The backstage of the booming China-designed and manufactured cell phone market is a well kept secret that most importers and many local buyers here in China have no idea about. While all of the Chinese mobile phone suppliers I work with believe that layers of complexion in a marketplace covers up the true cost of commodity products (and thus increases profits), I think transparency opens minds and channels of communication between buyers and supplier. Better educated clients may require lower pricing because they know th market better, but educated clients also present a better opportunity for a successful long term relationship. But like anything else the longer I've been in this business the more about it I've uncovered and I'm now able to share with you.
There are many levels of phone manufacturing in China from the high end for brands like Apple, the middle end for legitimate smaller brands, and the lower end for unbranded or knockoff phones. In this document we're going to focus on the middle and lower end because phones from the high end are only sold through a network of fixed distribution channels and not on the open market. The middle end factories are usually legal operations, approved by the Chinese government as a company and a cell phone manufacturer specifically. These companies have no problems putting their brand names on the products and even try to approach end buyers directly. Their phones are rarely direct knock offs.
The low end factories are usually unregulated, unlicensed to manufacture cell phones, often shut down and sometimes opened back up once the right politician is paid off, not reliable for the long term, but often produce good quality phones and offer a ton of different models.
So just to summarize: high end manufacturing is done by name brand companies who spend massive amounts of human resource dollars on product design, engineering, testing, marketing and sales; there is the middle level manufacturer who has spent the time and money to legitimize their manufacturing operations, maybe has internal product design, and works to establish their own direct sales channels; and lastly the low end factory that spends almost nothing on their legal foundation, makes decent quality phones on the quick and dirty, uses a network of trusted resellers to distribute their products, and can easily move in and out of new products as the market dictates.
I don't think it's fair to say which kind of manufacturing is better than the other; I suppose that depends on what sales channel the product is going into. To me it's like comparing a golf cart and a hot rod, each vehicle has its own purpose.
Throughout my years in Southern China I've seen a culture of aggressiveness, mistrust, smoke and mirrors, hard work, and a support of friends that defines the region. From my point of view it's different from any other part of China, let alone the world. The low end factories have become successful because they have a strong support network of resellers who put up a cloak between their illegal factory and the multitudes of buyers who want their products. This leads to a complex, competitive, exciting, and constantly evolving market since these sales channels are so unorganized and interbred. Working in such an unpredictable environment stresses the point why it's important to work with reliable suppliers who will work as much as possible within their capabilities to stand behind their products and honor a long term relationship.
My way of doing business is to educate the buyer as much as possible so that they understand the challenges and complexities within the supply chain and are able make purchasing decisions based on important factors they aren't usually made aware of. Our buyers end up saving money once we educate them, after sales service issues are greatly reduced, and the time we spend working with the buyers also decreases because we can communicate at a higher level. Clear communication mixed with product quality, low prices, and quick shipping are the keys to our business.