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iPhones Produced in China Smuggled Right Back in
Posted by
samzenpus
on Tue Feb 19, 2008 09:36 AM
from the the-iphone-cycle dept.
from the the-iphone-cycle dept.
Ponca City, We Love You writes "Factories in China produce iPhones that are exported to the United States and Europe and then smuggled right back in helping explain why Apple says it sold about 3.7 million iPhones last year while only 2.3 million are actually registered in the United States and Europe. For Apple, the booming overseas market for iPhones is a sign of its marketing prowess but also a blow to Apple's business model, costing the company as much as $1 billion over the next three years, according to some analysts. Since negotiations between Apple and China Mobile, the world's biggest mobile-phone service operator with more than 350 million subscribers, broke down last month, the official release of the iPhone in China has been stalled producing a thriving gray market. Copycat models are another possible threat to Apple in China. Not long after the iPhone was released, research and development teams in China were taking it apart, trying to copy or steal the design and software for use in iPhone knockoffs, or iClones and some people who have used the clones say they are sophisticated and have many functions that mimic the iPhone. "A lot of people here want to get an iPhone," says Shanghai lawyer Conlyn Chan."
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You just can't repress anything these days (Score:5, Insightful)
Re: (Score:3, Insightful)
Remember MusicMatch Jukebox? (The music player supplied with the first Wintel version of the iPod) The same deal - a tactical alliance, dumped the moment that they could stand on their own two feet. Portalplayer anyone? Logitech?
Th
Actually, they started pretty much open... (Score:2, Insightful)
It's post-Mac that Apple culture became locked-down.
Don't build in China (Score:4, Informative)
Recently I've found some iPod Nano knockoffs. These devices look good. They copy the Nano right
down to the nice plastic case that if it in on the shelf. The only difference is that these
devices do not have the feature where you can move your finger across the dial and they do not
have Apple's software. They are easy to use and cost less than $50 for a 4GB model. I've not
bought one yet. I have a 20GB iPod and it still works for me. When it breaks I'm buying a clone!
Re:Don't build in China (Score:4, Insightful)
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Re:Don't build in China (Score:5, Insightful)
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Re:Don't build in China (Score:5, Insightful)
Mainly because not much in those regions is cheap, and trademark & copyright laws are enforced against commercial entities that would try to make those knockoffs. China, Taiwan and such may have laws but the enforcement is quite lax.
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Re: (Score:2)
obviously you've never encountered the mysterious black resin.
You try to figure out a device, and this little blob of black plastic gets in your way. when you try to pop it off, it destroys the IC it was protecting.
the answer to piracy would therefore be to dip all our electronics into molten black resin. reverse engineer that!
Re: (Score:3, Interesting)
That's true but when you provide the factory and the bill of materials, it makes their job a lot easier. That's the problem companies have; the "knock-offs" are (or were) often being built by the same people building the "real" product. I saw it in Korea (in the late 80s and early 90s) and it happens now in China, Indonesia, and other places. It's a part of doing business and like you said, it happen
Re: (Score:3, Informative)
funny math (Score:5, Insightful)
Basically this "funny math" is saying: "We get $X from phone sale, plus $Y from the carrier deal. We expect to sell 1M phones, which means (X+Y)*1M $. We noticed that we actually sold 2M phones! Yay! But then we noticed that only half of those phones actually signed up for plans."
So they now claim that they have lost Y*1M $ because people didn't sign up.... umm... no. You made an additional X*1M $. That is not a loss. That is a profit.
"Costing" indeed.
Before you bash Apple (Score:5, Informative)
The funny math comes from business reporters/analysts that have been trained by this given the Record Labels/Movie Studios, as you pointed out. Also, it does matter to business analysts, because they are trying to project Apple profits. If you priced all iPhone sales as the deferred revenue model, you would be overstating future sales/profits. You need to know how many are "lost" to back them out of projections.
The loss is also probably more an accounting/spreadsheet thing.
If your estimate is $300 in profit from iPhone over 3 years, your line is probably:
If you estimate 1m/year
Year 1: $100m, Year 2: $200m, Year 3: $300m, Year 4: $300m, (and $300m in perpetuity)
Now, if you need to adjust that in future years, your choices are, recalculate and estimate new sales vs. unlocked sales. Or, put in a line under there: Loss from unregistered phones. The latter is easier, and looks more like an income statement's bad debt expense.
