Make no mistake about it, Shanzhai (fake) phones are big business in China. According to some in the local mobile industry, shanzhai phones make up between 20-30% of the market in China. If you take the industry figure of 650 million mobile subscribers in the middle kingdom then you’re looking at a ballpark figure of 160 million shanzhai phones.

To put that in perspective, my native country – Australia – has pretty much reached mobile phone saturation point at roughly 20 million mobile phones. That’s roughly 1 per person.

Other than pointing out Australia is a big country that’s sparsely populated, my point is, this is a huge market. And its estimated the shanzhai market will get bigger if the figure of 1 billion phones in China by 2013 is realised. That could mean a quarter of a billion shanzhai phones.

While device manufacturers like Apple and Nokia may not be too impressed by this, its not a huge worry for other stakeholders in the market – content creators and carriers. In fact, shanzhai phones probably create a great deal of money for those groups. Also, shanzhai phone making employs and gives many innovative people an income.

What I find interesting is the ability for these creators to work so fast on new innovative features and bring them to market. Even the direct copies of branded phones bring their own set of innovative features to the table – iPhone copies with shake shuffle and dual sim cards for example.

Whether these phones work as well as industry-tested phones is debatable, and whether they are as safe, and the companies that make them are accountable for creating safe phones is questionable. Like anything bought on the shady market: Caveat emptor.

The next question is how other countries such as Australia, India, USA, Europe, Africa and so on will respond to Shanzhai phones being exported. Will network providers work together with phone creators to require greater authentication to connect to networks? Will it lead to greater vendor lock-in?

Or, should users have the right to Shanzhai phones? And what’s the difference between Shanzhai and the Google Android powered Lenovo Ophone?

As an example of how well built some of these phones are here is the Hi-Phone: