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Within a month of its launch, the Shenzhen-Hong Kong 2 mobile phone sold over 100,000 units.

This number may not seem like much more than 20 years later, but in the Chinese mobile phone market in 1995, it was an earthquake.

The conference room at Motorola's Shenzhen office was filled with smoke.

Smith, the president of the China region, an American in his fifties, was pointing at the sales report and raging, "One month! Our sales have dropped by thirty percent! Can anyone tell me why?"

The marketing director wiped his sweat. "Mr. Smith, it's mainly because Shenzhen-Hong Kong Electronics has launched the Shenzhen-Hong Kong 2 mobile phone, which is priced at only five thousand yuan, but has similar functions to our models that cost seven or eight thousand yuan. Consumers are all buying theirs."

"Five thousand?" Smith's eyes widened. "How did they do that? How did they control costs so well?"

"I heard... I heard they use domestic supply chains and have low labor costs, so they can keep prices down."

"So what are our advantages? Our brand? Our technology?"

The technical director gave a wry smile, "Mr. Smith, to be honest, the Shenzhen-Hong Kong 2 is indeed not bad in terms of basic functions. It has caller ID, contact storage, games, and other features, and its standby time is even longer than ours. For the average consumer who uses a mobile phone, which mainly involves making calls and sending text messages, these functions are sufficient."

"So why would they spend eight thousand on our phones when they can get a decent one for five thousand?" Smith slumped into his chair.

Silence fell over the meeting room.

The same situation is playing out at companies such as Nokia, Ericsson, and Siemens.

Shenzhen-Hong Kong 2 is like a catfish, stirring up the originally calm Chinese mobile phone market.

These international giants have been operating in the Chinese market for many years and are used to their high prices and high profits.

Now a domestic brand has suddenly emerged, with prices only half of theirs and similar functions. How can we fight this battle?
Lowering prices? The costs are what they are; lowering them too much would result in losses, and lowering them too little would be pointless.

Upgrade technology? Research and development takes time, and the cost of developing it is higher, and the price cannot be compared with that of Shenzhen and Hong Kong.

Advertising? Shenzhen-Hong Kong Electronics is now flush with cash, and its advertisements are everywhere, from television to newspapers to billboards, with slogans like "Shenzhen-Hong Kong mobile phones, mobile phones made by the Chinese people themselves" everywhere.

A month later, the heads of the China regions of several giant companies sat down together.

“This can’t go on,” Motorola’s Smith said first. “If Shenzhen and Hong Kong continue like this, our market in China will be finished.”

Richard, Nokia's president in China, is British. He frowned and said, "The problem is, how do we respond? We can't win the price war, we can't win the technology war in the short term, and the brand war... They're playing the national card, which we can't handle."

“Then let’s look at it another way,” the Ericsson representative said. “Shenzhen-Hong Kong Electronics is a company that’s only been established for a few years. Where does their technology come from? Can they develop it independently? I don’t believe it.”

"what do you mean……"

“Sue them,” the Ericsson representative said in a low voice. “Sue them for copying our patents and stealing our technology. These kinds of lawsuits can last for years. Even if we don’t win the case in the end, we can still drag it out and cause them negative consequences.”

Smith's eyes lit up. "That's a great idea! China is starting to pay attention to intellectual property rights now. If this kind of lawsuit goes on, the reputation of Shenzhen and Hong Kong will be ruined. Consumers will doubt the source of their technology and won't dare to buy it."

“The problem is, do we have any evidence?” Richard asked.

"What evidence do you need?" The Ericsson representative laughed. "If we say we have it, then we have it. Even if the court rules against us in the end, that's a year or two from now. By then, we'll have already taken back the Shenzhen and Hong Kong markets."

The group looked at each other and understood.

This tactic is ruthless—you don't need to win, you just need to stall.