Bad debt expense is booked as an expense and a loss. However, for a company with virtual sales (software), obviously it's not really an expense. Producing the item cost you zero marginal costs, so if you don't get paid, you're no worse off than if you didn't make the sale. However, accounting treatment requires you to book the sales and then book the estimated losses from bad debts as a percentage, rather than incurring as you go.
For a small business, you might just not spend the cash until the credit card/check payment clears, but bigger businesses need to worry about GAAP compliance, and it's really important that revenue/costs are booked in the period that they occur, not when the cash clears.
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I would never steal. (Score:2)
Re: (Score:3, Insightful)
Re:funny math (Score:4, Insightful)
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Re: (Score:3, Interesting)
the iphone is nice... but the lack of copy/cut/paste is frustrating - being edge on
MOD PARENT UP (Score:3, Insightful)
Opportunity cost, in short, is the cost of NOT doing business. This means that Apple could be making $X IF every iPhone is registered by AT&T or any other cooperating carrier outside the US. This is not just fake number. This number is important for many reasons. Mainly, if we do X instead of Y, what revenue would Y have brought in, and is that more or
Isn't that theft? (Score:4, Interesting)
Apple is the only producer of these phones (well, through OEM partners), wich presumably moves the phones to some Apple warehouses and they, in turn, are moved off to Apple stores and authorised resellers (AT&T, Orange, T-Mobile and O2 if I'm not mistaking).
So, where do all the grey market phones come from? And how can Apple account for them if they've never been in their warehouses?
Mine was bought in an Apple store so I'm not even worried about it but I wonder about those I see in downtown Montreal cell phone outlets (at a premium price). Should those be considered stolen devices?
Re:Isn't that theft? (Score:4, Informative)
So they are devices legally purchased, so they get counted as sales.
That is why they are considered grey market, they are a legal product being used in an area where the manufacturer does not provide support or authorize thier sale.
Parent
Re:Isn't that theft? (Score:5, Interesting)
Company A from America contracts with Company C in China to build product I.
Company A orders 100,000 I's every month.
Company C builds 120,000 I's every month.
Company C ships 100,000 I's to company A.
Company C sells the other 20,000 I's domestically at a higher profit.
Happens all the time. That's how most IP/knockoffs in China come about. Same product line, same product, they just build a few extra (at their cost, their customers know what the BOM is, and can quickly figure out overcharges) and sell them locally for more profit.
The key to keeping IP "protected" in China is to partner with a strong Chinese manufacturer and give them financial incentives to police the market for you. It's what I do with my IP; I have two "blessed" factories in China authorized to build with it, and they get to maintain that "blessed" status as long as:
1. The products they build meet quality standards
2. The products they build meet typical BOM and profit margin costs
3. They monitor and police the Chinese market for me to watch for knock-offs
The carrot? They get a virtual "lock in" of clients. They get to charge a few percent more profit because my IP carries a premium.
The stick? They would lose the lock in, and either lose their "blessed" status or end up having two, three, or a dozen more factories so blessed and then lose their premium profit.
The key to China is pretty simple - make it worth their while to do the policing for you. It's all about the RMB, folks...
Parent
Re: (Score:3, Interesting)
About 10% of the Germans
Re:Isn't that theft? (Score:4, Interesting)
Restricting a component is a good approach, as long as you can guarantee restriction of that component. You know the back-channels of China, though! A cousin of the senior engineer happens to work at that component vendor and over dinner at the New Year's celebration a deal is struck...
Personally, I've found it better to control on deliveries to the destination market (usually the US and the EU), and incentivise the Chinese factory strong enough that they make the same amount of money AND don't have the headaches of extra production to just play ball from day one.
BTW, for those others reading this little piece of lint (that is what a small, sub-thread is, right?) the problem is bad in China, but about 5X worse in India, based upon my experiences (consumer electronics products).
Parent
Re: (Score:3, Informative)
Step 2: I sent it via US mail to my friend in Shanghai.
Neato, eh?
They're all in hong kong (Score:2, Interesting)
Grey markets will always exist until all companies hop aboard the concept of the global on-demand rather than the localized rubbish they peddle now.
failed projections and "costs" (Score:4, Insightful)
Gah, I hate that terminology. Making a business model around a certain fee structure, and then failing to get people to play along with your business model, is not a cost. It's just like those piracy reports where they say they LOST a billion dollars because people who were never going to buy the product ended up not buying the product. Apple may fail to meet projections. Apple may wish more people would fork money over to their exclusive business partners. Apple may have had their heart set on a shiney new building or parking lot or bonus for Steve, but not being able to meet those expectations isn't a loss or a cost. It's a failure.
