Talking Shanzhai: bunnie Huang

Andrew “bunnie” Huang author of the 2003 book Hacking the Xbox: An Introduction to Reverse Engineering and a founder and VP of Engineering for Chumby Industries, Inc. was one of the first people to put pen to paper on his blog “bunnie studios” and identify the shanzhai cultural tech trend as one that is highly influential, successful and not merely producers of copycat products. We were fortunate to have the opportunity to do an email interview with him and find out his opinions on the shanzhai players and what he thinks will be the next big IT product segment for the shanzhai entrepreneur to tackle.

Shanzai.com: In your opinion are the shanzhai players copy cats, innovators or some other breed of entrepreneur?

bunnie: The transition from copy-cat to innovation is a natural evolution. As children first learn through imitation, I think the first step toward innovation is always emulation. So, yes, initially the shanzhai were copycats, but they have gotten good enough at this point where they can be considered budding innovators, and I expect they will continue to gain skill and strength as time goes on.

Shanzai.com: What are the key drivers that made the phenomena happen beyond MediaTek’s efforts?

bunnie: Freedom of information. While in the US we call it piracy, in other circles it can be considered a form of information freedom. Without shared source for the hardware and the software, this could not have happened. I have bought some of the books circulating in the Hua Qian markets and they are of good quality and they are instructive on how to make phones. I can't find books like this in english, and that makes me sad. The other drivers are the natural progress of technology toward better APIs, higher integration, and internet-driven services that have allowed one-man operations to do what previously took a large corporation.

Shanzai.com: How hard is it really for someone to set up a small shanzhai operation?

bunnie: I don't know the answer to this. I wish I knew.

I know that if we were to replicate what the Shanzhai do in the US, it would cost millions of dollars. The cost of labor in the US is very high, and so is the cost of basic services like SMT and injection molding. I have a feeling that the cost to setup a shanzhai operation in china is probably a fraction of what it costs in the US due to the ready availability of quality contract assembly and engineering services, and the lower cost of living.

Shanzai.com: Strictly local or international aspirations? What's the true goal of the shanzhai entrepreneur?

bunnie: I don't know. I wish I knew. I've heard stories that they distribute broadly to other nations -- India, African countries, Russia. I don't think the Shanzhai particularly care what region they sell to, as long as they are paid in cash and they are paid on time, and there are low barriers to trade. Low barriers meaning perhaps a very efficient gray market for their goods -- a market with almost no barriers around product safety, emissions, or IP.

However, I suspect there's more to it than just money -- reputation, curiosity, and mastery of a trade probably are factors as well. If they just cared about money they would just be traders. The fact that they also innovate technically means something in addition to money is driving them to do what they do, in my opinion.

Shanzai.com: Can the average shanzhai entrepreneur transition to legitimate business and in your opinion what are key technical/social/regulatory barriers?

bunnie: I think one of the keys to the success of Shanzhai is that in many markets, people will buy or tolerate "80% solutions". In other words, if you can get 80% of the functionality you'd expect for a fraction of the price, you're happy. Of course, market regulations exist to prevent you from just getting away with an 80% solution, and that last 20% is deceptively hard to execute.

Thus, I think the key barriers would be product safety, reliability, and liability issues -- they will have to offer warranties, RoHS compliance, and pass a variety of safety regulations around their product. Other barriers would include EMI compliance (FCC/CE) and IP. The IP barrier can be particularly tough to cross, especially since if the Shanzhai were to transition to legit, they would be competing on the turf with incumbent monopolies with large resources to fight legal battles over murky IP issues, and local governments would probably not be very warm to them either because their low-cost and innovative products might depress local job markets and ultimately cause problems for politicians.

Shanzai.com: What's the hardest technical hurdle for the average shanzhai player in developing any product? What expertise/cash does he need to get over that hurdle.

bunnie: Don't know, definitely beyond my experience with shanzhai.

However, I will say that I think one of the biggest eventual barriers for the Shanzhai will be software and overall user experience integration. If they want to compete in developed markets, it's been well-established that consumers will pay a premium for solutions that are easy and intuitive to use. Many of the shanzhai solutions are a bit difficult to figure out and their software support is limited. But, with time, I think they will be able to figure this out as well.

Shanzai.com: Unique localized or copycat phones, netbooks, smartbooks… what's the next big IT category to be tackled for the shanzhai entrepreneur?

bunnie: I hope it will be an interesting hybrid of netbooks and mobile phones. There's a huge convergence coming up of mobile phones and netbooks, and my guess is that the large incumbent players like Dell, Lenovo, AT&T, and China Telecom will be too slow to capitalize on this -- there is a big opportunity for the Shanzhai to create a great product in this space.
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Shanzai.com would like to thank bunnie for taking the time to provide his insights and recommends that you read his “Tech Trend: Shanzhai” blog entry to further understand the cultural and historical aspects of the shanzhai entrepreneurial mindset.

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