While most of the discussion here is technical from engineering and business perspectives, your question digs more at the root of the problem: this is a cultura

While most of the discussion here is technical from engineering and business perspectives, your question digs more at the root of the problem: this is a cultural and institutional problem. I live in China: people pinch pennies (or mao) here without taking into account the overall cost. This is why you have a large market for imported goods; even amongst the most nationalistic Chinese consumer, there is an assumption that imported goods are better because domestic products are made by cutting corners. There's a strong suspicion of things that are priced cheaply but, bizarrely, people still buy cheap goods but are resigned to the product failing rather quickly. This just doesn't apply to electronics, but also to clothes, vehicles, etc. There's a very strong tension between value-pricing and product quality. That is, there is a demand low prices but assume that the product quality is poor. On the other side of the spectrum there is a demand for high-quality "luxury" goods too. Thus pricing your product too low, even though it may be a quality product, basically indicates that it is a low-quality product. Part of the myopia here is that people will cut corners without figuring out the benefit/risk ratio. That is, is it worth losing a contract to improve your bottom-line by a negligible percentage? Culturally (and I'm speaking in a broad generalization here) there's a desire to "win" at a contract... to make the contract be better for yourself than what's on paper. So even if the contract spells out your profit margin, it's a matter of pride to be able to improve on it (aka, "sticking it to the man"). With China's large population and widening gap between rich and everyone else, there's a perception that you have to get rich or die trying; no one else is going to help you... certainly not the government. China's future could be a lot brighter than it is; the problems aren't technical.