This study uses the transition of China’s mobile phone industry from Shanzhai (copycat) to branding as a case study to distill the theoretical path for latecomer integrated firms to achieve independent innovation and promote the upgrading of the local industrial chain when core components are “bottlenecked.” Based on the Lancaster framework, this paper deconstructs the industrial chain of multi-technology products and constructs a four-stage game theory model that includes two types of components, three types of suppliers, and three innovation models, focusing on analyzing the innovation and outsourcing strategies of integrated firms. The paper finds that under the dual advantages of technology and market of upstream suppliers, the key to the transformation and upgrading of downstream integrated firms lies in expanding their knowledge boundaries to deeply participate in the research and development of components and increase investment in integrated innovation. This will lead to a shift in innovation activities in the industrial chain from supplier-led to upstream and downstream collaborative innovation, as well as the localization of non-core and core component supply chains in sequence. This study provides an important reference for the development of China’s multi-technology product industry.