Abstract
In 2008, “Shan Zhai” went mainstream, particularly “Shan Zhai” mobile phones” which have flooded China during past few years. In this process, MediaTek, the so-called king of boxing in Taiwan’s semiconductor industry, played a key role. However, can the success of “Shan Zhai” mobile phones be attributed to MediaTek only? This research expects to base on “disruptive innovation” theory to explore the development and evolution of “Shan Zhai” mobile phones value chains and the role that the Chinese government played. Through linking data to theories, this research aims to decipher the secrets of how “Shan Zhai” mobile phones achieved success and where the sources of disruptive innovation in “Shan Zhai” mobile phones came from. In this research, I found behind Mediatek's success is the development of a cheap and easy-to-develop SOC (system on chip) that integrates the software for all complex functions a mobile phone needs on a single chip. With its innovative chipset, Mediatek has lowered the barrier for producing mobile phones to a minimal level. Besides this, we also cannot neglect the fact of China’s being the world’s biggest factory agglomerated particularly at Shenzhen. The “ant army” nurtured through the whole process of supply chain formation, has been growing since the Chinese economic reform and has formed a “virtual factory” led by semiconductor firms. By using speed and cost as its main strategic advantages, this factory nibbled away like a silkworm or swallowed like a whale the market share of the Chinese mobile phone market. To the surprise of the Chinese government, the policy that was designed to create the 2nd Lenovo, Huei-Wei, or the strong intervention that was geared towards the development of China’s own telecom standard, have resulted in the rise of “Shan Zhai” mobile phones. The success of “Shan Zhai” mobile phones was an accident. As a follower, the vendors of “Shan Zhai” mobile phones were brave to try something new and create an innovative environment. Moreover, low-end customers in the countryside which consisted of the majority of China’s population, generated a lot of demand for China’s domestic market and became the major source of “grass-roots” innovation. In the end, the research came out the conclusion and contribution as the following: “Shan Zhai” mobile phones bring not only advantages but also disadvantages to suppliers across the Taiwan Strait. We can see many issues that vendors of “Shan Zhai” mobile phones are facing in the short term such as over-competition, difficult to reform, being resisted by many countries. These issues concern not only vendors of “Shan Zhai” mobile phones but also Taiwanese suppliers which locate at middle- and down- stream of the whole supply chain. Taiwan’s government should pay more attention to the economic influence of “Shan Zhai” culture across the Strait, and to compromise and negotiate with the Chinese government by establishing bilateral institutions. After all, given that the conditions of “Shan Zhai” mobile phones keeps involving and outside environment is constantly changing, Taiwanese firms can never satisfy with the currently situation, no matter system firms like EMS or supplier firms like equipments and components. They must have the attitude to increase their competitive capabilities through continuously improving technologies, speed, human resource, strategies, marketing and branding. Nobody can foresee “Shan Zhai” mobile phone will be phase-out or remain mainstream in the market so far.