Bunnie Huang on China's "Shanzai" Mash-Up Design Shops

saccade.com writes "Bunnie (of XBox hacking and Chumby fame) has written an insightful post about how a new phenomena emerging out of China called 'Shanzai' has impacted the electronics business there. A new class of innovators, they're going beyond merely copying western designs to producing electronic "mash-ups" to create new products. Bootstrapped on small amounts of capital, they range from shops of just a few people to a few hundred. They rapidly create new products, and use an "open source" style design community where design ideas and component lists are shared."

Comments

USA is losing because we think we're winning

[mpoulton]

This is why the US is falling behind faster than we think. We are more governmentally encumbered and less capitalist than China in many ways!

Re:USA is losing because we think we're winning

[KibibyteBrain]

This is also part of the problem in outsourcing the actual industrial production of all this stuff. It's really hard to remain innovative and relevant when you design by CAD tool only. This whole idea of design here produce there is just not sustainable for very long. Daily hands on experience with a wide variety of actual manufacturing technologies and techniques is part of what made the US innovative before and is what of what will make China innovative in the future.

Re:USA is losing because we think we're winning

[mochan_s]

This is why the US is falling behind faster than we think. We are more governmentally encumbered and less capitalist than China in many ways!

Why is it that with China the first reflex is always "us vs them" like the parent post?

The Chinese will innovate with the resources that the Chinese have while the US will innovate with the resources that the Americans have (note no us and they).

I don't understand why people feel that it would be better if the Chinese were deprived of this opportunity. I would be more inclined to say "join the party", the "more the merrier" in the engineer's club.

Re:USA is losing because we think we're winning

[Jeff DeMaagd]

I think another part of the problem is when engineers, mathematicians and so on graduate and work for the financial services industry. So they design the latest fad financial service rather than the latest fad electronic device.

At least electronic devices don't up end entire economies like intellectually bankrupt financial services apparently can.

Re:USA is losing because we think we're winning

[Ihmhi]

This is one of the two reasons why I admire Steve Wozniak as a person. He's a tinkerer at heart. He'll sit down at a table with various parts and put together something that's cool. Engineering is like lego for geniuses.

.

.

(The other reason I admire Woz is for his sweet, pimped-out Segway.)

Re:USA is losing because we think we're winning

[jandersen]

We are more governmentally encumbered and less capitalist than China in many ways!

Funny you should say that. To my mind this is the spirit of socialism at its best - the people at the bottom working together rather than each individual competing against each other. Open source is another prime example of what socialism and communism was really about before powerhungry egomaniacs like Stalin and Lenin took out a patent on the idea.

Re:USA is losing because we think we're winning

[DNS-and-BIND]

When browsing comments by Chinese, you will very, very often see the phrase "We Chinese" (women zhongguoren). They consider themselves as different from Americans as ants are different from dirt. Superior, actually - culturally, morally, and physically. You have to realize that years of viewing things like "Sex and the City" has done tremendous damage to the view of Americans from China's viewpoint.

Re:USA is losing because we think we're winning

[the white plague]

It amuses me that the average hater of "American Cultural Imperialism" knows more about those shows than I do.

Re:USA is losing because we think we're winning

[timmarhy]

communism hasn't worked anywhere. it ignores basic human nature.

Re:USA is losing because we think we're winning

[Anonymous Coward]

Yes, the US is falling behind because it doesn't have whole industries whose business model is to churn out nothing but counterfeit, cheap knock-off products like China's counterfeiters...

anymore.

This is exactly what the US and Japan and probably most modern industrialised countries did to get themselves started.

Re:USA is losing because we think we're winning

[jabithew]

Because people are stupid and think economics is a zero-sum game. This leads to the chain;

China is getting richer.
If China is getting richer, someone is getting poorer.
We are getting poorer.

Whereas the only thing that holds is the first. If China is getting richer, it means they have more money to buy things from the US/EU and less competitive labour!

Re:USA is losing because we think we're winning

[RichiH]

Because the first world is scared of the low-wage Wirtschaftswunder which Japan, Korea, Taiwan etc showed us. Only there is over a billion people in China. 10-20 years more and the next billion, the Indians, join the party for real. And by _that_ time, the Africans will be where China & India are now.