“Then it’s settled.” Smith made the decision. “Several of us will jointly sue Shenzhen-Hong Kong Electronics for infringing on several of our patents. We also need to take care of the media and get the news out.”

"it is good!"

……

A week later, the summons from the Shenzhen Intermediate People's Court was delivered to the headquarters of Shenzhen-Hong Kong Electronics.

Meanwhile, major media outlets received the news.

The Southern Metropolis Daily's front-page headline reads: "International mobile phone giants jointly sue Shenzhen-Hong Kong Electronics for alleged plagiarism and technology theft!"

Economic Observer: "Behind the Hot Sales of Shenzhen-Hong Kong 2: Independent Research and Development or Technology Theft?"

On the television news, the host solemnly stated, "Shenzhen-Hong Kong Electronics, as a representative of domestic mobile phones, has recently been jointly sued by several international companies, including Motorola, Nokia, and Ericsson, who accuse it of infringing on multiple patented technologies. This matter has attracted widespread attention in the industry."

The market reacted immediately upon the release of the news.

The next day, sales of Shenzhen-Hong Kong 2 plummeted by half.

Many customers who had already placed orders requested refunds, and the long queues outside the stores disappeared, replaced by crowds of people returning their purchases.

The atmosphere was somber in the conference room at the Shenzhen-Hong Kong Electronics headquarters.

The general counsel, holding a copy of the indictment, frowned. "Mr. Su, they're accusing us of infringing twelve patents, covering everything from circuit design to software interface. While most of the accusations are far-fetched, three are indeed a bit troublesome—our caller ID function and SMS storage method do have similarities to their patented patents."

"Is similarity plagiarism?" Su Ning asked.

"Legally, it depends on whether the specific implementation methods are the same. But the problem is that these kinds of technology lawsuits are very difficult to resolve. Judges are not technology experts, and often it comes down to whose lawyer is more capable and whose evidence looks more credible."

What is the worst possible outcome?

"If the three infringements are established, we will have to pay compensation and stop the production and sale of the relevant models. The Shenzhen-Hong Kong 2 will have to be taken off the shelves."

A collective gasp filled the conference room.

Huang Yunyun panicked, "President Su, what do we do? The production line is still running in three shifts, and there are already tens of thousands of phones piling up in the warehouse. If we can't sell them..."

Yang Ru also said, "The distributors are also urging us, asking what's going on. Some have already started to waver and say they want to stop ordering more goods."

Su Ning was silent for a few minutes, then asked the general counsel, "How long will the lawsuit take?"

"These kinds of transnational patent lawsuits can take anywhere from one to two or three years. In between, there are technical assessments and hearings, which takes a lot of time."

"In other words, even if we win in the end, we've already lost the market."

"Basically...that's it."

The conference room was deathly silent.

Everyone understands – this is not a legal battle, it's a business battle.

The other party's goal is not to win the lawsuit, but to drag Shenzhen-Hong Kong Electronics down.

"Mr. Su, how about we settle this privately?" someone suggested. "Let's pay some money and try to get them to drop the lawsuit?"

“Impossible.” Suning shook his head. “If we reach a settlement, it would be tantamount to admitting that we plagiarized. From now on, Shenzhen and Hong Kong mobile phones will never be able to hold their heads high and will always be said to have ‘started by stealing technology.’”

"What should I do?"

Su Ning stood up, walked to the window, and looked outside.

After a long pause, he turned around and said, "The legal department will handle the lawsuit with all its might. Hire lawyers if necessary, find experts if needed, and don't skimp on a single penny."

"Yes!"

“Production cannot stop,” Suning continued. “Not only can it not stop, it must be accelerated. Shenzhen-Hong Kong 2 will continue production, and it must be produced in large quantities.”

"But Ms. Su, the sales volume is already..."

“Sales will recover.” Suning interrupted Huang Yunyun. “Yang Ru, contact the media and hold a press conference tomorrow. I want to respond personally.”

"Mr. Su, what do you want to say?"