Product "makeup": (Score:3, Insightful)
That is what Apple is doing with the iPho
Re: (Score:3)
Apple employees in Apple stores say to you when you buy an iPhone (at least, they said it to me): "You HAVE to activate the iPhone with a 2-year contract with AT&T".
The Apple store didn't activate the phone with an AT&T contract. The Apple employee didn't get you to sign anything to the effect of "I hereby owe $X/month for Y months to third-party Z." You just chose to follow the Apple store employee's (scripted) suggestion that the companion service would be appropriate. If I buy a piece of equipment and don't sign a service contract, I have the right to do whatever I want to do with it, including stuff the phone in a blender or get out my soldering iron or ref
Unrealized gain != Loss (Score:3, Insightful)
Apple (might) have $1b unrealized gains.
Apple didn't have $1b in losses.
(If I buy a lotto ticket for a $1M pot, I don't suddenly have $1M in losses when I don't win, I have $1M in unrealized gains.)
Re:failed projections and "costs" (Score:4, Interesting)
The only question I have for you is the following: You said you lived in an underdeveloped country. Is it illegal in your country to pirate US-made stuff? I Don't live in the US myself, so I sure as hell don't follow US laws. I follow my country's laws (which however, support copyrights), and thats it. If tomorrow the law says that copyright is null and void, I'll only buy videogames (because I'm a collector), but movies will all get pirated, and software will be free (and as a software developer, I'll change job!).
Personally though, when I was young, my family could barely afford food (if that). If we couldn't afford something, we didn't buy it. Simple as that. Didn't go and get a bootleg. Sure, it meant I spent most of my life with no computer, no videogame, no nothing, but Im still alive.
(I'd make exception to that on softwares and tools that would help someone get OUT of poverty. Entertainment is one thing.... education and such, I feel is a RIGHT, not a priviledge, like games are.). Besides, if pirating tools and software get you rich, then you'll have money to buy them later
Parent
Still haven't seen a genuine clone (Score:2)
Having worked with apple since the late 80s (Score:5, Interesting)
Another piece of purposedly planted misinformation (Score:4, Interesting)
Both lies were nothing more than another drops in the long stream of manipulative misinformation about Apple concocted by stock market criminals. Steve Jobs clearly debunked these rumors, but apparently, after waiting for a short while, the criminals are trying to milk this cow again.
Re:Remember (Score:5, Insightful)
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Re:Remember (Score:4, Informative)
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Re: (Score:3, Insightful)
It was fairly hilarious as this was the new york store, and the particular clerk that was helping them was a first
rate asshole that was seconds away from saying "no phone for you!" to them. They finally ended up buying 5 each
after a long dressing down by the clerk.
I tried to activate the phone with my dubious credit and AT&T wanted a $500 deposit plus $136 just t
Re:Remember (Score:5, Insightful)
Sure, and with China's well documented tendencies towards theft of intellectual property, no one should be surprised.
What we should be doing here in the US, though, is everything we can to discourage use of Chinese products. There's no need to give China all our wealth and in the process create a powerful competitor. Problem is, we're already there...now it's time for damage control. The one good thing about a weak dollar policy is it will help.
Good thing we have a big crop of American scientists and engineers to compete into the future! Oh, wait...
Parent
Re:Remember (Score:5, Insightful)
Going with the Slashdot meme here, it's not theft because they haven't taken it away from you - you *still* have your IP.
But then I guess that it's only when $BIGFACELESSCORPORATION is complaining about you downloading their products in violation of US copyright law that such semantics come into play.
When another country is getting competitive against the US they *must* be *stealing* your ideas!
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Re: (Score:3, Informative)
The Chinese make cheap goods:
1 - Walma
Re:Remember (Score:4, Insightful)
1) People like to buy cheap goods
There, fixed that for you.
Capitalism/The Market is to blame. People want to buy commodity goods (virtually everything these days) as cheaply as possible.
