai or a few blocks away.

I happened to get a lesson on a cultural aspect that we in the West are not aware of or choose to ignore. This post is not about defending violations of copyrights or patents, but more of bringing a perspective that goes beyond the headline grabbing “piracy” scream. The lesson came via a documentary produced by CCTV, which followed a ceramics professor in the region of Shaanxi. The documentary was showcasing a method which this professor had perfected for reverse engineering clays, glazes and kilns for ancient Chinese pottery. With his method the professor was able to recreate “perfect” copies, that not even carbon dating could pick out as copies. The professor was honored and presented with an “emeritus – curator” status at one of Beijing art museums.

This is obviously not the only instance of Chinese culture honoring someone who’s talent for making a copy is just as revered as the original artist, after all it was the Chinese that invented the printing press, which quite simply is a mechanism to make many replicas of an original! And by the way, it was Germans that copied the technology and perfected it to what we know today as highly technological printing presses.

Can the Chinese turn the copy culture into their own highly developed technical products? I believe this is not only possible, but inevitable. I am old enough to remember when toy robots made out of tin with terribly silk screened graphics and batteries that operated blinking lights were flooding the world courtesy of the country that today makes high end brands like Lexus and Sony. For those of you who were not alive then, Japan was producing these trinkets only 30-40 years ago.

Gaming consoles and any MP3 or Cell phone imaginable!

So is it too far fetched for China to do the same?
The answer is no, it is not far fetched! In fact, given what I am able to see at factories and in retail stores in China, I would tell you that it will not take 30 or 40 years, Why? Because of their very ability to reverse engineer anything from an aircraft carrier to a cell phone. Recently a high level official in the Chinese Navy confirmed that China had purchased 3 aircraft carrier hulls from Russia, for the purpose of studying them, loosely translated: reverse engineer them!

The "new" LV cell phone. An original?

Ahhh. Enter the “new Louis Vuitton” cell phone!!! I am sure that many companies very likely don’t know that they have a product line like the cell phone featured here. OK, so it is blatantly using the LV mark to sell phones, but let’s look a little beyond this and talk about the engineering, design, creation of molds and yes, the features that accompany this phone.

• Two SIM cards (Means you can have to different cell numbers ring in one phone)
• FM radio
• MP3 player
• Touch screen
• Calendar, Contact management, etc.

First we must understand that unlike Nokia or LG or Motorola, many of these products are actually made by handful of small companies banding together. Large global corporations may outsource some components of their products but along with this have very strict quality, design and compliance rules as well as strict audits to ensure the final product is worthy of the brand name. The makers of these “copy” products are in essence mavericks that have a little money and a lot of guts. The core manufacturer will invest in the molds for the exterior shell and provide the mold manufacturer with a “sample” of what he wants made. The mold manufacturer has a 3D scanner that will render CAD drawings of the “sample” supplied and also provides young CAD operators that can help the investor/core manufacturer decide on the cosmetics desired, like the LV, Gucci or iPhone look.

The molding process although somewhat unorthodox is not much different than what a large brand name company would do, is the inside components were it gets sketchy. The investor or core manufacturer will then approach friends of friends who can manufacture the circuit boards and display (electronic components that make the cell phone operational). Many of these components are adapted from other products and made with copies of chips that have been taken out from some name brand products. The core manufacturer then decides what name the phone will carry which can vary from Golden Dragon to Apple iPhone, Gucci or whatever.

The software is quite often developed by a “hacker” who is able to recode an existing cell phone operating system so that it works with the hacked circuit boards. This is why quite often some of these phones which make their way out of China, do not work with local cell phone companies abroad or loose much of their functionality. This being said, we all have to admit that this is not a simple process and those who are involved in it are learning every day to make their products better. This leads to an eventual development of their own solid technology like it has for many Chinese companies that evolved into their own competitive brands and not copies.

It is not only likely, but probably inevitable that these Chinese “maverick-manufacturers of copies” will eventually have enough money to hire one of the many young Chinese that are graduating from MIT in the USA to design products from the ground up. Just like the Japanese, it is inevitable that the Chinese mavericks will be able to turn industries up side down, like Seiko did to the watch industry, Toyota to the auto industry or Sony to the television industry.

My personal belief is that the effects of China on globalization are only half way through the cycle, considering that China has a clear goal of reducing it’s rural population to level bellow the 25% mark. The Xinhua News Agency reports that census for 2007 put this percentage at 56%, this means that in addition to India’s push to enter global supply of electronics and autos we can look forward to the added effect of another 300 million Chinese entering industry in China!