The Maker Culture in China (II): Shanzhai, Emerging Innovation in an Open Manufacturing Ecosystem

China offers an alternative for taking maker culture out of the field of entertainment and into the market. Shanzhai, a think tank focusing on open innovation.

TV-B-Gone SHP Gen5 Assembly Line. Shanghai, 2011.

TV-B-Gone SHP Gen5 Assembly Line. Shanghai, 2011. Source: Flickr.

China offers an alternative for taking maker culture out of the field of entertainment and into the market. This model is the result of the encounter between makers and another open innovation process that emerged in the electronics manufacturing system that has been generated in China. David Li and his fellow members of Hacked Matter, a think tank focusing on open innovation in Shanzhai, call it “Shanzhai”.

As one of the major elements of the production system that has moved to the so-called developing world, China has developed an extensive industrial fabric around the manufacture of electronic components, mostly in the Pearl River Delta, Guangdong province. This low-cost, flexible ecosystem has remained competitive through the production of copies, remakes, and systems for sharing its designs.

The word Shanzhai comes from the Chinese characters for “mountain fortress” and was used to refer to the outlaws or bandits who opposed a corrupt government and hid in rural areas. The term has now come to refer to the cheap, low-quality copies or fakes manufactured in China. The rejection of individualism that is ingrained in China’s cultural tradition has little appreciation or understanding of intellectual property laws, a peculiarity that has for years allowed these “bandit” manufacturers to apply reverse engineering to devices invented by corporations such as Apple and Sony in order to adapt them to the demand for low-cost products. These products, mostly mobile phones, can be found in the huge department stores or “cybermarts” that offer all kinds of electronic components and gadgets under dubious brand names such as Svumsung, Blockberry, Nakia and Anically, along with other devices of questionable taste such as phones shaped like cigarette packets, anime characters, and other devices. These products are also widely distributed throughout Asia, Africa, the Middle East and South America, with production reaching 200 millions of phones a year, accounting for a quarter of the global market. The quality of these imitations has gradually improved and, more importantly, the modification of technology to adapt the devices to small market niches on the sidelines of the big corporations has led to the emergence of innovations that have later been implemented by major brands. This is the case of the dual SIM, for example, which allows a mobile phone to operate with two cards at once: it was developed so that people who frequently commute between countries could save on roaming costs, and the feature was later implemented in Blackberry devices.

This video introduces the second part of a workshop series organized by Hacked Matter in conjunction with the 2013 Shanghai Maker Carnival.

Remakes are not the only form of innovation in Shanzhai. This ecosystem consisting of small electronic manufacturing companies has kept its costs low and remained competitive by creating systems that allow them to share designs. This does not just lower production costs, it also speeds up the process of creating new products, favouring bottom-up innovation. For example, Taiwanese company World Peace Industrial (WPI), an electronics component manufacturer based in Shenzhen, develops reference circuit boards known as “gongban” (public base), which provide basic functions ranging from bluetooth connection to sensors for measuring the movements, heartbeat, and other vital statistics of their users. These gongban are used by a huge number of manufacturers, which either integrate them directly into their products or use them as a base and modify them to create their own. The company produces around 130 circuits a year, which can be used to produce smartphones, tablets, the new smartwatch craze, smart buildings and industrial controls, and it makes money by selling the components. This maker-style approach based on subsistence and need has generated a flexible, accessible manufacturing network for fast production, on a small scale, with a small budget, giving makers/entrepreneurs an infrastructure that allows them to turn their projects into products.

Young entrepreneur Pan Hao saw this opportunity and in 2008 he founded Seeed Studios, an open hardware company that emerged from a cross between industrial manufacturing and the hackerspace culture. Seeed Studios offers makers the opportunity to produce and market their ideas by helping them to create quick prototypes and to manufacture small shipments. The company draws on the experience and resources generated by the manufacturing ecosystem in order to offer all the services required to launch products on a small budget, from open hardware components to crowdfunding services. Crowdfunding works as an open production system, based around a website with over 70,000 participants, in which anybody can post their ideas and those that attract the most community support are produced.

This company that began with a staff of two now has over 100 salaried employees and puts around 500 projects on the market each year, ranging from bluetooth wifi connections to laser scanners, generating over 10 million dollars in profit per year. Having made it possible for anybody to put a product on the market, it has now become the world’s largest provider of technology manufactured on a small scale. The company, which also has its own hackerspace called Caihuo, is based in the Shenzhen area, known as the Silicon Valley of hardware, and works under motto “Innovate with China”. Shenzhen is the heart of the industrial fabric of Guangdong, accommodating a third of the manufacturing companies in the area. The city was the first Special Eonomic Zone (SEZ), an exception to Chinese protectionism that allows foreign investment, which has made it once of the fastest growing cities in the world, with a population of around 10 million people. This industrial centre is now the headquarters of the Maker Faire and houses several hackerspaces and other innovation companies similar to Seeed, including HAXLR8R (pronounced “hackcelerator”), a company founded in 2011 that provides support and financing for Chinese and foreign companies. Companies joining this organisation receive an incentive of 25,000 dollars and professional consulting before being invited to Shenzhen to develop their products.

This capacity to attract foreign talent and generate new companies has led the Chinese government to turn its attention to the culture of hackerspaces. Maker Culture and Made in China were two of the topics discussed at this year’s Lianghui, the city that hosts the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), the two annual meetings that set the agenda for the nation’s economy.

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The Maker Culture in China (II): Shanzhai, Emerging Innovation in an Open Manufacturing Ecosystem