Uncovering the World of Counterfeit Electronics in Huaqiangbei

 

Uncovering the World of Counterfeit Electronics in Huaqiangbei

Shenzhen Huaqiangbei, renowned as an international hub for electronic components and 3C digital products, stands as a core marketplace and ecosystem in China. Officially designated as "China's Electronics First Street" by relevant national authorities, it rivals Beijing's Zhongguancun in reputation. Where there are profits, there exists a diverse marketplace including both genuine and counterfeit goods, reflecting a microcosm of society and adding to the unique allure of Huaqiangbei.

 

Counterfeit goods in Huaqiangbei span a variety of types and methods. As an insider who has spent years undercover in this vibrant marketplace, I've gathered insights which I'm keen to share. Whether you're navigating through the world of Beidou GPS antennas with Kinghelm Electronics, or exploring semiconductor solutions with SLKOR Semiconductor, Huaqiangbei's nuanced dynamics offer a wealth of experiences and challenges.

 

 

 

"Huaqiangbei" refers to an administrative district centered around Huaqiang North Road, spanning from South Shennan Road in the south to Hongli Road in the north, and from Huafu Road in the west to Shangbu Road in the east. Covering an area of approximately 1.45 square kilometers, this district is officially known as the "Shangbu Area" according to legal zoning maps. To enhance management of the Huaqiangbei area, renowned as "China's Electronics First Street," Huaqiangbei Street was established on July 1, 2009.

 

In addition to the Shangbu area, Huaqiangbei Street also includes the Tongxinling area (formerly part of Yuanling), the Municipal Party Committee Compound, Lychee Park, and Huaxin Village. The commercial district of Huaqiangbei, located within approximately 930 meters north-south and 1560 meters east-west, covers a core area of about 1.45 square kilometers. This area serves as a pivotal hub radiating to surrounding regions.

 

According to urban planning standards, such a core commercial district typically covers a living area accessible within half an hour, offering a wide range of amenities for daily life such as dining, entertainment, shopping, and educational facilities. Electronics components sold in Huaqiangbei are known for their high standardization, ease of preservation, transport, and storage, low weight for easy circulation, high value, potential for reuse (as refurbished goods), and economic value in recycling leftover materials. These factors contribute to Huaqiangbei's influence not only in the Pearl River Delta, Yangtze River Delta, and Beijing's Zhongguancun, but also extend to interactions with regions as far as Singapore, Malaysia, and Thailand.

 

These aspects collectively contribute to the prosperity and economic vibrancy of Huaqiangbei.

 

Refurbished (Disassembled) Goods in Huaqiangbei

 

Originating from overseas electronic waste, these goods were initially dismantled and roughly processed in local areas centered around towns like ChenX and GuiX in the Chaoshan region. Eventually, they flowed into Huaqiangbei for sale. The dismantling methods used included "smoking, smashing with hammers, acid washing, alkali floating, and scooping with sieves," which were crude and efficient but caused significant environmental pollution due to their low added value. Over time, these operations had to relocate gradually to remote areas like Zhuhai and Qingyuan or even operate clandestinely in underground markets, yet Huaqiangbei remained the primary sales point using a front-store, back-factory sales and processing model. Previously, there was also a "bulk goods" model where entire containers or shiploads of foreign garbage were brought in, minimally sorted and classified, then wholesaled and sold in Huaqiangbei. Pricing was based on the lowest guaranteed alchemical value locally, with units sold in bags, pounds, piles, boxes, or even the number of IC pins. Initially, this was essentially a profitable enterprise, and these inventories in Huaqiangbei were substantial! After undergoing processes such as sorting, testing, acid washing, polishing, typing (screen printing/laser), tape spooling, and packaging, most were transported for sale in Huaqiangbei, streamlined through a comprehensive assembly line. Typing, tape spooling, repair, takeover feet, and BGA packaging ball planting were also separate businesses, with packaging sometimes being indistinguishable from the genuine. Early stories of sudden wealth among the wealthy in Huaqiangbei's electronics circle often stemmed from this. Some people changed professions after making their first fortune, some laundered money, and some sang and danced to enjoy life. There were also those who upgraded their industries, moving towards the high end of the value chain, becoming traders or agents. A few ambitious bosses, utilizing their first bucket of gold earned in Huaqiangbei, developed into original factories with brands, channels, R&D, and production capabilities.

