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

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.

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

[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.

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: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.

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: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.)

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.

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: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

[agnosticnixie]

Basic human nature is cooperative.