Where the former first world will be is anybody's guess, really.

I can understand both 'their' and 'our' pov.

Re:USA is losing because we think we're winning

[agnosticnixie]

Basic human nature is cooperative.

Re:USA is losing because we think we're winning

[fuzzyfuzzyfungus]

I think that the post you quote wasn't calling for the Chinese to be deprived of the opportunity; but for us to recapture it for ourselves.

Competition of the "if I can't have it I don't want you to have it" school is mean-spirited and rather unproductive; but the "interesting idea you have there, I should look into that" school has been responsible for a great deal of progress, and seems to be what grandparent was driving at.

Whether one likes the fact or not, it is undeniably the case that contemporary America has very high levels of regulation(both official on-the-books stuff, and stuff that you de facto cannot do because you'd likely face a ruinous lawsuit if you did). I didn't see anything from grandparent about sending in WIPO; rather the suggestion that perhaps we should dial back things at home a bit.

Re:USA is losing because we think we're winning

[AvitarX]

Probably true for the majority, but there are enough people who who go out of their way to take advantage of others to make a society relying on that basic cooperation not work.

So the fix inevitably becomes iron grip nasty government. Of course the people that are comfortable in such a position of power are not particularly nice people, so it becomes worse over time, as the good people get killed or leave.

Re:USA is losing because we think we're winning

[jandersen]

communism hasn't worked anywhere

Most families are working models of communism - the family shares its possessions etc. It's true that many of the states that have called themselves "Communist" have failed, most notably the Soviet Union, but the question still remains whether this was because of communism or because of other factors - such as the permanent state of conflict with the Western world, the general incompetence of its leaders, the extreme paranoia of the same or whatever. I would say that it is impossible to have a stable society that is based on constant oppression of the majority, there is nothing inherent in socialism that requires oppression.

The argument one sees elsewhere, that oppression becomes necessary "because there will always be some that are too selfish", is only valid in the special case where the state insists on an extreme form of "perfect" socialism; but that is the same whether you insist on pure capitalism, theocracy or just about anything else. If deviation from the ideal is not tolerated, oppression becomes necessary.

There are many stable countries in the world that are predominantly socialist - Scandinavia springs to mind, but China is a good example; China is still a communist society and likely to remain so for the foreseable future, not despite its opening up to the international community, but because of it. The openness has taken away much of the oppression and people don't feel the need to revolt.

Re:USA is losing because we think we're winning

[brizzadizza]

Most likely it will be tied to the rate at which natural resources can be extracted from the land. This can be mitigated to some degree by greater demand for natural resources causing new extraction businesses, but that will not in all cases completely counter a very large demand. Many industries like mining concerns, oil refineries, oil wells and chemical plants take many years to go through planning, permitting, construction, production. All of that prevents "the market" from responding to the increased demand by increasing supply.

In addition, at some point we will reach the limit at which we can no longer extract the natural resources we need for certain businesses. Whether that point is dozens or thousands of years from now depends on the resource, but it is a limiting concern ultimately.

Shanzhai, not Shanzai

[jsse]

Literally 'Shanzhai' means a fortress on a mountain in Chinese, but it's a equivalent to 'garage' in western terms of innovation process. Both means making things at low cost, labour intensive environment, but doesn't necessarily refer to making things in a real garage or a actual mountain fortress.

Often case the term 'Shanzhai' production implies 'cheap and dirty, but work'. Say, we procure electronic parts from a 'Shanzhai' factory, we expect them to be cheap but not with very high quality.

Re:Shanzhai, not Shanzai

[gzipped_tar]

Shanzhai in Chinese refers to a camp or basement of mountain bandits in the original meaning.

MBA shortsightedness

[hwyhobo]

For temporary profit (that few have participated in) we have outsourced ourselves into irrelevance. As the purchasing power of the increasingly service-based economy diminishes, so do the profits. It is a shortsighted policy - something that MBAs excel at.

Re:MBA shortsightedness

[chromas]

...whom will the Chinese exploit or outsource their own jobs to?

How about the US?

Re:MBA shortsightedness

[iamdrscience]

Soon the only jobs left on the planet will be: 1) prostitute 2) mercenary 3) bankers who own 1 and 2.

Well, judging from present lack of demand for my sexual services, I don't think I have to worry about being a prostitute. Being a mercenary or prostitute/mercenary-owning banker both sound pretty badass though, sign me up!

Re:MBA shortsightedness

[Hal_Porter]

You joke about this but it does happen. I've worked on projects where there are people working all over the place. E.g. Euro/US company designs something and manufactures it in China and the software is done by an Indiam company.

So far, so conventional. But the Chinese are often just assembling parts that come from the US (e.g. processors from Intel, components from Europe, displays from Korea and batteries from Japan) and immediately exporting them. And the Indian company might subcontract work back to Europe or to the US. It's simplistic to say that work has moved from Europe/the US to China/India, it's more accurate to say that China and India have joined in networks that were global before.

And it's also simplistic to say that jobs are always moved from high wage countries to low wage ones. I've seen projects move from the US to Northern Europe for instance, or from Eastern Europe to Western Europe.

The other thing is that labour costs aren't everything. If you have an efficient company making components they are a tiny fraction of your gross sales. Finally there's a pecking order in terms of where the money ends up - and low wage low skill places are not very high in it. A factory in China makes a tiny percentage of the sticker price on a laptop - most of it stays in the country it was bought or was used to buy parts for import. Most of those Indian consultancy companies are going to end up going bust because they bill several clients for one hour of developer time and thus have a low perceived productivity. The few good ones that survive are quickly going to start charging the same rates that US or European companies charge.

Back when Indian and China opened up I thought it would gut engineering in rich countries. That hasn't happened and my few trips to both places tells me it won't happen. Probably consultancy rates would have been 10% higher if they weren't there, if that.

Smart; Very smart

[Anonymous Coward]

Several thoughts;

1. Our IP is getting in our way. That is why our forefathers created SHORT TERM IP rights. Now, it is just a money maker for a bit longer, but is KILLING the west.
2. I have thought that if I had money, I would buy some of the plastic fabs as well as electronic fabs that remain in America. Then I would set up SMALLamount manufactuering and ask for ideas. THe approach would be that if an idea came across, then cut a deal with the person(s) to build it, and sell it, and give them a cut. This is done, but typically only after somebody has done 99% of the leg work. That is so that somebody feels protected, but does little good. Better to get the idea in, work with person, and use real experts.

The west will lose unless we get smart and change. China is in this for the long haul. They keep their yuan pegged to the dollar, keep up their trade barriers, and then gripe when our economy is crashing. In the meantime, they are building 2-4 NEW NUKE subs EACH YEAR. It borrow HEAVILY from western ideas.

Re:Smart; Very smart

[Anonymous Coward]

Our IP is getting in our way. That is why our forefathers created SHORT TERM IP rights. Now, it is just a money maker for a bit longer, but is KILLING the west.

Not to mention the 150 year-after-Disneys-death copyright. That really helps preserve the wealth of the rich, but at the cost of a stagnating society.

Re:Smart; Very smart

[Hal_Porter]

Several thoughts;

1. Our IP is getting in our way. That is why our forefathers created SHORT TERM IP rights. Now, it is just a money maker for a bit longer, but is KILLING the west.

IP rights have their uses. I happen to know that China has cloned processors and that are unlicensed. Inside China anything you buy will use one of those. For the export market Chinese companies have to import legal components from somone who has a license. So if you work for US processor manufacturer for example, IP law is protecting your job. I suspect that if you have an engineering job in a rich country, IP licensing is one of the things that pays your salary.

Re:Smart; Very smart

[Stray7Xi]

For the export market Chinese companies have to import legal components from somone who has a license. So if you work for US processor manufacturer for example, IP law is protecting your job. I suspect that if you have an engineering job in a rich country, IP licensing is one of the things that pays your salary.

GP was complaining about long term IP rights. So in effect you're saying that we're protecting the Pentium 2 processor from being copied (released 1997). I think it's had enough time with protection and should be allowed to be copied

Re:Smart; Very smart

[home-electro.com]

So in other words, they did not 'clone' the processor, but merely reimplemented MIPS instructions set. If the instruction set is patented, the patent should be in the bin where all other s/w patents belong, that is of course a garbage bin.

GSM and other similar licenses are a total rip-off.

