Mobile Monday Beijing 28


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Presentation on the Shanzhaiji phenomenon in China & around. It is not "fake phones" as much as it is unchecked electric equipment. The run on a common Taiwan-made platform and are disruptive force in the handset market.

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Mobile Monday Beijing 28

  1. 1. Web Site:
  2. 2. Table of Contents Evolution of Global Handset Industry Globalization of Technology – Three phases What is a Shan Zhai Ji Phone? China Market handset statistics Shan Zhai - Bandit Handset characteristics Shan Zhai Ji examples in the grey market Greater China Integration Stratety – “Taiwan Inside” with Shan Zhai Ji, for competitive advantage The rise of MediaTek MTK and their Blue Ocean Strategy in Greater China, emerging markets Disruptive Innovation from a Silicon Chip (SoC) Birth from Shan Zhai Ji to global brand – it can happen! Conclusion
  3. 3. Evolution of Global Handset Industry Q: How did Shan Zhai Ji phenomenon start, why is it occurring now? A: Greater China is the global supply chain center for outsourced of R&D, design, assembly and manufacturing in the cell phone industry! History of Mobile Handsets in China 2000 2003 2005 2006 2007 Handset industry China NingBo Bird Chinese Government TianYu Lantong Chinese government in China begins, and DBTel (Taiwan) enforced production became the first cancelled production Motorola and became most popular certification system, 40 domestic certificate system in Nokia occupy top local brands, initiated handset vendors obtained company to October, leading to handset sales prosperity of the permits to produce mobile create their own- the prosperity of positions domestic mobile handsets, any phones brand, private Shan Zhai Ji phone market produced without these handset using handsets permits were illegal, lend Mediatek MTK to bubbling phenomenon chip of market 2008 2009 Lenovo China sells their mobile phone business Major Tier #1 handset vendors sales plummet, at a loss in January, During Beijing Olympic much concern in the industry that Shan Zhai Ji games, Digital TV is formally broadcast leading are unstoppable and certainly difficult to fully to hot sales of Mobile TV phones enforce. Many local handset vendors spin out handset biz altogether, Moto, Sony-Ericsson in a world of hurt.
  4. 4. Greater China integration strategy •“Greater China” is leading in technology for the mobile device market. •Taiwan - source for R&D and finances. • China – assembly & distribution •2/3rds of all cell phones assembled in China •Prior to 2008, 50% of all cell phones designed in Taiwan
  5. 5. Globalization of Technology Three Phases Globalization: First Wave 1415-1914 Portugal - seeking way to obtain wealth from the Sea, controlled Straits of Hormez on Persian Gulf, made Goa, India its possession Columbus was also looking for a route to India, instead found US. Portuguese the first to claim Formosa, but settled in Macao in 1500s. Dutch, French, English and Spanish came to Asia (USA & Japan also involved) in search of wealth, natural resources for the next 400 years Dutch East India Company, Jardine Mathison, Hutchison Whompoa, colonization of India, Opium War in China, British licensed Hong Kong
  6. 6. Globalization of Technology Three Phases • Globalization: Second Wave 1947-2000 – America led the second wave with Western Democracy, philosophy. – Objective was to rebuild a new generation in Asia/Europe after WWII – Constructed trading system, discarded protectionism, mercantilism of the past, eventually created GATT, then WTO, opened up markets – Marshell plan for Europe, Dodge plan for Japan, focus to set production in motion, created an export orient system from new factories – Golden age for the USA 1950-1973 in terms of growth – Gold standard set, in 1971 exchange of Gold halted in favor of US $
  7. 7. Globalization of Technology Three Phases – Dollar system set up, all other currencies would float or be adjusted or fixed against the US Dollar – U.S. long term competitiveness started to slide in the 1980s, trade deficit with Japan, then others, eventually China as U.S. economy moved from manufacturing to service industry. – The Internet helped in 1990s build the U.S. back into an innovation society, but then the bubble burst in 2001 • Globalization: Third Wave – In the third wave, China has re-emerging after 600 years! – The rise of the microcomputer industry is leading the way, then broadband communications, technology converges, globalizes – The innovation that drove the Industrial Revolution was based in England, and for years the British Government maintained strict export controls on technology and people to prevent the movement of capital out of the U.K. – It failed, however, to stop the outward flow!
