Skip to main content
Part of complete coverage on

China's pirates turn their backs on wearable tech

By Johan Nylander and Justus Krüger, for CNN
updated 9:18 PM EST, Wed January 15, 2014
A store in Shenzhen promoting the Samsung smart watches.
A store in Shenzhen promoting the Samsung smart watches.
STORY HIGHLIGHTS
  • Wearable gadgets like smart watches are billed as the next big thing in technology
  • However, China's tech counterfeiters appear to shun the category
  • Business expert Alf Rehn says this is a warning signal for market players
  • "Knock offs" act as bellwether for electronics consumption, he says

Shenzhen, China (CNN) -- From futuristic Google Glass headsets to smart watches like Samsung's Galaxy Gear, wearable gadgets are billed as the next big thing in technology.

But China's tech counterfeiters -- notorious for having a nose for what's hot and what's not -- appear for now at least to be giving wearable technology the cold shoulder in what one expert calls a "serious warning signal" for market players.

CNN reporters approached wholesale companies and retailers at one of China's biggest electronics trading districts to learn how the "knock-off" business works.

"There are no copies for sale. Only originals," said the managing director of wholesale company that specializes in mobile electronic devices in Shenzhen, a factory town in China's southern Pearl River Delta region.

"Maybe we'll have them (fakes) in a few months. I don't know, interest is low."

MORE: Wearable gadgets search for mainstream appeal

Stores selling Samsung products at Huaqiangbei, a district famous for tech rip-offs.
Stores selling Samsung products at Huaqiangbei, a district famous for tech rip-offs.

China's thriving market for counterfeit electronic goods has been a headache for global hi-tech firms including Apple, HTC and Samsung, as illegal cut-price copies of much sought after products eat into their profits.

But, one might argue, if there is one thing worse than being copied, that is to be ignored. And that seems to be the case with Samsung's new Galaxy Gear smart watch -- one of the first wearable devices to be made commercially available and as such an indicator for the emerging category.

Without the buzz, no need for the counterfeit, and it seems like Samsung's smart watch hasn't quite gotten the buzz going
Alf Rehn

A visit to the shops of Shenzhen's Huaqiangbei commercial district -- a tightly packed group of malls surrounded by high rises that form the epicenter of China's trade in electronic knock-offs -- suggests demand for Samsung's smart watch is ice-cold.

"You won't find any copies of the smart watch here. I've never seen or heard of any," said a young man who was busy shipping off boxes, that he said were filled with counterfeit mobile phones, at a local logistics center.

"Thinking about it, I've never even seen anyone wear one," he added.

MORE: The top 10 tech 'fails' of 2013

The launch of Samsung's Gear seemed like something of a victory against its big rival Apple, which is rumored to be launching its iWatch sometime this year, but the device was conspicuous by its absence in Huaqiangbei's market halls, logistic companies and workshops.

"I've never seen a knock-off Gear in this whole town," said a young woman working in a shop full of Samsung products. Her shop is one of the few outlets that sell the real Gear but she said "they don't sell well."

"[Counterfeiters] don't care about the Gear as consumer demand is too weak," said another shop assistant in his early twenties, who was selling a number of what he said were real Samsung products, but not the smart watch. "We don't sell it anymore. It was not popular."

MORE: Chinese headphone fakes cash in on Dr. Dre Beats bonanza

Priced at around $300, Chinese consumers find Samsung's new gadget too expensive, he added.

Out of 20 shops visited by CNN, not one sold fake Samsung Gear smart watches and none could offer leads on where to find copies. All these 20 shops sold the smart watch, out of hundreds perhaps thousands, of market booths that didn't sell Samsung's Gear.

Ad promoting Samsung\'s Galaxy Gear on Hong Kong\'s subway.
Ad promoting Samsung's Galaxy Gear on Hong Kong's subway.

However, many of the same shops openly promoted copies of Apple's latest iPhone and the Samsung Galaxy Note III -- models also launched in September -- suggesting the counterfeiters are quick to copy if they see market potential.

Warning signal

The lack of copy versions of the Gear is a "serious warning signal," according to Alf Rehn, a management professor at the Åbo Akademi University in Finland, who has spent years studying the global piracy phenomena.

"Piracy is all about benefiting from buzz -- create something good enough that looks like the real deal, and make money off those who are not willing or able to pay for the authentic item but who still want to be 'with it.'

"Without the buzz, there's no need for the counterfeit, and it seems like Samsung's smart watch hasn't quite gotten the buzz going.

"This doesn't mean that the Galaxy smart watch is a complete bust, rather that it primarily speaks to a small group of gadget enthusiasts who will pay to get the real deal, rather than to the mass market.

