Chinese manufacturing has come a long way. It is the country that puts together Apple’s iPhones, one of the world’s best-crafted smartphones. But the luster of high-quality manufacturing fades when it comes to Chinese brands. They might use the same manufacturers as foreign brands, but their adoption still lags that of established foreign names in the higher-end goods market.

Former Huawei executive Joe Peng is trying to change that with FIIL Headset, a maker of headphones that is aiming for the middle-to-higher end market for audiophiles now dominated by the likes of Apple’s Beats. He joins FIIL founder Wang Feng, a famous rock & roll star in Beijing. In this interview with [email protected], Peng talks about the startup’s market positioning, sales channels strategies and hardware development plans. He believes that smart wireless headphones are the wave of the future.

FIIL Headphone Market
Image source: FIIL
FIIL Headphones

An edited transcript of the conversation follows.

[email protected]: Let’s talk about FIIL. How did the company come about and what has it done since its founding?

Joe Peng: FIIL was founded in March 2015 and I joined the team in July that year. We spent half the year developing the first-generation product [of headphones] and launched the first series of products in October 2015. Then we launched two more series — FIIL Diva and FIIL Carat — this summer and fall. We are planning to have a sharing platform on product development and expect to launch two to three series of products each year when ready.

Our first-generation product has won Germany’s iF Product Design Award, the Red-Dot Design Award and [received] the HI-Res [Audio designation from the Japan Audio Society]. We have sold more than 100,000 units, the highest volume among Chinese brands for the high-end headset market. After a 30-million-yuan angel investment, we received an A-round VC investment of $20 million at the end of last year.

We actually had higher expectations on sales as we are confident of the quality of the product and it has a 30% price advantage compared to foreign brands of the same quality. However, we underestimated the difficulty of communicating to consumers and failed to deliver the message of the product features. Many people feel rock star Wang Feng is just doing this for fun and our customers are currently restricted to music buffs and fans of Wang Feng.

“If we persist with the ‘smart and wireless’ direction, FIIL will be totally different from other brands.”

[email protected]: What challenges have you met in communicating the brand to the masses?

Peng: We positioned FIIL as a middle-of-the-road to high-end brand with our major product priced at 1,000 yuan. This assumed a target consumer with purchasing power looking for high quality audio. There may be five target consumers among 100 potential clients, but we haven’t found an effective way to reach precisely those people.

Compared to the well-established players in this segment, we are still searching for a clear brand position. [Our competitors fall into] two camps: Sennheiser, Audio Technica and Monster all have decades of history and they have gained a good reputation among music fans; Beats and some other brands have a great amount of cross-border cooperation with the sports and entertainment worlds and a great influence among young people.

To make a mark in the high-end market, you have to be able to get [a clear brand identity]. Our first-generation product has performed well in audio and design. It is comfortable to wear and has Bluetooth technology and more. However, we haven’t found a feature [that makes it] stand out. For example, the OPPO mobile phone has highlighted its exceptional battery life, Wanglaoji Herbal Tea is branded as a drink that “dispels pathogenic dryness.” … We haven’t [found] this kind of positioning yet.

[email protected]: What is the future development direction of your product?

Peng: Headset products are going wireless, becoming smarter and will be scenario-based in the future. The first two features — “smart and wireless” — will characterize our future direction.

In the past, good headsets were all wired. However, the current Bluetooth 4.1 can support very high quality audio, and our team is especially strong in Bluetooth technology. Our CTO, Wu Ning, comes from Plantronics (a U.S. headset company), which is well-known for its wireless communication [technology]. We provide good wireless quality within 100 meters with very low power consumption and standby time of more than 30 hours.

Meanwhile, the wireless headset is likely to be popular commercially. Our first FIIL wireless is priced at 1,599 yuan, 50% more expensive than wired products, but its sales are much better. Wireless products are much more convenient than wired, with many scenarios you can imagine. For example, you can walk around with it at home. Our product portfolio will gradually eliminate wired products.

As an audio player device, the headset has a history of more than 100 years, although its function has not changed substantially. The current technology is smarter, more interactive and more convenient. For example, when you are wearing a headset, someone comes to you to say hello. Can the music be stopped automatically and then restart automatically? This means it gets more humanized. I believe if we persist with the “smart and wireless” direction, FIIL will be totally different from other brands.

[email protected]: Are you on track to launch new features? What else are you working on longer term?

Peng: The automatic off-and-on function has been realized. We had a lot of ideas which have not been actualized due to current technology restrictions or concerns about the integrated user experience, as some new functions might weaken the performance of others. For example, we found out that the headset can be independent and separate from the mobile phone but it will require an implanted 4G or Wi-Fi communication module. This will have some negative impacts – radiation as well as increased power consumption and weight.

“The headset has a history of more than 100 years, although its function has not changed substantially.”

Our product development process is quite interesting. We all brainstorm together and put forward some bold and unconstrained ideas. However, the R&D team is usually more conservative because they have to balance all demands from the angle of engineering feasibility.

[email protected]: Many players in the headset market have hundreds of years of history. How can a startup catch up with them?

Peng: In terms of key technology, the headset industry has seen no substantial improvement. That’s why a new team can have a late development advantage. Our R&D members all come from leading brands of high-end headsets. Most of them have more than eight years’ experience in design, communication technology, noise reduction and other key production processes.

We have also invested massive resources in R&D. The whole FIIL team is around 70 people with 40 in the hardware R&D unit and another 10 in Internet experience-related functions. In other words, our R&D is more than 70% of total headcount. Annual R&D expenses are around 30 million yuan for our Suzhou Research Lab, which is unparalleled in domestic headset companies.

Those foreign high-end brands are mainly produced by OEM factories in the Pearl River

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