  8. 8. IT Innovation moves Westward The knowledge and experts escaped, moving the center of innovation into the United States by the early 1900s, with its large local market and freedom to pursue new opportunities. With a strong investment in education, a high degree of economic freedom and strong intellectual property protection, the U.S. remained the world capital of innovation and technology. The next great wave of technology advances began just a few miles away as New England was building the first industrialized factories in the U.S. Years later the computer industry emerged in and around Boston, Massachusetts, along the corridor defined by Route 128, where Digital Equipment, Data General, Lotus Development and dozens of world-class innovators thrived.
  9. 9. IT Innovation moves Westward As the Personal computer took over the business world, the center of innovation moved westward to Silicon Valley in California and Silicon Forest in Redmond, WA with the likes of Intel, Microsoft, HP, Palm, and Oracle. Another shift has been underway since the mid-1990s as the semiconductor and electronics manufacturing has moved off shore to Greater China and the new center is China with Shan Zhai Ji simply a direct reflection of the roots of creativity and innovation, transferred from the high-tech hallways of Silicon valley to the back alley’s of Shenzhen.
  10. 10. One-minute Chinese Language Lession • = Shan - Mountain • = Zhai - Fortress, hideout • = Ji - mobile phone
  11. 11. Which one is the real Apple iPhone- Can you tell?
  12. 12. What is a Shan Zhai Mobile phone? Early Shan Zhai mobile phones were inferior brands that where unknown. They put on the label “CECT”on the mobile phones and paid CECT company a certain amount of cash to use its brand name. Later on, there came out a variety of new brands. Some are named as Sunyericcsun, NCKIA or SAMSING, leading customers to mistaking them as the famous brands. Shan Zhai You can find anything printed outside the package, Combo Shaver except for the address of the real manufacturer. and cell phone Extremely powerful functions with extremely low price. Extremely fancy appearance with extremely unreliable quality. During recent years, Shan Zhai mobile phones have shown pretty impressive innovation in terms of technology, appearance and manufacturability which find no parallels. A lot of unusual technologies and designs are combined together. These combinations brings out a How about a wild variety of functions, though most infringe on the shave with original manufacutrer in some way. Now, Shan Zhai mobile phones have become part of the that call? non-mainstream culture. It increasingly attracts more and more people with the so-called Shan Zhai spirit, - wild ambition, innovation and endless catering to the need of customers.
  13. 13. Shan Zhai Spirit Be extremely creative, brave, and not pay too much attention about the low profit. Make everything possible. Try super hard to satisfy Customer demand Create new demand even if it didn’t exist before. Nothing is impossible to a willing mind! The biggest problem is the quality. Shan Zhai's way to “success” Multilevel and diversified markets in China, worldwide Mobile phones became an everyday consumption. Includes any functions that the customers could imagine “We are witnessing the rise of the hacker-entrepreneurs, it is a classic Silicon Valley legend brought to the back alleys of Shenzhen”. Karl J. Weaver, Shenzhen – January, 2009
  14. 14. High-Tech Golden Egg with “Taiwan Inside” China - largest handset market – More than 620 million cell phone users. Every month, China adds another 8.52 million new mobile phone users. Since 2007, there has been a new wave of self-branded or unbranded quot;white-box“ handsets, known locally as quot;bandit cell phones“ 90% using MediatTek chips. Cheap ' bandit cell phones' have carved out a massive niche for themselves in China' burgeoning handset s market, with Taiwan' Chips, LED, PC Board and panel s makers playing key roles in the process. China’s 900 million rural dwellers are set to become the next engine of rapid growth for the country’s handset industry. Over 250 million Shan Zhai Handsets were produced in 2008
  15. 15. Annual Handset Output Volumes in China
  16. 16. China’s Handset Market, Q4 - 2008 Source: CCID Consulting, Dec. 2008 Chinese Handset vendors use the Mediatek SoC solution include Gionee, Lenovo, TianYu, Haier and Shan Zhai Ji also use MTK - Mediatek chips to gain important time-to-market results. TianYu and Lenovo use MTK chips in all phones – they are growing.
  17. 17. Sales Situation of China's Mobile Phone Market, 2006-2008 Source: CCID Consulting, Dec. 2008 China' domestic mobile phone manufacturers are on the edge of s tough existance and survival under attack from foreign brands and Shan Zhai Handsets. The rise of “Shan Zhaiquot; handsets, has impacted traditional players – Many players are spinning off their handset business.
