Today, one of the most visible smart watches is Pebble, which retails for about $200. For the burgeoning hardware start up scene, Pebble is a triumph. After failing to attract traditional investors, Pebble received most of its funding from a record-setting $10 million Kickstarter campaign.

Pebble Technology

But a less virtual reality lurks behind the crowdsourcing success. Once the Kickstarter campaign ended, Pebble had effectively promised to ship over 50,000 watches, a volume that was far beyond the company’s previous experience. So Pebble CEO Eric Migicovsky came to the Southern Chinese city of Shenzhen, the global hub of electronic manufacturing, to bring the product to market at scale.

Some think that ramping up production is just a matter of spending more money to receive more goods, but the transition from making a few things to making many things is not a simple or easy one. Migicovsky encountered a string of problems and delays in the assembly and manufacturing process, which led to late shipments, disappointed customers, and bad PR. Migicovsky seems to have considered manufacture late in the process, only after the completion of the initial prototype used to pitch his Kickstarter horde. Transitioning to commercial scale was thus seen as an uncreative process of mere execution. As a result, Pebble didn’t pay enough attention or respect to the system of trial and error experimentation embedded in the manufacturing culture of Shenzhen.

A different story emerges in the burgeoning wearable electronics market of Southern China, one that is based on a rapid, flexible and open ecosystem called shanzhai 山寨.

Take, World Peace Industrial (WPI), a Taiwanese electronic sourcing company located in Shenzhen, as an example. The company’s application technology unit (ATU) spends millions annually to develop reference circuit boards, called gongban 公板 (“public board”). A gongban can be used by a variety of different companies, who either incorporate it in their products directly or build atop it as they please via modifications. ATU develops 130 gongbans annually in areas ranging from smart phones, tablets, smart watches, smart homes, and industrial controls—and distributes the designs for free. WPI then makes money by trading in the boards’ components.

"We call this shanzhai in Shenzhen. It’s a mass production artwork,” explains Lawrence Lin head of the Application Technology Unit at WPI. Thirty some companies in Shenzhen are shipping their own smart watches with gongban from ATU and gongmo (‘public case’) sourced from the massive shanzhai ecosystem, which consists of tens of thousands of companies that manufacture and distribute goods.

Shanzhai used to refer to knock-off retail, and later end-consumer electronics, such as mobile phones of major brands like Nokia, Motorola and Ericson, often specifically designed for non-Western markets in China, South East Asia, South America, the Middle East and Africa. The ecosystem grew rapidly and by 2010, it was producing 200 million phones annually and was responsible for a quarter of the global mobile phone market. Since then, the shanzhai ecology has moved beyond cloning and enabled a wealth of iterative innovations including dual-SIM for frequent travelers to avoid roaming charges, seven-speaker phones for workers to listen to music at construction sites, and custom-designed phones for migrant populations unable to afford the latest smartphone.