SShan zhai bandit phones and popular youth culture

[BananaPeel]

For those intereseted there is small write up with a few pics on the cultural aspects of Shan zhai on:
http://chinayouthology.com/blog/?p=369

Talking to friends in China last week "Shan zhai" anything is a hot word in china now, being applied to mobile phone, fashion, whatever.

While I was there I offered over half a dozen iphone look alikes which can be bought from around 1000 yuan (~£110)

Remind me again, how did Apple start?

[KlaymenDK]

Remind me again, how did Apple start?

I think that this sounds more like a new type of consumer-producer than just piracy, and that the "mash-up" is an apt comparison.
These guys may end up revamping a part of the market with their "hardware shareware", and if they do, I say more power to them. Especially since they are doing more than just plain copies, they are producing products that are, arguably, "improved" models.

Quoth the article, "contemporary shanzhai are rebellious, individualistic, underground, and self-empowered innovators" ... which one of those does the marketplace *not* need? (Mark you, I say "need", not "want"; I'm quite sure they want none of it, but will nonetheless have more of it than they like.)

Re:Remind me again, how did Apple start?

[Jeff DeMaagd]

The likes of an Apple, HP and such to start out making hardware out of a garage like these people do, seem to be diminishing. I don't know if any US garage company can build a custom phone from the circuits on up these days. Designing computers from circuits is probably too expensive of a job now for a garage company. Assuming they do it, the buyer is not going to be consumer, maybe commercial, industrial, government or military uses can justify the expense, but a garage company probably has too low of a profile to tap into those markets without some heavy hitting contacts.

Re:Remind me again, how did Apple start?

[N1AK]

Especially since they are doing more than just plain copies, they are producing products that are, arguably, "improved" models.

If they are as good as that, then surely they don't need to rip off Apple's branding to be a success?

The current implementation of Patents is harming innovation by legitimate businesses, that does not mean that companies should not be able to protect any form of new development for a limited period of time. Currently the nations with the loosest attitude to IP are the ones with the least to gain by cracking down on it, do you think that in 10 years time when there are a few Chinese owned firms actually pushing development the of new products forward the Chinese government won't be much keener to ensure IP rules are followed in other countries?

Re:Remind me again, how did Apple start?

[DNS-and-BIND]

Apple started by ripping off designs from existing manufacturers in the 70s? I think you might have done too much acid if that's how you remember things.

Re:Remind me again, how did Apple start?

[DNS-and-BIND]

Shanzhai manufacturers are NOT into sharing with others, not at all. Making a spiffy product, following environmental laws, and not ripping off your workers...no reward for that. Someone sees your product, says "gee, that's nifty!" and proceeds to produce a shabby but just-works-enough copy, undercuts you, dumps all of his byproducts into a hole next to a farming village, and witholds his workers' pay for two months before paying half of it and threatening any complainers with beatdowns.

Yup, just like Apple in the 70s. Innovation at its finest.

Re:Remind me again, how did Apple start?

[Zerth]

Except for the toxic waste bit, that does sound like working for Steve Jobs.

If he goes on chemo, then it will be exactly like working for Steve Jobs.

SMALL-amount manufacturing exists

[KlaymenDK]

There are already a number of small-amount manufacturers, as you call them. Some are prototyping shops, some will build any number of items for you.

http://www.emachineshop.com/
http://www.tapplastics.com/
http://www.pad2pad.com/
http://www.olimex.com/
http://www.eurocircuits.com/
(no affiliation to any of them)

But you have to supply a sellable idea that's not been done yet, and bear the cost of iterating the bugs out of the design.

Also, and more to the point, the burden of IP is on your shoulders; at least, they're just punching out parts on your behalf and AFAIK that's not been contested in court as of yet.

Re:The solution

[KlaymenDK]

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 Iâ(TM)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 itâ(TM)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 â" 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 wouldnâ(TM)t allow (or be zoned for) mixed living, manufacturing, and selling.

Capitalistic open source super cool

[Anonymous Coward]

This is amazing, great stuff. And this is emergin in capitalistic (sic!) China, as a natural way of doing business. By natural I mean not bound by copyright/patent laws, free flow of ideas - things we all love in open source *can* be moved to other markets as well and it is great example.

Wondering if we shouldn't run some campaign that'd allow this kind of things happen in EU?

