The electronics research group iSuppli reports that fake handsets from China are posing an increasing threat to multinational brands such as Nokia as they flood emerging markets.
Total shipments are set to reach the equivalent of 13% of the legitimate global mobile phone market this year.
China’s grey market wireless handset production is expected to amount to 145m units in 2009, up a "stunning 44% from 101m in 2008", said iSuppli.
Thousands of small workshops, mostly in Shenzhen, have been churning out cheap copies of branded handsets and "improved" models with creative new features such as powerful speakers or flashlights.
The rise of the whitebox handset makers — typically tiny assembly shops with no previous history in electronics manufacturing and an average headcount of less than 10 — was helped by Mediatek, the Taiwanese chip design house, which offered turnkey software products alongside its mobile chips.
Growth is now slowing as domestic branded handset makers such as Lenovo Mobile, TCL and Tianyu have started hitting back with cheaper phones that carry some of the features invented by the copiers.
Kevin Wang, director of China Research for iSuppli, said: "Margins in the grey market are being squeezed so producers have started exporting aggressively."
C114.net states the iSuppli report estimates that grey market handset exports will jump to 110m units from 60m units last year.