iPhones Produced in China Smuggled Right Back in

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."

Comments

Remember

[Qwerpafw]

There was a story a few weeks ago noting the discrepancy between Apple's sales numbers and the number of subscribers on AT&T and other services using iPhones.

Looks like that million+ phone "gap" is thanks to China.

Re:Remember

[mrxak]

Can't say I'm all that surprised about the phones being used in China or the copycats. I guess with one of the world's largest markets, there's going to be a healthy "grey" market too.

Re:Remember

[nbert]

Having been in Shanghai last autumn I'm wondering why people are surprised right now. I've seen more iPhones on the street there than in Germany. The electronics markets are full of them.

Re:Remember

[Glock27]

Can't say I'm all that surprised about the phones being used in China or the copycats. I guess with one of the world's largest markets, there's going to be a healthy "grey" market too.

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...

Re:Remember

[Anonymous Coward]

I live in brazil, and are surprized at the number of brazilians with iPhones as well.

Re:Remember

[Anonymous Coward]

Sure, and with China's well documented tendencies towards theft of intellectual property, no one should be surprised.

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!

Re:Remember

[Anonymous Coward]

Sure, and with China's well documented tendencies towards theft of intellectual property, no one should be surprise Intellectual "property" isn't, and imitation is not theft. DEATH TO INFOFASCIST PATENTIST SCUM.

Re:Remember

[wattrlz]

To further the memage: ... First they stole IP from $BIGFACELESSCORPORATION I didn't speak up because I wasn't $BIGFACELESSCORPORATION. yadda - yadda - yadda ... there was no one left to speak up.

Re:Remember

[duncan3dc]

That's exactly what it says. What was the point in that post?

I think ultimately the iClone users will want the real thing, and when that is available to them, they will still buy. And even if they don't, with a 50% increase in profits I don't think it will cause the downfall of Apple.

Re:Remember

[Nuclear Elephant]

Well, and this is capitalism at its best. Apple wanted to save money by outsourcing their development operation to a country that would cost them pennies on the dollar. They're now starting to see the consequences of that move, in that they're doing business with a country having a long history of black and gray-market ripoffs, stolen technology, and clones, which will end up costing Apple tens if not hundreds of millions of dollars in business. I'm not talking about reverse engineering, I'm talking about having schematics and trade secrets stolen as a result of doing business there. If capitalism plays through, Apple will at some point realize what a tragic mistake this was, and move their operation to a more civilized country. If not, at least they'd paid a hefty fine for their mistakes and gotten what they deserve.

Re:Remember

[rickb928]

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.

Or perhaps you are arguing that one should not be protected against others' copying their efforts and profiting from them.

Or perhaps, instead, you are arguing some other point you didn't make. 'Cause I don't think you've made either or your points. Wait, actually, you just spewed. No real explanation or logic, just a pair of statements.

Ok. But intellectual property is real to those who create and develop it. And copying someone's work is pretty much considered wrong if it's *yours*, believe me. Imagine writing a stellar term paper, and lending it out to someone. Not even to copy, since plagiarism os so easy to detect, but to let them touch it up a bit and benefit from your original work. Now imagine they post it out there and sell it for a few bucks a whack. Do you share in the revenue? And if not, is that perhaps the least bit unfair to you? Oh, yes, you can choose to give it away. But what if you didn't choose, 'cause you didn't know it was being distributed...

Actually, bad analogy. You sound like the sort of AC that would take the contrary position just to annoy me. Feh...

Re:Remember

[Anonymous Coward]

The article says, "Although unlocking the phone violates Apple's purchase agreement, it does not appear to violate any laws here, though many stores may be avoiding import duties."

Does Apple's purchase agreement prohibit a purchaser's ability to resell the phone? Methinks not. IANAL, but it seems to me that the new owner isn't obligated to abide by said agreement in the first place. I'm not sure it would violate any laws in the US, either.

Re:Remember

[reidconti]

Yes, because if it was built in California, them shady Chinese wouldn't be able to get their grubby little paws on it.

Great logic.

Re:Remember

[zappepcs]

When a foreign government or other country is not playing fair by the rules of business that your country uses, the one thing that you can leverage against them is trade, or war, perhaps both. In this particular case, the Chinese have an unfair advantage due to the fact that the US is (for some Clintonian reason) entangled with Chinese trade in such a manor that it *SEEMS* impossible to just pull the plug. While I will use few words here, this is a multifaceted problem.

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:Remember

[Anonymous Coward]

The Chinese make cheap goods:
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.

Re:Remember

[Glock27]

Going with the Slashdot meme here, it's not theft because they haven't taken it away from you - you *still* have your IP.