  18. 18. Mobile Phone Retail Channels in China Mobile Phone Retail Channels in China Mobile Phone Chain Stores Source: CCID Consulting, Dec. 2008 Mobile Phone Chain Stores Business Halls 27.1% Supermarkets & Shopping Professional Malls Mobile Phone Mobile Phone Counters in Stores 45% Computer Stores TV shopping TV Business Shopping Halls 15% Online Shopping 4.5% Other Supermarket & Shopping Malls 6% Other 1.4% Professional Mobile Phone Stores Online Shopping Mobile Phone Counters in Com puter Stores 1% 0.3%
  19. 19. Bandit Phone Characteristics, usage appeal Targeted for China’s rural markets They can be very cool looking, imagine Spiderman cell phones They are very cheap, feature-to- feature compared to name brands Constant style and design changes are assured in a short time frame – the sky is the limit! Provides innovative solutions to previously tough technical challenges
  20. 20. What type of handsets can we expect? 7 speaker cell phones for rural farmers, who need to hear ringing from a distance Students use same speakers to reproduce Dance floor or boom box music environs 4 bright LED lights to server as a dual Cell phone and powerful flashlight. For Senior citizens, big sounds, big displays and big key caps For people who work outside in the Fields, an extended battery life handset For senior citizens to listen to various Broadcasts, FM radio, local TV tunner Religious handsets and software Money authenticity readers Sports venue branding (2008 Beijing Olympic “Fuwa” phone) Consistently support two SIM card slots Budda Mobile
  21. 21. This is an ordinary Shanzhai mobile phone with straight silvery appearance not as wild as its name.
  22. 22. However, it includes a Super vibrating low- pitched woofer in the back of the handset Two amplifiers bring out the effect of vibrating low-pitched woofers playing ear-splitting music. Make sure that you can' miss any call even t in a noisy train station.
  23. 23. Includes: 2 sim card slots, and an extraordinarily long standby time The Claim: Extraordinarily long standby time of 366 days
  24. 24. Specific Hot selling Shanzhai mobile phones 1) Cigarette? Mobile phone? Or a mixture of both? 2) My Ferrari consumes no patrol. 3) Big Thunder phones. 4) Fierce Shanzhai, big cannon “paparazzo” mobile phone. 5) Ouch, a hidden mobile phone camera! 6) Watch-like mobile phone with hidden camera 7) Orange: HiPhone 8) Transformation 9) 800RMB Vertu mobile phone 10) PSP mobile phone 11) Shanzhai mobile phone welcomes the Beijng Olympics 12) Buddha preserve me - mobile phone blessed by eminent monks. 13) Shanzhai' little brother s
  25. 25. Cigarette? Mobile phone? Or a mixture of both? – A real converged device. This is the Perfect combination of mobile phone and a cigarette pack, for those infectious smokers on the go.
  26. 26. Cigarette? Mobile phone? Or a mixure of both? The most incredible one can be put in at most 7 cigarattes of various brands such as Baisha, Marlboro or Zhongnanhai. If you are a heavy smoker or simply want to be very cool, now listen to me, you really need this.
  27. 27. Cigeratte? Mobile phone? Or a mixture of both? Chonghwa, Panda, Marlbara, 555, Yuxi, Furongwang, any famous brands that you can think of. All of them are produced-with honor, by a sound “China Communication Facilityies Co., Ltd.”whose location still unknown.
  28. 28. My Ferrari consumes no Gasoline When you Open the battery chamber...Even the shape of the battery resembles an engine. Actually a Ferrari mobile phone. phone
  29. 29. My Ferrari consumes no Gasoline Shan Zhai products are just for Ferrari, Porsche, BMW, Hummer, Cougar, Benz... Also, in fact any brand names that you can call out.
  30. 30. The so-called Big Thunder phone! Looks just like a normal phone... Double SIM cards and can be used simultaneously? That' not unusual for s any Shanzhai mobile phone.
  31. 31. Big Thunder phones However, when it turns around... The unique aura hits you in a sudden.