"What should I say?" Su Ning laughed. "Tell the truth."

……

The following day, the Shenzhen-Hong Kong Electronics press conference was packed with reporters.

Suning walked onto the stage without a script.

"Dear journalists, I know you've come today to ask about the patent lawsuit," he said bluntly. "I've also seen the news reports that Shenzhen-Hong Kong Electronics plagiarized and stole technology. Here, I formally respond: this is a false accusation, malicious competition, and international giants resorting to shameless tactics because they can't beat us."

The audience was in an uproar.

“All the technologies in Shenzhen-Hong Kong 2 are independently developed by us. We have complete R&D records, patent certificates, and technical documents. We will present all of these in court.”

A reporter raised their hand and asked, "Mr. Su, the other party has accused you of infringing on twelve patents. How do you explain this?"

“An explanation?” Su Ning laughed. “I don’t need to explain. I’ll just state a fact—the R&D team for Shenzhen-Hong Kong 2 has 120 people, 80 of whom have master’s degrees or above, and 30 of whom have overseas study experience. We invested 20 million yuan in R&D and it took 18 months to develop Shenzhen-Hong Kong 2. All of this is verifiable.”

"And what about those companies that sued us? They've been selling mobile phones in China for so many years, how much money have they made? But how many technical personnel have they trained for China? How much research and development have they invested? Let me tell you, almost none!"

The audience fell silent.

"They'd rather spend a fortune on lawsuits than lower prices and offer discounts to Chinese consumers; they'd rather use underhanded tactics to suppress Chinese brands than compete fairly. Why? Because they're used to being high and mighty, used to making money effortlessly. Now that a Chinese company has suddenly stood up and is on equal footing with them, they're not used to it!"

Applause began.

“I promise three things here today.” Suning raised three fingers. “First, Shenzhen-Hong Kong Electronics will do its utmost to defend its rights with legal means.”

"Secondly, the Shenzhen-Hong Kong 2 will not be taken off the shelves or discontinued. Moreover, starting today, the price will be reduced by 500 yuan, and the price will be 4,500 yuan!"

The audience erupted in cheers.

"Third..." Su Ning raised his voice, "Shenzhen-Hong Kong Electronics will establish a technology open laboratory, welcoming any peers and experts to visit and examine our technology. Whether it's plagiarism or theft, let the technology speak for itself, let the facts speak for themselves!"

Immediately after the press conference, reports flooded the media.

Shenzhen and Hong Kong electronics companies respond strongly: This is malicious competition!

Suning's Three Commitments: Price Reduction, Legal Response, and Opening of Laboratories

The Counterattack of Domestic Mobile Phones: No Backing Down in Shenzhen and Hong Kong

The market reaction came even faster.

The next day, sales of the Shenzhen-Hong Kong 2 not only recovered but also reached a new high.

The news of a 500 yuan price reduction stimulated a large number of consumers, and Suning's speech on "rectifying the reputation of Chinese brands" aroused the nationalistic feelings of many people.

"Support domestic products! Buy from Shenzhen and Hong Kong!"

"Why can foreign brands sue us? Isn't it just because we're doing well?"

"Four thousand five hundred! This price is amazing!"

Meanwhile, the international giants looked at the sales figures for Shenzhen-Hong Kong 2 with grim faces.

They didn't expect Suning to be so tough, nor did they expect Chinese consumers to be so supportive of domestic brands. The lawsuit is still ongoing, but the market has already given its answer.

Shenzhen-Hong Kong Electronics not only survived, but grew stronger with each battle.

This war has only just begun.

……

Three days after the press conference, Shenzhen-Hong Kong Electronics dropped another bombshell.

At 10:00 AM, all mobile phone stores in Shenzhen and Hong Kong across the country simultaneously changed their price tags...

The price of the Shenzhen-Hong Kong 1st generation mobile phone has been reduced from 3999 yuan to 2999 yuan.

