iPhones Produced in China Smuggled Right Back in 159
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."
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:Remember (Score:4, Informative)
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.
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.
Re:Don't build in China (Score:3, Informative)
Re:Remember (Score:3, Informative)
The Chinese make cheap goods:
1 - Walmart needs cheap goods
2 - Clinton was on the board of Walmart
3 - Clinton signed the trade deal with China
Yes, that is minimal information, but hints at what I'm trying to convey
Now many people are relying on the cheap goods from China for business, and with recession a breath away, cheaper goods are on everyone's mind.
The trouble is that China (and other non-western countries) are not particularly concerned about the health/safety issues of manufacturing goods for the US and other western markets. Consequently, the good that western funds will bring to the Chinese economy is a net negative when you look at the environmental impacts of allowing them into the Western economic food chain. For just the Olympics, the Chinese government relocated TWO MILLION people. That should give you some taste of what they think of hardships for their own citizens. What's a little lead poisoning? What does it matter if a big manufacturer leaks a few toxic chemicals into the environment? We have plenty of people to replace those workers when they die.
Meanwhile, western manufacturers are dealing with unions, safety concerns, worker safety, and other issues which would drive up the cost of Chinese products if they also had to worry about them.
Another issue, the one at hand, is the fact that when you source your manufacturing from a country that does not respect your laws governing manufacture, proprietary property, IP, and other issues, you will find that 'all your base are belong to them' in no time.
The suggestion that we as a society not buy Chinese products is partially useful. The suggestion that Anonymous start telling western governments that WE DON'T WANT TRADE WITH CHINA is obviously more useful. Only when governments stop dealing with China will their ways change. An economic embargo to force China to play nice in the ways that western governments deem nice will work, but first you have to get the western governments to play fair.
Moral? you reap what you sew. Time to tell the Clinton's and their 'old boys network' that we don't like China anymore, and that isn't even trying to make comment on their human rights abuses issues, just on business rights issues.
Re:funny math (Score:2, Informative)
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.
Re:Isn't that theft? (Score:3, Informative)
Step 2: I sent it via US mail to my friend in Shanghai.
Neato, eh?
Re:funny math (Score:1, Informative)
The loss is from their phone being STOLEN and the subscriptions and support not being routed through Apple's profit model.
Just like the Xbox or PS3, these high tech device's costs are leveraged over their projected subscription profits. Whatever Apple makes on the initial iPhone sale is minor compared to the subscription profit for the carrier over the product's lifespan, likely shared by Apple.
While Apple may not take a loss on the iPhone they are also probably not making enough profit alone on sales to afford millions of pirated phones.
In any case, it's a fairly badly designed product that shows idiots will buy anything that appeals to their gadget fix regardless of relative usefulness or price. People easily obsessed with simplistic material gadgets are the real user base of this crap.
Normal people use normal, high availability low cost phones that are easy to replace because it's a utilitarian solution, not a supped up pic viewer/cell phone.
Apple's decision to actually produce the iPhone was a great mistake vs selling the mobile platform in an open business model. The iPhone's fate is more or less sealed since Apple will never compete on a price/performance ratio with low cost asian competition. They could potentially have owned the market with a mobile Mac platform instead of some stupid touch screen gadget.
We are looking at eye candy over usability. The iPhone isn't even comfortable to talk on, which should be it's single most important use.