  32. 32. The Big Thunder Phone - is a Boom Blaster Eight amplifiers!!! For the volume- Level 1: already powerful. Level 2: Feels noisy and ears uncomfortable. Level 3: Can be heard from every corner of the room, sharply penetrating. Above Level 3, I believe everyone around would get very very annoyed. I tried only once and dare not try it again.
  33. 33. Fierce Shanzhai,- big cannon “paparazzo” mobile phone Open the packaging and... now you see it... Before we fix on the “big cannon” lens, let' s take a look at the impressive design of this wild mobile phone. Above the low-pitched woofer is a 1.3 megapixel camera. Around the lens is a specificly designed flute to insert the Easy steps - put the lens in the slot “big cannon” lens. and lock it by rotating clockwisely.
  34. 34. Fierce Shanzhai, big cannon “paparazzo” mobile phone From side, it looks pretty much like a professional long lens camera with the “big Rotate 3 rounds, and here we make the first mobile phone camera with a cannon” lens. 6* optical zoom lens. With it, even the little bird standing on the wire can be captured clearly! In a nutshell, this is a universal mobile phone which is featured with 3 inchs touchscreen, Chinese handwriting, double SIM cards, additional MicroSD slot, bluetooth, MP3 player, 6+1 super big loudspeaker and megapixel camera. Anything you can think of. That' the s unique philosophy of Shanzhai!
  35. 35. Fierce Shanzhai,- big cannon“paparazzo” mobile phone Try its performance with 6 times telescopic effect. We focus on the clothes store on the other side of the street. On the left is the preview without the lens, just like taken by an averge mobile phone camera.You are not able to tell the store name and the street is unecessary. On the right is the performance of “big cannon”. It' much closer now and s you can even see the pretty storekeeper preparing for the store opening, and of course the words on the poster. The big cannon does deserve the reputations it enjoys.
  36. 36. Fierce Shanzhai, big cannon “paparazzo” mobile phone Shan Zhai handsets are famous for surprises. In spite of 6.1 soundtrack, 6* telescope effect, we have even another function that you would never imagine. The intrigue hides simply on the seemingly ordinary battery compartment. As you press this long button, the light on the left will radiate purple beam. However, it' neither a s flashlight nor additional flash for camera. It’s a money authentication reader
  37. 37. Ouch, a hidden mobile phone camera! In this technologically highly developing era, walls not only have ears, but also pinhole cameras, and also SD999- the king of secret peering . It can easily expose your secrets to the sunlight! Inserted inside is a radio wave reciever. Together with a monitoring video camera, it can send videos recorded through air. The effect distance is 10-30 metres. For those who want to monitor their house but have no professional equipment, this is like a stove fire in snow. To mothers cooking in the kitchen that worries about their babies playing in the living room, this will make it possible that they can cook and take good care of the babies at the same time. And of course, this is also the best choice for those who enjoy peeping on others' secrets.”
  38. 38. Ouch, a hidden mobile phone camera! SD999 works as a remote monitor in such way: it need no wires, no 3G, no transmission fee. From the screen of mobile phone, you are capable to see anything within 10 metres. Taken off this video function, SD999 is just a normal Shanzhai- touchscreen, stereo loudspeaker, NES, 1.3 megapixel camera, microSD card slot... All nothing special for a Shanzhai in Shenzhen.
  39. 39. Dick Tracy Watch mobile phone with hidden camera This watch would look very geekish for a female to wear. On the watchband is actually a keybroad on which you can simply dial phone numbers Some more wildly This “watch phone” has a tiny 0.3 megapixel camera on it, hidden in a secret part, Perfect for candid camera. innovative Watch phones You can pretend to be checking out the time while actuall take a picture of the hot girl in front. This watch phone is a favourite for many people.
  40. 40. Orange: HiPhone Like an iphone, with a gravity inductor inside, it can also rotate screen At the first sight, you automatically. simply won' believe t this is a Shanzhai mobile phone. It' more s HiPhone provides acceleration games, caculator, WAP webpage than 90% looks like an browser, memo, MP3 play that can iPhone! copy songs and play simultaneously, MP4 player, calender, graphic operation interface like Multitouch, selecting Chinese Orange only costs ¼ of the price songs by shaking, audio recorder, of Apple iPhone. You TXT e-book reader, inside can even buy it at bluetooth. Some functions are even RMB 999 superior to iphone!