"So this isn't necessarily a disaster for Samsung, but definitively a serious warning signal as the Shenzhen crowd is the bellwether for electronics consumption."

It's not uncommon for top-selling products to be on the market before launch of the original; there were pirated iPhone-lookalikes on the market months before the first iPhone launched, Rehn added.

Likewise, unpopular products are unceremoniously dropped by pirates who simply cannot afford to get stuck with the inventory; there are stories about how new Nokia models basically were discontinued by counterfeiters before the genuine article even made it to market, according to Rehn.

Samsung\'s smartwatch on display.
Samsung's smartwatch on display.

"This is a warp-speed market economy, where every product faces an 'up or out' decision on a daily basis. Competition is brutal," he added.

In an email to CNN, Samsung said that Galaxy Gear received "positive consumer feedback globally" and that 800,000 units were sold in the first two months after its release.

However, Samsung's head of Open Innovation Center, David Eun, told a conference in November that the Gear is still a "small green tomato" that has not yet matured into something special.

China's pirate community seems to agree.

ADVERTISEMENT
Part of complete coverage on
updated 7:13 AM EDT, Fri October 17, 2014
A smuggler in Dandong, a Chinese border town near North Korea, tells CNN about the underground trade with North Korean soldiers
updated 2:54 AM EDT, Fri October 17, 2014
Yenn Wong got quite a surprise one morning earlier this month when she found out an exact copy of her Hong Kong restaurant had opened in China.
updated 11:15 PM EDT, Tue October 14, 2014
When I first came across a "virtual lover" service on e-commerce site Taobao, China's version of Amazon, I thought it was hype.
updated 9:15 AM EDT, Tue October 14, 2014
Each year Yi Jiefeng does what she can to stop China turning into a desert.
updated 10:54 AM EDT, Mon October 13, 2014
As its relationship with the West worsen, Russia is pivoting east in an attempt to secure business with China.
updated 10:29 PM EDT, Tue October 7, 2014
Aspiring Chinese comics performing in Shanghai's underground comedy scene hope to bring stand-up to the masses.
updated 12:54 PM EDT, Tue September 30, 2014
Liu Wen is one of the world's highest-paid models and the first Chinese face to crack the top five in Forbes' annual list of top earners.
updated 7:44 AM EDT, Fri October 3, 2014
Cunning wolf? Working class hero? Or bland Beijing loyalist? C.Y. Leung was a relative unknown when he came to power in 2012.
updated 7:25 AM EDT, Thu October 2, 2014
 A man uses his smartphone on July 16, 2014 in Tokyo, Japan. Only 53.5% of Japanese owned smartphones in March, according to a white paper released by the Ministry of Communications on July 15, 2014. The survey of a thousand participants each from Japan, the U.S., Britain, France, South Korea and Singapore, demonstrated that Japan had the fewest rate of the six; Singapore had the highest at 93.1%, followed by South Korea at 88.7%, UK at 80%, and France at 71.6%, and U.S. at 69.6% in the U.S. On the other hand, Japan had the highest percentage of regular mobile phone owners with 28.7%. (Photo by Atsushi Tomura/Getty Images)
App hopes to help those seeking a way out of China's overstrained public health system.
updated 8:20 PM EDT, Thu October 2, 2014
Yards from pro-democracy protests, stands the Hong Kong garrison of the People's Liberation Army (PLA), China's armed forces.
updated 7:23 AM EDT, Thu October 2, 2014
The massive street rallies that have swept Hong Kong present a major dilemma for China's leadership.
updated 3:07 AM EDT, Sat September 27, 2014
Chinese wine drinkers need to develop a taste for the cheap stuff, not just premium red wines like Lafite.
updated 9:09 PM EDT, Tue September 23, 2014
The Dalai Lama, Tibet's spiritual leader, set off a media kerfuffle this month when he spoke about his next reincarnation.
updated 10:18 AM EDT, Sun September 28, 2014
He's one of the fieriest political activists in Hong Kong — he's been called an "extremist" by China's state-run media — and he's not old enough to drive.
updated 10:57 PM EDT, Mon September 22, 2014
China has no wine-making tradition but the country now uncorks more bottles of red than any other.
updated 5:29 AM EDT, Tue September 16, 2014
Christians in eastern China keep watch in Wenzhou, where authorities have demolished churches and removed crosses.
updated 1:38 AM EDT, Wed September 10, 2014
Home-grown hip-hop appeals to a younger generation but its popularity has not translated into record deals and profits for budding rap artists.
ADVERTISEMENT