Hi-phone anyone? Fake mobiles threaten China brands

By Zhou Xin

BEIJING (Reuters) - Steve Jobs may not lose sleep over knock-off iPhones, but legitimate Chinese brands such as Ningbo Bird (600130.SS) are fretting about fakes in the cut-throat world of low-end handset makers.

China is the world's largest market for handsets, but domestic brands such as Ningbo Bird and Amoi are struggling amid intense price competition from local rivals, including some that specialize in knock-offs, having ceded their once dominant market position to foreign brands.

"A Nokia user would not be my client, but those who use Ningbo Bird handsets are very eager to try my products," said Fu Jiangang, who owns a website that sells pirated and unregistered mobile phones.

Fu is now thinking about upgrading his Hiphone, a blatant ripoff of Apple Inc's (AAPL.O) popular iPhone which comes at a fraction of the original's price.

From four small assembly plants owned by a partner located in the southern boom-town of Shenzhen, Fu sells hundreds of handsets a month and is targeting farmers, migrant workers and other low-income users to expand his sales network.

"You can't expect a farmer earning 10,000 yuan a year to spend 5,000 yuan on a new phone," said Fu. "But the farmer also wants phones that look fancy, can take pictures and play music."

His products are competing against Ningbo Bird and a host of other domestic manufacturers such as Konka 000016.SZ and Lenovo (0992.HK) in the bottom third of the market.

Ningbo Bird reported a loss of 34 million yuan ($4.94 million) for the first quarter, citing fierce competition in the local market, one that it once dominated just a few years ago.