Parent
you are joking right? (Score:4, Insightful)
Your whole post is simple minded but this takes the cake. You think a country with a population of over 1 billion people that is joining the ranks of developed nations can be forced by an embargo to change their ways? You do realize just how many American dollars they own right?
In your ideal view of the world the only things we get from China is the cheap crap we don't need, and if we could just stop being addicted to cheap crap things would go right back to being pleasantville. Keep thinking that while sitting on a chair made out of chinese parts, wearing clothes made by chinese companies, typing on a computer manufactured in china. Do you really want the job of making these things? Wouldn't you much rather get an education and sit around and post on slashdot all day?
It looks like there will be more and more China bashing coming up, and it makes sense. It is easier to see the world as black and white, us vs. them. It is easy to disregard how complex a 1 billion person social system must be that has underwent revolution after revolution in the last hundred years. It is easy to proclaim that American's are the only ones that can properly carry out capitalism, when the Chinese have only been at it for 20 years.
and trust me, I don't like Clinton or her ol' boys network, but you don't know anything about business if you think cutting off one of the largest growing markets is a good idea.
Parent
Re:you are joking right? I second that not all is (Score:4, Informative)
Even Japan and Korea have been forced to manufacture in China, and Chinese companies DO realize that they have to improve or else...:
Japanese management style in China? Production practices in
http://www.blackwell-synergy.com/doi/abs/10.1111/1468-005X.00058 [blackwell-synergy.com]
Location decisions of Japanese new manufacturing plants in China
http://ideas.repec.org/a/spr/anresc/v40y2006i2p369-387.html [repec.org]
Even way back in 2002:
Samsung, LG Relocating Plants to China| Korea.net News
http://www.kois.go.kr/news/news/newsView.asp?serial_no=20020505006&part=104&SearchDay=2002.05.06 [kois.go.kr]
I find it hypocritical that US and wester nations (but the US, particularly) will spew volumes of criticism against China when just recently we have facing us a 143 million pounds beef recall. We endured selenium and other chemicals and metals in our water supply, with government not being aggressive enough on some offenders.
Granted, it is totally unacceptable for any company to produce goods containing lead, arsenic, other toxins, or flaking/dangerous matter.
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Re:Remember (Score:4, Insightful)
China's trade practices are unfair and their government encourages deceit. It is IP theft.
And I don't even work for a US based company... so it's not US vs China.. it's China vs the Industrialized world.
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Re: (Score:3, Interesting)
The reason the Chinese own the United States has nothing to do 'theft of intellectual property'; it doesn't even have much to do with trade. It [msn.com] has to [state.gov] do with debt [wikipedia.org]. You keep borrowing, and the Chinese, who are thriftier than you are, keep lending. And they've now lent you so much that you have to borrow more even to pay the interest. Face it - the Third World War is already over, and the United States lost.
China owns you.
Re: (Score:3, Insightful)
Arguing with an AC is always fraught with risk, but hey, this is /. so...
You seem to be arguing that intellectual property 'isn't, as in 'isn't property'. That would so cleverly explain why this thing, which 'isn't property', is so coveted as to be copied and produced.
Non sequitor.
Many thinks which aren't property are coveted; thy neighbours wife and thy neighbours ass, among others.
I'm not a great believer in property even in physical things, but so-called 'intellectual property' isn't even property in legal theory. It's a disparate set of short term grants of monopoly given by the power of big government, and given because they have in the past been believed to have overall economic benefit for the community. Whether they do or not, the people who defend 'intel
Re:Remember (Score:4, Funny)
Great logic.
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As for your assertion that the software isn't as good as Ubuntu, I'll say when Ubuntu works out of the box with my hardware I'll agree with you. Until then, I'll keep considering OS X a better solution. No it's
Re: (Score:3, Interesting)
As for your assertion that the software isn't as good as Ubuntu, I'll say when Ubuntu works out of the box with my hardware I'll agree with you. Until then, I'll keep considering OS X a better solution. No it's not a fair comparison, since Ubuntu can't control all the hardware, but fact is OS X simply works and is generally more simple and intuitive.
Linux on my Asus eee is a lot like the Mac. It is very well integrated. Much better than Ubuntu on the same device. The more I think about it, Asus seem to have been inspired by the approach of Apple in designing this machine.
Once vendor supplied Linux takes off, distributions like Ubuntu may have to change their approach. This makes the deals with Dell look like a lost opportunity because the distribution was not significantly tailored for the hardware.