The truth about chinese brands

When China first became a global industrial epicenter –  it was known for contract manufacturing, OEMs, crazy knock-offs, and an entire ecosystem of producers who flooded the markets of the world with low cost, no-name electronics. However, the game has now changed for many of China’s manufacturers; it’s no longer merely about production, but innovative design, interesting products, and brand identity.

In the beginning of September, the IFA Berlin opened its doors .it is the world’s leading trade show for consumer electronics and home appliances.

Beside all the big players like LG, Sony, Samsung, Huawei (Huawei achieved to be in the brandz top 100 most valuable chinese brands, the annual study is compiled by kantar millward brown and WPP) and many more, there are also a lot of random Chinese companies I’ve never heard of  and who popped up in the exhibitor list. Last year all those Chinese companies did fit into the main exhibition place, but this year, too many companies from china attended the trade show, so there simply was no place to fit 700 of them into the main exhibition halls.

The Chinese pavilion has been hosted then by the Chinese Ministry of Commerce aiming at promoting the overall image of China’s electronic home appliances, displaying China’s intelligent, environmentally friendly and innovative design products, so that more European consumers could learn more about Chinese brands.

I got invited from Sony to IFA berlin. They didn’t pay me any money, but they paid the whole trip and 2 days in a fancy hotel. Also I could attend the press conference and got my hands earlier than everyone else at the new Sony Xperia XZ1 and some nice Bluetooth headsets. Their booth was huge and I’m sure that they paid a few million dollars, just to promote a new smartphone of a sony product department, the only department, which does not make any profit. However, all those big brand events are cool, but I’m actually more interested in all the small Chinese booths hidden in the secret halls a few train stops away from the main exhibition center. There I met with linas and Dave from TechlineHD and we digged into the halls of Chinese hardware.

If you have a look at the IFA exhibitor list, you will see that they all have somehow Shenzhen in their name and it’s hard to differentiate because all their products kinda look the same. Most of the companies are so called Original Equipment Manufacturer (OEM) which are companies that produces parts and equipment that may be marketed by another manufacturer. A good example are headphones. Most smartphone companies do not make the headphones themselves since that’s not their main field of activity and they mostly don’t have resources to develop and manufacture their own. They buy the headphones from an OEM in high quantities and just put their own Logo on them. On IFA we found alot of companies who claimed that they make headphones for big players in the Smartphone business.

The major and initial issue in choosing a Chinese manufacturer is determining whether the manufacturer is “real” or not.  Chinese companies are masters of disguise. They use the Internet and sourcing websites to make themselves look much better than they are. But they can also hide the reality even on site. So you have to develop an efficient system for breaking through the facade to get to reality as quickly as possible. Fake it till you make it, is real business here.

This year we visited a chinese OEM that manufactures for elephone and It is shocking how much variation there is in manufacturing systems even within developed areas such as Dongguan, Guangzhou and Zhuhai. Factories making a virtually identical product can range from those using primitive hand techniques from the 1930s all the way to those that use state of the art German or Japanese automated equipment. You cannot believe what the factory says about its systems and you cannot believe the photos they provide. You must go to look personally. Even if you visit them, we have seen a buzzing, active factory with all assembly lines moving at full speed. As soon as the buyer leaves, the place shuts down again, waiting for the next victim to arrive. So if you are looking for a chinese OEM or supplier, make sure to visit them and check everything from office to warehouse. If the factory is working at full speed, but the warehouse is empty, then something is fishy here and they just play a big show for you.

The problem I see with all those companies attending IFA is, that hardly any of the representatives speaks english. They just take all the effort to come here to germany and showcase their stuff, but if you want to talk to them, the hardly understand you and can’t give you simple answers to basic questions. However they are usually very friendly and give you a quick and dirty product presentation and hand you a information sheet which is usually badly translated. So good companies also usually have atleast 1 person at the booth which speaks good english and knows their products and doesnt only hand you a specsheet. They even have websites in english and social media presencens in the local language.

If you are planning to sell a generic product under your own name, just like many of the funny brand names you see on amazon, then you came to the right place. If you can order the minimum order quantity, everything is possible. They can put your own logo on everything they produce and then you can sell the product as your own, just like many other companies like also Polaroid do. An okay product and perfect Marketing is everything here. You can even order your own mobile game or other software there.

What you don’t find there are shanzhai products, which are immitations of trademarked brands or electronics like fake iphones. These companies do not come to these tradeshows since their products do infringe all kind of legal property rights and are not permitted to attend this fair.Shanzhai mobile phones can be sold at very low prices compared to other mobile phones. On average, the imitations sell at retailers at about 70 to 150 USD while production costs are about $US20. Shanzhai mobile phone factories are able to manufacture at a very low cost for two reasons, they do not buy mobile phone manufacture licenses from the Chinese government, they have cheapest labor costs, use cheap components and no costs for development or marketing.

We visited the shenzhen electronics market and its incredible what you can find theire, so many smartphones you have never heard of. But its even more incredible what gets sold in the streets. There is a great documentation from wired which shows how people strip apart phones in the streets and sell components dropped off or stolen from factories on the urban village market. You can find everything there. And with the help of some people with knowledge about parts and electronics, you can even get a headphone jack on the iphone 7.

From my experience on those tradeshows its hard to find chinese companies which are really innovative. The only company i saw this year, which really surprised me with their technology was honeycomb electronics. Honeycomb electronic blocks is a set of new type teaching aids for education, its purpose is to let people with no engineering background build cool electronic that works quickly. Simply by connecting input and output blocks, users can play in various ways. This was so mind blowing, even though it works on a simple principle.  I’m not sure if their kickstarter campaign was actually successful, but i wish that they get big, because that was really the only innovative thing I’ve seen. Other than that, there were alot of great products too, but they all looked the same and some companies didn’t even take effort to show up at their booth, so why pay so much money to attend the fair ? So if you visit IFA next year, don’t forget to take a tour through the hidden halls of IFA and explore the chinese brands, since this is a mind opening experience.

It seems like nothing is impossible in china and I’m so thrilled to visit this great place again.

Written by Stefan Warecka (@ITXtutor)


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