 

Low-value products such as capacitors and resistors are often bundled together with PCB boards and sent directly for refining precious metals when they have no refurbishment value. However, in previous years of shortages, some automotive-grade and capacitor and resistor materials were refurbished and resold. Chips like Flash memory, whose functions degrade and age with time, are rarely refurbished and reused when not in shortage, as even refurbished units hold limited commercial value. However, dismantled parts with intact functionality still offer good value for money in Huaqiangbei, thanks to its rich product variety, mature supply chains, ease of procurement, and comprehensive accessory offerings, contributing to its status as a thriving effective market. In recent years, the popularity of electric scooters has soared, and even after price wars, some manufacturers have directly purchased refurbished Mos tubes from Huaqiangbei, making substantial profits. Visitors from all over China and abroad frequently come to Huaqiangbei seeking old-model chips. According to insiders, X86 chips used for repairing old equipment in some foreign companies are sourced through Huaqiangbei. I often encountered foreigners shopping on Taobao in Huaqiangbei before; many backpackers also frequent the area.

 

At the same time, similar industries also exist in places like Lishui and Cixi in Zhejiang Province. Their products are mostly sold to electronic markets such as Zhongfa and Hailong in Beijing's Zhongguancun area. However, these operations are smaller in scale, have shorter durations of existence, and employ fewer people.

 

Huaqiangbei's Scatter New Goods

 

Let's take a look at the processes and procedures of foundry factories. In order to ensure product quality and consistency, industrial products have a certain yield rate. Electronic components undergo processes like photolithography and acid washing in foundry factories. After completion, they are inspected. Dies on wafers that fail inspection are marked with red dots. A small portion of these components still holds some utility value and are bought through various channels as scrap, undergo simple testing and screening, and then resold. Similarly, during the packaging and testing stage of products, there are also such goods known as "scatter new goods." These items differ from original equipment in terms of current, voltage, insulation level, yield rate, electrical indicators, pin flatness, memory capacity, etc., but can be downgraded for use in specific products. When these goods arrive in Huaqiangbei, daring bosses might sell them directly as original equipment, while those with a conscience or caution will inform buyers that these are scatter new goods, often at a significantly cheaper price than original equipment. In Huaqiangbei, it's a rule to "label goods as they are," and "penalize one for selling fakes" is a common saying among companies, serving as an informal quality standard in Huaqiangbei. During shortages, discontinuations of original equipment, or disruptions in the supply chain, some people make substantial profits!

 

Years ago, someone told me about terms like "white die, black die" in the storage component industry, referring to original goods and scatter new goods. "Black die" indicates storage sectors/quadrants that are partially damaged, with slightly reduced capacity and functionality but still usable. In recent years, cheap USB flash drives and memory cards falsely labeled with capacities were prevalent in Huaqiangbei following this trend.

 

Substituted Goods in Huaqiangbei

 

In Huaqiangbei, a large volume of goods are swapped, primarily focusing on resistors, capacitors, diodes, transistors, MOSFETs, and similar low-level and generic products. These products are highly standardized, with minimal differences in quality. For instance, MLCC capacitors come in standard sizes like 0805, 0603, 0402, 0201, typically packaged in 3K/5K units, and both reel and box sizes are uniform. Similarly, diodes, transistors, and MOSFETs are standardized in packages such as SMA, SOT-223, SOT-23, SOD-323, SOP-8, TO-220, and packaged uniformly, making substitution very straightforward. In Huaqiangbei, these products can easily be passed off as genuine.

 

When technical parameters are similar or nearly identical, previously it was mainly "domestic substitutes," such as using LRC instead of SHARP, Yageo instead of Samsung, and Changjiang Electronics instead of AOS. In recent years, with the rise of Kinghelm and SLKOR, products like SLKOR's diodes, transistors, and MOSFETs and Kinghelm's Beidou antenna connectors have become best-sellers. Imitation products have emerged, marking a stage where "domestic substitutes" are now being replaced by "imitations," marketed under brands like "Kinghelm" and "SLKOR." We have mixed feelings—happy that after years of hard work, SLKOR has finally gained recognition and sales, yet concerned that soon there will be imitations that undermine our efforts in building the "SLKOR" brand.

 

In a corner of the third floor of Huaqiangbei's Old Huaqiang Market, there are several small shops specializing in branding services. They store logos, coding rules, barcodes, QR codes, and other data in computers. In previous years, people queued up for branding services. Larger merchants in Huaqiangbei now simply buy their own branding machines. Shops also sell anti-static bags, desiccants, branded packaging trays, and vacuum sealers, offering comprehensive services.

