The True Cost of a Chinese iPhone Knockoff

Illustration for article titled The True Cost of a Chinese iPhone Knockoff

Coverage of Chinese "shanzhai" knockoff phones tends to be dismissive at best, but the NYT, in a fit of earnestness, has done a full-on, iSuppli-style cost analysis of your typical iFauxne. Spoiler: They're extremely profitable!


Inspiring a knockoff is something like a rite of passage for any new handset, and virtually no desirable phones go uncopied. This article is a decent primer on the industry in general, but its material cost breakdown—the likes of which we regularly see for desirable, legitimate handets—is particularly revealing. These knockoff houses feed from the same supply chains as their mainstream counterparts, and a meaningful proportion of their build costs—for basic parts like mics, vibration motors and speakers—are therefore identical.

The major cost savings come from in the most expensive—and generally, important—components. Judged against, say, a G1 (which carries a build cost of $140), a $40 knockoff will have a significantly cheaper screen, baseband, and camera module. Software, design and marketing costs are almost nothing, so the customary 100%-200% markup, which is roughly inline with—if not a bit lower than—the expected markup for no-contract mainstream handsets, is pure profit. The take-home message: these companies aren't just doing this to be funny. [NYT]


Adam Dyess

"Software, design and marketing costs are almost nothing", while they most certainly are fixed costs that can be applied to the cost of the product, if you only sell a few of them, then you're not recouping those fixed costs very well. I think that iPhone could outsell this product in any market.

Now if you're a good chinese company, you find a way to steal the majority of the software. That's cost savings.