Price reduced by 1000!
The news spread like wildfire.

At the flagship store in Huaqiangbei, the store manager had just put up the new price tags when a group of people rushed in through the door.

"Really 2999?"

"Really! The price was just adjusted today!" the clerk answered loudly.

"Give me one!"

"I want one too!"

"Do you have any in stock? I need three!"

A long queue instantly formed in front of the cashier.

Many customers who were initially hesitant immediately paid the price of 2999 without hesitation.

"2999! What more could you ask for at that price?"

"Exactly! The cheapest Motorola is over five thousand. Although the Shenzhen-Hong Kong 1 doesn't have as many features as the 2nd generation, it's enough for making calls and sending text messages!"

"I'll buy one for my dad. He just wants one that can make phone calls. 2999 is a perfect price!"

In just one morning, more than half of the Shenzhen-Hong Kong first-generation inventory that had been piling up in warehouses across the country was cleared out.

……

Motorola China President Smith was having lunch when he received a call from the sales director.

"What? Shenzhen-Hong Kong 1 has dropped in price to 2999?" Smith's fork clattered onto his plate. "Are they crazy? This price doesn't even cover the cost!"

“Mr. Smith, we just calculated that with Shenzhen-Hong Kong Electronics’ supply chain costs, 2999 should still leave a small profit. But the key is... this price is too competitive.”

How much does our lowest-end model cost?

"Five thousand two..."

"Five thousand two against two thousand nine?" Smith rubbed his temples. "How are we supposed to sell this?"

There was silence on the other end of the phone.

"Lower the price!" Smith gritted his teeth. "We'll lower it too! To four thousand five!"

"But Mr. Smith, 4,500 to 2999 is still not an advantage..."

"Then what do you suggest we do? Just watch the market get emptied out?"

That afternoon, Motorola announced a price reduction of 700 yuan for its lowest-end model, bringing the price down to 4499 yuan.

Nokia followed suit, lowering its price by 600 yuan to 4599 yuan.

Ericsson and Siemens followed suit.

But consumers didn't buy it.

"It's been reduced by 700 but it's still 4,500? I can buy two Shenzhen-Hong Kong 1s for only 6,000, and even give one to each of my parents!"

"Exactly! Do foreign brands really think Chinese people are stupid and have too much money? Before, we didn't have any other choices, but now that Shenzhen and Hong Kong brands are available, who would still buy yours?"

"Support domestic products! 2999 is such a great deal!"

……

At the Shenzhen-Hong Kong Electronics headquarters, the sales department was filled with jubilation.

Holding the latest sales data, Huang Yunyun excitedly reported, "President Su, the Shenzhen-Hong Kong 1 has sold 50,000 units in just three days since the price reduction! The inventory is almost depleted! Many dealers are asking to restock and inquire if we can produce another batch?"

“We’re not producing anymore.” Suning shook its head. “All production lines for Shenzhen-Hong Kong 1 will be converted to produce Shenzhen-Hong Kong 2. We’ll stop production once we clear out the inventory of the first-generation models.”

"Huh? Why? It's selling so well now..."

"Because we can't let consumers think that Shenzhen-Hong Kong phones are only about price wars," Suning said. "The 2999 price is to clear inventory and also to send a signal to the market that Shenzhen-Hong Kong phones offer the best value for money. But our main product is the Shenzhen-Hong Kong 2, a mid-range phone priced at 4500 yuan. We want consumers to understand that if they want to save money, they can buy the first generation; if they want more features, they can buy the second generation. It's up to them."

Yang Ru seemed to be thinking, "Does President Su mean to use the first-generation model as a price benchmark to highlight the cost-effectiveness of the second-generation model?"

“Yes.” Suning nodded. “Look at it now, the Shenzhen-Hong Kong 1 sells for 2999, and the Shenzhen-Hong Kong 2 sells for 4499. When consumers compare them, the second generation is only 1500 yuan more expensive than the first generation, but it has caller ID, games, and a larger address book. They will feel that the second generation is more worthwhile.”