 

 

 

Counterfeit Goods in Huaqiangbei

Counterfeiting, as the name suggests in Huaqiangbei, means "using less to sell more, using lower-grade as higher-grade." Products of the same brand and model are sold as civilian-grade instead of industrial-grade, industrial-grade with the brand and model unchanged, only changing the suffix letters, such as changing 'I' to 'V', which doubles the price. Some also commonly use smaller capacities to pass off as larger ones, which is most common in storage products, such as selling 256K as 512K, 512K as 1G, and so on. There are also products like Flash, DSP, FPGA, etc., where they manipulate aspects like storage capacity, processing speed, resolution, etc. A few years ago, our SLKOR's field-effect transistor SL13N50, with some improvements in technology, had a high cost-performance ratio and was in short supply. However, one day, an old customer feedbacked that our products were expensive, which we found incredible. Upon analysis, we realized that domestic imitations couldn't have been produced so quickly. We took a competitor's product and tested it in the lab, only to find that their parameters were the same as SLKOR's SL13N45, one tier lower than ours, but counterfeited. After explaining to the customer, they insisted on using our SLKOR brand. After this incident, our trust in SLKOR's products increased, gradually increasing the purchase volume of SLKOR's new products.

 

China Substitutes in Huaqiangbei

 

When foreign brands discontinue certain models but there remains market demand, Chinese fabless IC design companies often replicate these products. Due to the limitations of reverse engineering or cost considerations, they may produce simplified versions that retain only core functionalities or target specific markets. These versions, known as "white-label" or neutral products, are then distributed by dealers in Huaqiangbei under various brands, packaged and sold without explicit acknowledgement of their origin.

 

For instance, years ago, the UPD6453 IC model from NEC in Japan, originally priced around 18 RMB, was reverse-engineered by a company in Hangzhou, reducing production costs to around 3.5 RMB per unit. A certain boss surnamed Zhou in Huaqiangbei sold this model and bought a Land Rover Range Rover three months later. In 2011, the flooding in Thailand caused a halt in production at Sanyo's semiconductor factory, leading to the discontinuation of the popular 2SC2078E power transistor used in Motorola's GP88 walkie-talkies, which originally cost 0.25 USD each. Post-discontinuation, even residual stocks were inflated to 8 RMB. Subsequently, Chinese manufacturers like Wuxi Gudian and Quanguang developed their versions priced at around 0.5 RMB each. Quality may vary, but I discovered instances in Huaqiangbei where these products were repackaged and sold as original Sanyo goods.

 

Nowadays, domestic integrated circuit technology is becoming stronger with increasing support from the government, and the market environment is improving. Domestic design and testing companies can now openly promote their own brands and establish sales channels, which is a long-term positive development. It has been quite challenging to invest in R&D, build a brand, and establish distribution channels in the early stages.

 

MOSFET Transistors

 

Slkor Semiconductor has been progressing well in the direction of domestic substitution:

 

Slkor's MOSFET transistor SL2301 replaces CJ Changdi, LRC Leshan, and VISHA's CJ2301, LP2301LT1G, SI2301CDS.

 

Slkor's MOSFET transistor SL2302 replaces CJ Changdi, LRC Leshan Radio, and VISHA's CJ2302, LP2302LT1G, SI2302CDS.

 

Slkor's MOSFET transistor SL2309 replaces LRC Leshan LP2309LT1G and VISHA's SI2309CDS.

 

Slkor's MOSFET transistor SL3409 replaces CJ Changdi, LRC Leshan Radio LP3409LT2G, Youtai Semiconductor UMW3409, VISHA AOS Semiconductor AO3409.

 

Hall Sensors

 

Slkor's Hall sensors:

 

SLSS41F replaces Honeywell SS41F.

 

SLSS360 replaces Honeywell SS360.

 

SLSS451A replaces Honeywell SS451A.

 

Best-selling Products from Slkor:

 

Slkor's popular products include M7 (SMA), AMS1117-3.3 (SOT-223), AMS1117-5.0 (SOT-223), SS34 (SMA), SS36 (SMA), SS8050 (SOT-23), SS8550 (SOT-23), 2N7002 (SOT-23), BAT54C (SOT-23), SD12C (SOD-323), ZMM5V1 (LL-34), LL4148 (LL-34), SMBJ6.5CA (SMB), SMBJ5.0A (SMB), etc. These models and products are selling well in Huaqiangbei specialty stores and major online platforms!