  41. 41. Transformation Shan Zhai handsets Looks just like nothing but an ordinary Shanzhai mobile phone It can slide out like this. But it's common. And can slide like this. And like this.... Hmm, a little Have you ever imgined that? interesting.
  42. 42. 800RMB Vertu Luxury mobile phone Vertu in Latin language means “high quality, unique”. A Vertu mobile phone costs 100,000 to 150,000 RMB. It is made by hand by those craftmen who makes Rolls-Royce motor cars. A variety of jewelleries and expensive metal are used in producing a Vertu, selling in limit quantity. There are two types of shells- gold and platinum. The screen is made of 800 RMB? A Vertu? Yes, your ears are hearing blue crystal, never gets a correct. However, this Vertu is not the one scratch on. Under every button, larvished with diamonds and gold, but a Shanzhai there' a ruby, to make sure of s Vertu. The Shanzhai Vertu copies almost every touch exactness. detail of a real one- shining shell and special V- shaped buttons. Those who have a real Vertu must get mad if they know the price of this one.
  43. 43. Play Station Portable (Mobile phone) Shanzhai started to Expert in multimedia, entertainment and games, it has inserted promote PSP mobile Nintendo game emulators, with phone even earlier than classic games including Super Mary, Contra, Bomberman, Sony. Salamander, etc. Whether the buttons in the front, or the loudspeaker at back, the special metal ring by the side of the lens, all looks 90% the same with the original. Only difference is this one is half the size of a real PSP mobile phone, much more exquisite.
  44. 44. Shan Zhai mobile phones welcome Beijng Olympics This handset is specifically for Beijing Olympic Games. Apart from its very Chinese design, together in the package also includes a Chinese knot. Catching the atomsphere of Beijing Olympic, a new set inspired by Fuwa Huanhuan came out.
  45. 45. Buddha preserve me - mobile phone blessed by eminent monks • It is blessed by eminent monks and even has a certification This mobile phone for proof. is called Buddha • A perfect heart and karma. combinatio It has a sounding n of religion background which and high- is not to be taken lightly. tech.
  46. 46. Shan Zhai's little brother It looks like just a pari of sunglasses In fact, it' both a s This is a sunglasses MP3 pair of sunglasses player with 1GB storage. Those three buttons are and MP3 player. shortcut keys. Looks like the “FBI” There are multiple colors of them. The earpieces can in hollywood films? be adjusted and fit you perfectly. They are copied from Oakley’s design
  47. 47. Bandits' Secret Weapon: Taiwanese Technology • Handset chips are the most critical component to design a cell Phone–MediaTek rules this market! • In Shan Zhai land, MTK – Mediatek inside is true branding power – deeply rooted in Chinese Consumers minds – “MTK inside” • Mediatek has launched a Revolution in China’s handset Industry, which has helped “Made in China” cell phones narrow the Gap with international brands.
  48. 48. 90% share of China’s mobile phone chipset market 160 million chipsets for cell phones shipped in 2007, that is 60% of its total revenues, 95% of those orders cames from China customer MTK system-on-a chip is creating a disruptive innovation revolution, rewriting the rules in a 1.2 billion a year handset industry. SoC (system on a chip) integrates software of the phones complex functions onto a single chip, the software includes a menu for simply adding hundreds of function, giving it the ability to tailor to specific vendor product design requirements. The guts of these 250 million China-made handsets rely on major components and major assemblies by Taiwanese vendors
  49. 49. China’s Domestic Mobile Handset Industry integrates with Taiwan’s ICT Supply-Chain • Giantplus Technologies, small/medium sized TFT Final Assembly, QC display panels, Plotech Foxconn Technology’s printed circuit boards, Harvatek TFT, LED Inc’s LEDs and Elan displays Microelectronics Corp’s Software chips to Premier images and Altek Corp’s camera Camera modules modules, WPG Holdings Electronics component Silicon chips services and Foxconn’s Finished phone assembly (EMS) services, Printed Circuit Boards Taiwanese companies have built the world’s Crystals, LEDs, Resistors biggest handset industry in China.