"But what happens after the first-generation inventory is cleared out? If there are no more low-priced models, will it affect market share?"

“We will produce new low-priced models,” Suning said. “But it’s not the Shenzhen-Hong Kong 1; it’s a completely new model. The price may be lower, but the functions will be more streamlined. In short, we need to expand our product line to cover different price points.”

Huang Yunyun understood, "Just like cars, there are low-end, mid-range, and high-end models."

“Yes.” Su Ning looked out the window. “The mobile phone market is huge. Not everyone needs the latest and best. Some people just want to make a call, while others want more features. What we need to do is to occupy every price segment and leave foreign brands with nowhere to go.”

……

The market reaction confirmed Suning's judgment.

After the price reduction of Shenzhen-Hong Kong 1, the sales of Shenzhen-Hong Kong 2 were not only unaffected, but also increased.

Many customers who originally wanted to buy the first generation bought the second generation after seeing its features in the store.

"Since I've already spent three thousand, it's worth it to add another fifteen hundred to buy a better one!"

"Shenzhen-Hong Kong 2 can play games! My son will definitely love it!"

"This caller ID feature is so useful; I can know who is calling without even answering the phone."

Meanwhile, low-end models from international brands have completely stopped selling.

At an internal meeting, Nokia China President Richard was furious: "We can't even sell ten phones a day that cost 4,500 yuan! We have tens of thousands of units stuck in the warehouse, what are we going to do?"

The marketing director whispered, "How about... we lower the price a bit more?"

"Lower the price again? How much? Three thousand? That wouldn't even cover our costs!"

"But the Shenzhen-Hong Kong 2 only costs 4,500 yuan, it has more features than ours, and its brand is now just as good as ours..."

"Shut up!" Richard slammed his cup down.

The meeting room was completely silent.

Everyone knew that they had lost this battle.

It's not that we lost because of technology or brand; it's that we lost because of price, because of the cost-effectiveness, and because Chinese consumers finally have better choices.

……

A month later, the data came out.

Shenzhen-Hong Kong Electronics' total sales exceeded 150,000 units that month, of which Shenzhen-Hong Kong 2 sold 90,000 units and Shenzhen-Hong Kong 1 sold 60,000 units.

The market share jumped from 15 percent to 35 percent.

Meanwhile, international brands such as Motorola and Nokia saw their market share collectively decline, with an average drop of more than 20%.

What's even more alarming is that this decline is continuing.

Suning looked at the sales report with a blank expression.

He knew this was just the beginning.

The Shenzhen-Hong Kong 1, priced at 2999, is like a knife stabbing into the most vulnerable part of international brands—the low-end market.

Meanwhile, the Shenzhen-Hong Kong 2, priced at 4499, is dominating the mid-range market.

Next, he needs to move into the high-end market.

But that's a matter for the next step.

Now, what he needs to do is consolidate his gains, expand production capacity, and firmly grasp market share.

"President Su," Huang Yunyun came in to report, "the court has notified us that the patent case will be heard next month."

“Okay.” Su Ning nodded. “Have the legal department prepare. We not only want to win this case, but we want to win it gracefully.”

"Yes!"

After Huang Yunyun left, Su Ning walked to the window.

Outside the window, the sky in Shenzhen is very blue.

He knew that those international giants wouldn't let it go so easily.

Patent lawsuits are just the first wave; more measures will follow.

But he wasn't afraid.

Because he has the most powerful weapons, the best value for money, and the support of Chinese consumers.

In this battle, Shenzhen-Hong Kong Electronics has gained the upper hand.

The era of Chinese mobile phone brands has truly arrived.

However, the international mobile phone giants have no way out. Their failure is not in technology, but in the supply chain of the Shenzhen-Hong Kong electronics sector.

...(End of this chapter)