I returned recently from a visit to our contract manufacturing partner in China – I always enjoy going there and seeing how things are progressing. I could write at length about the ways that start ups like us can and do work with massive, highly resourced, highly skilled factories in the Far East – but I’ll save that for another post.

I’d instead like to share with you some photos and thoughts about “Shanzhai” products being made in China. (Bunnie Huang has written extensively about the Shanzhai and I jotted some notes down a while back as well. Google the term for more info.)

In a nutshell, “Shanzhai” refers to groups of engineers, designers, hackers and manufacturers operating in China that build electronic products for gray-to-black markets: knock-off “iFones”and the like. These guys are not just simple counterfeiters though; they are creating all kinds of new (and often strange) products outside the normal channels of large companies.

Because they don’t care about obeying IP or trademark restrictions, they do some stuff you won’t see in your local Target or Best Buy. And because they operate outside the law, they do some crazy brand mash-ups too.

Walk around the electronics markets in Shenzhen and you’ll see these devices. I saw a great iRobot-branded iPad knock-off with the Android character on it, which was a pretty excellent combination of three brands.

But here’s one I really liked:  the G1-on-the-outside + iPhone-on-the-inside smartphone. (Apologies for the picture quality, I took them with my very official iPhone 3G):

The creators of the device faithfully recreate icons and interactions down to the tiniest detail, but they do deviate in interesting ways. First, the real last-mile polish is just not there. The touchscreen is just difficult to use: you have to scrape with your fingernail and really push. I think they used a cheaper resistive touchscreen.

But it has a fully working TV tuner: straight-up rabbit ears! You can tune in to local TV and watch it on your phone. The antenna even rotates so you can watch in landscape mode.

It’s easy to dismiss these products as the work of cheats and counterfeiters, but that is only half the story. A lot of innovation is occurring in the Pearl River Delta, unencumbered by law and protocol. As an entrepreneur here in the USA, it is fascinating to observe this kind of hardscrabble creativity playing out in different ways in different places.