  50. 50. Disruptive Innovation from a Silicon Chip (SoC) Combining Taiwan’s handset technology with China’s huge handset market and manufacturing environment, has created an emerging market trend of good quality, fair priced Shan Zhai ji. MediaTek is the original catalyst of “Bandit phones”, however, calling these phones low value is unfair. China’s handset vendors possess strong capabilities in industrial and mechanical design, also network and inventory management, they can get products to market and expand scale Originally, Tier #1 handset brands controlled design/manufacturing of cell phones from start-to-finish, monopolized the setting of handset specs and standards, dictated OS and chipset design core of each phone, controlling supply chain, chipsets were limited to Qualcomm, TI or Infineon OS platforms. Taiwan ODMs served big OEMs, could not gain critical mass for a long time, then MTK had a technology breakthrough, launched disruptive innovation and helped bridge the chasm between handset manufacturers and handset chipset makers. Innovation through differentiation!
  51. 51. Shan Zhai Ji by any other name!
  52. 52. Breaking the Mobile Phone Chipset Monopoly The development process of a new cell phone, from R&D and circuit and mechanical design to tooling and mass production, takes 9 months. MTK’s handset chipset platform integrates complex technical devices (digital camera, video camera, MP3s, RF radio, PDA, PIM functions) all on one chip, has customized 100 different modules for customer differentiation. After checking off functions needed, a price is quoted to each customer, then Customization of the chip and software takes just a few days to be ready! Now, it takes only 1-3 months for a new phone MTK chips help strengthen handset vendor’s strengths in software integration capabilities, thereby allowing them to concentrate resources on developing new Applications/functions. Handset vendors are able to streamline product design process and this allowed many new handset design houses to pop up for the past 3-4 years in Shenzhen, Beijing and Shanghai. Now orders for as low as 20K~30K can be delivered in 45 days.
  53. 53. Complete Turn-Key Operating Model MTK has transformed itself into a customer service-oriented software company MTK has focused the energies of Bandit Handset troops, now able to challenge established armies of Nokia and other big branded multination al handset players
  54. 54. Bridging Global Shan Zhai Ji Markets Taiwan’s ICT sector is helping China’s phone vendors develop presences in emerging markets around the world, to penetrate lower end markets that multinational brands have ignored. MTK has set up branches in India, is acting as a match- maker to introduce other Chinese handset customers, helping telecom operators in many countries connect with mobile phone vendors in China. China’s mobile phones have essentially replaced MP3 players, FM radios, telephones, digital cameras and TVs, all this now going to emerging markets. Shan Zhai Ji handset vendors have adopted a “Blue Ocean” strategy of selling into emerging markets where price is very sensitive and quality not expected to last forever – they sell well and are undercutting Western brands in these markets, just like they have in the China market.
  55. 55. From birth as Shan Zhai Ji to global brand The chance to grow into Shan Zhai Ji, to produce handsets with, no-name, no brand, no service, no guarantee, no manual, not sold in operator-sponsored retail chains, many Possible Network access designs started to use MediaTek SoC chips. license verification and approval means operators 2007 2008 Domestic License will begin welcome them requirement to into their networks produce handsets 2005 waved to stir on competition 2001 2009 China’s Handset industry starts to Possible partnership with rise China mobile for “Xin Ji” handset customization Today’s Shan Zhai handset vendors have projects a real chance to move from back alley’s to boardrooms – the possibility exists to create a global brand
  56. 56. Shanzhai mobile phone's Blue Ocean strategy graph and coordinate system Shanzhai mobile phone high Blue Ocean Standard mobile phone Strategy is a way to make the competition irrelevant by creating a leap in value for both the company and its customers. low Target price performance individuation marketing service Intellectual quality license customer property group •Mobile phone have become Add various outstanding “everyday consumption” Eliminate licensing of Functions @ Extremely Intellectual property •Lowest cost gives it a low prices competition advantage •Mainly focus on rural and Decrease Quality low- Create Distinctive feature middle and low level cost chip, manufacturing characteristic service marketing markets Target customer group •Distinctive characteristics
  57. 57. Conclusion The Globalization of Technology has caused the global supply chain shift to Greater China for the entire handset ecosystem, technology continues to migrate Westward. The Local Chinese and Shan Zhai handset market vendors are a very important growing handset market channel, set into motion by MTK – MediaTek’s Blue Ocean strategy with destructive innovation results in the handset industry the last two years. We are witnessing the emergence of a new Hacker- entrepreneur class of vendors able to create new brand adoption.