Cheap and functional counterfeit phones that closely resemble the high-end phones they are modeled after are slowly being replaced by both international and domestic companies looking to break off a piece of the budget phone market. In south China’s city of Shenzhen, known to some as the birthplace of counterfeit phones, shops with "for rent” signs can be seen everywhere. Although the city has long been known as one of the country’s top sellers of electronic products, figures from the municipal government indicate that more than 3,500 shops, most of which were mobile phone dealers, have closed and retreated from the market. This year’s Canton Fair, the country’s largest small commodities expo held in the city of Guangzhou, featured a scarce amount of counterfeit phones, an unthinkable occurrence in previous years. Industry insiders say counterfeit phone manufacturers don’t have the technological known-how to compete with Apple and Samsung, while domestic brands have made breakthroughs that have allowed them to offer inexpensive smartphones, cutting into the counterfeit phone market. Domestic phone manufacturers ZTE, Huawei and TCL ranked third, fifth and ninth, respectively, in terms of smartphone sales among the 10 biggest phone manufacturers last year. Domestic manufacturers have launched smartphones that cost less than 1,000 yuan (160 U.S. dollars), cutting into market territory previously dominated by counterfeit phone companies. Chu Xiaohai, a man who works for an electronics company in south China’s city of Dongguan, said he was astonished to see an "iPhone” with a price tag of just 500 yuan five years ago. "Although it was fake, I bought it because it was cheap and looked fashionable,” he said, finding later that the phone frequently broke down or lost its signal. Chu bought a ZTE V880 smartphone for just 800 yuan last year, eventually replacing it with a genuine iPhone. "The domestic brands are alright in terms of functionality, but the iPhone was more attractive,” Chu said. Tang Ruijin, director of the Shenzhen Federation of Mobile Communication, said counterfeit manufacturers have retreated to underdeveloped overseas markets like southeast Asia, Latin America and Africa. Their fate has underscored the importance of innovation for other domestic manufacturers, as the phone market is both volatile and full of competition. "The rise and fall of counterfeit mobile phones has vividly demonstrated that an industry without core competitiveness will not be able to withstand the test of the market,” said Wu Yixin, a researcher at the Shenzhen Academy of Social Science. Domestic phone companies have subsequently drawn lessons from counterfeit manufacturers and invested heavily to shore up their competitiveness. At 2012 Mobile World Congress, Huawei unveiled a quad-core mobile phone processor, a technological leap for the company. Huawei is one of few companies that develops its own computer chips, as large companies like Samsung and HTC use Intel chips. "I know our brand is not the most well-known brand, but I do hope that our products will become the best,” said Yu Chengdong, CEO of the Huawei Consumer Business Group.  Xinhua