iPad Popularity Revives Shenzhen PC Makers

Shenzhen’s PC manufacturers are enjoying an unexpected boom thanks to the demand for “white box tablet PCs” — inexpensive copies of Apple’s popular iPads.

“Just one month after the iPad was first launched, 60 percent of China’s netbook manufacturers and many of its portable media player suppliers started rolling out tablet PCs as cost-effective alternatives,” says Livia Yip who publishes a newsletter on the tablet PC industry.

Shipments of so-called white-box tablet PCs surged 230 percent from 567,000 units in the last quarter of 2010 to 1.9 million units in the first quarter of 2011, says a DisplaySearch Quarterly Mobile PC Shipment and Forecast Report in June. China represented the largest market for white-box tablet PCs, accounting for 44 percent of global shipments.

The low-cost alternatives may be hurting sales of the company that kicked off ythe tablet boom. China iPad sales fell 5.14 percent in Q2 of this year, according to Analysys International.

“If 2010 is the first year of the tablet-PC era, 2011 must be the start of Chinese white-box tablets,” says Liu Muhe, CEO of 1pad.cn, a Shenzhen-based website that covers the tablet-PC industry.

White-box tablet PCs bear no known brand names and mostly use the Google Android operating system versions 2.2 or 2.3 originally designed for smartphones while most major tablet brands use Android 3.0 made specifically with tablets in mind.

The white-box tablet PC use less-expensive older screen technology to keep costs down. They are ideal for less affluent families who would not be able to afford iPads or Samsungs. They also save on the cost of apps as they are compatible with free software, apps and games.

The demand for cheap white-box tablets seem virtually inexhaustible as countless small manufacturers jump into the market. There is virtually no R&D as tablets consist of only a screen, a motherboard and a battery. One such firm is Shenzhen’s Yuandao. From November to July Yuandao launched eight different models of tablet PCs priced from 199 yuan ($33) to 1,999 yuan ($330). In March alone it sold more than 100,000 units. It is seeking to capitalize on back-to-school buying with September promotional events in its direct-sale stores.

White box makers have also been pleasantly surprised by demand from an unexpected source — foreign consumers looking for bargains. Easydy, another of hundreds of tablet PC makers in Shenzhen, received overseas orders for over 15,000 units in August, about 10 times the number it shipped 18 months ago.

Most international orders are from the Middle East and Africa where consumer purchasing power is far lower than in the U.S., Europe and East Asia. These orders have been a godsend for manufacturers who had been struggling to survive after the demand tanked for netbook clones in 2010.

The average white-box tablets being shipped overseas from Shenzhen provide about 80 percent of the functions of an iPad. Some provide even more functions than tablet PCs from major brands.

“I am sure 99 percent of the digital companies in Shenzhen appreciate [Steve] Jobs, who has set up a model as well as created a huge market demand for us,” says Wen Feng, general manager of Easydy. “Many companies were struggling or even bankrupt until the iPad was launched in early 2010.”