Re:Capitalistic open source super cool

[DNS-and-BIND]

+2 insightful? WTF? Shanzhai manufacturing is RIPPING OFF OTHER PEOPLE'S IDEAS, it has nothing to do with innovation, open source, etc. You think a Shanzhai manufacturer is going to let me into his factory and inspect his line? Maybe he'll post his CAD drawings and mold milling specifications on the web? Make a forum post where he reveals the specific material he uses, his suppliers, and the prices and contract terms he got from them? You want to see what shanzhai manufacturing makes? Crapity-crap like this janky fake Wii. I guarantee there's no way it will last more than six months, guarantee it. It's not open source at all, free flow of ideas? If by free flow, you mean one-way flow - to the shanzhai guy and not the other way around. It's "let me rip you off, make a cheap crap copy, add a couple of features from OTHER people's work (features that are probably not well-thought-out, nor integrated well with existing features) and sell it at a discount by disobeying all environmental regulations (China DOES have them), and forcing my workers to work overtime for free otherwise I'll fire them and have them beaten by thugs if they complain. I know more manufacturers than you do, buddy.

Re:Capitalistic open source super cool

[manekineko2]

Maybe you should read the article before you rant.

"Interestingly, the shanzhai employ a concept called the âoeopen BOMâ â" 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."

It's actually kinda like the GPL. The Shanzhai guys aren't going to share their stuff with you, because you're not in the ecosystem and not gonna share with them.

Cf. Silicon Valley

[femto]

The big thing going for the Shan Zhai is that their component makers are just around the corner. Need a touch screen for you iPhone knock off? Duck across town and talk to "Joe" and buy a few crate fulls off him. No long distance language barriers, freighting, delay, currency exchange or other things that an kill momentum in a project. It's not that different to Silicon Valley, in that it is effectively a technology shopping mall for engineers.

Compare that to Australia, where I live. Manufacturing base is close to zlich. Components have to be procured from overseas and local distributors are just not interested. Most time and effort goes into procurement rather than design. Better be sure of your design too, as deciding to make a design change involves a while new procurement cycle. No ducking down to "the local" to get a replacement. As an engineer, I'm envious.

Brute-forcing the market = new innovation

[Technomancer]

The way these companies are trying to find winning combinations in the market is very simple, they iterate through 2,3,4-dimensional space of gadget combinations.
Righ now it seems they are at stage 3, combining 3 things together for instance usb-mouse/heater/skype handset.
It is just their way of "innovation", they have almost infinite resources - money, people, factories so they try different combinations.
Kind of like brute-forcing crypto key instead of finding weakness in algorithm.

Re:Open source capitalism? o_O

[Rennt]

You couldn't be more wrong. One of the main pillars of capitalism is that there are no barriers preventing new players from entering a market. In this sense OSS is capitalism at its most pure.

Shops like MS and Apple actively lobby the Government to raise the barrier of entry with laws like the DMCA and software patents. This is decidedly uncaptialistic. Its much closer to fascism really.

Believe it or not, profitability is not really a consideration when it comes to classifying an industry as one kind of ism or another. The key indicator for a capitalistic economy is COMPETITION.

Grrr.

[apodyopsis]

This was happening years ago, back in 2005 in my last trip for example.

What is really behind this is a business that is not shackled by the same leg irons that cripple development in the west - for example accountability, itellectual property, patenting, copyright, health and safety, quality management and so on.

The gist of the problem is that you can either have development that is ethical, safe, manageable, legal, and controlled.... or you can development that is rapid, fluid and prone to appropiate and adapt any idea that fits the bill.

It is impossible to have both.

In China you see an emphasis on the latter and in the west you have the former, this is a culture clash of epic proportions. At the end of the day we are all to blame, we all like the idea of promoting western businesses and industry - but we all have a greater desire for cheap DVD players and iPhone clones.

Yes I can appreciate the rapid, innovative engineering this trend shows in China - but behind it is a clash of cultures and ethical and moral decisions that have decimated industy and development in the western world.

I think Bunnie is confused to what a "mash-up" is

[mbourgon]

"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[...]I can't help but wonder out loud if mashup in hardware is all that bad."

Adding a user-replaceable battery does not make it a mashup. The combination cell-phone/racecar, sure. But that? That's just a knock-off.