That's fine, and also irrelevant. The salient fact is not that I still have my IP, but that whatever profits I might make with said IP will be (possibly massively) diluted by a competitor who has no right to my idea/design/product.

The delta between what I would have made and what I did make is what was "stolen".

If you or other /. folk don't like the term "IP theft", come up with another one. It's still theft.

Re:Remember

[LoofWaffle]

The Chinese make cheap goods:
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.
Correction
1) Companies like to buy cheap goods to improve margin
1a) People like to buy inexpensive goods

Re:Remember

[Anonymous Coward]

"Going with the Slashdot meme here, it's not theft because they haven't taken it away from you - you *still* have your IP."

You would be right, except there's no such thing as "intellectual property".
Lacking an iPhone to copy, China certainly has enough clever scientists who
could design something that works as well or better without our help.
If you have a great new idea that will make you money, then make your money while it's still a new idea. Don't expect protection in perpetuity.
Good thing the first guy to think of running water thru a pipe didn't have
protection for his "intellectual property", or ./'ers would smell even worse.
(How appropriate: the captcha word is: cellar)

Re:Remember

[Ogive17]

China has, in the past, reverse engineered entire automobilies, built them cheaply, then sold those as OEM. This is a huge problem because we all know most knock-offs don't have the same quality standard as the origional. But at the same time they make true OEM auto makers jump through hoops in order to just get their server parts into the country (I've been dealing with this for the past two years).

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.

Re:Remember

[Anonymous Coward]

It's surely not very well documented that how the western countries dump garbages to China. It's against China's law but you guys do it anyway.

Re:Remember

[Anonymous Coward]

As the AC-GP, I tend to agree with you. It was really pointing out what I perceive as something of a double standard in the Slashdot community.

It "fine" to download media which one has no (copy)right to - "Don't blame me for your failing business model!"

But when tech jobs get outsourced to India or China can produce Good Ol' American tech cheaper then the protectionist attitude kicks in.

If someone downloads music choosing to ignore the terms under which the artist made it available thereby depriving the artist of the income which he should have received for the user's enjoyment of that product (had the user abided by the license) then (morally as well as legally) the user is for want of a better word stealing that content.

Re:Remember

[Anonymous Coward]

Come on! Blaming Beijing's relocations is like blaming major US cities' surburbanization in 50/60s. With the housing booming like that in Beijing, it's simply wrong not to take the chance to flatten the slums and rebuild, especially all the lands and buildings are government owned. Looking at the boarded up streets in Baltimore you'd know what I mean.

I get it. You don't like China. But at least give the country some credit on the good things they're doing OK?

Re:Remember

[djdavetrouble]

I bought my wife an iphone for Valentines day. While I was checking out, 2 Chinese guys were in there trying to buy 10 each and not give ID's.
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 to get in the door.
Instead of choosing the deposit or "pay-through-the-neck-as-you-go" plan, I laughed at them and said I was unlocking it.

1 Hour later, I was unlocked, jailbroken, and all hooked up with T-Mobile, who gave me some very generous loyalty incentives to stay with them.
My wife is very happy with the phone, and I am contract free still muahahahahaha......

I'm not mad at AT&T but they really suck. Why require a deposit for something you can just turn off if a bill is not paid?

Re:Remember

[el_coyotexdk]

That would be because you're a Post-paid customer, and you incur a loss to the company if you dont pay your bill. So they demand a security deposit if you have a history of being a High-Risk/Bad costumer. It's common practice with the Danish mobile operator i work with - if you're registrered at a credit agency. You pay a deposit, that your first few bills get deducted from it.

Re:Remember

[bev_tech_rob]

Correction 1) Companies like to buy cheap goods to improve margin
1a) People have to buy inexpensive goods because most of the good paying manufacturing jobs have gone overseas and they cannot afford better
Fixed it again....

Re:Remember

[Grishnakh]

Can't say I'm all that surprised about the phones being used in China or the copycats. I guess with one of the world's largest markets, there's going to be a healthy "grey" market too.

Sure, and with China's well documented tendencies towards theft of intellectual property, no one should be surprised.

I see no problem with there being a grey market at all. No one is being stolen from, it's just that these products aren't being sold exactly the way Apple likes. Too fucking bad. Remember, grey market != black market.

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.

I disagree. If China can produce better products at better prices, why not buy from them? If we're too stupid to compete effectively, that's our own fault. Now, you could make arguments about environmental laws, labor laws, labor rates, cost of living differences, etc., but those would only make sense if we actually had workers here in the USA who could do the same jobs as the Chinese. But as you noted...

Good thing we have a big crop of American scientists and engineers to compete into the future! Oh, wait... ...we don't. We're all too busy trying to become overpaid actors and actresses, lawyers, and CEOs, and we don't actually believe in science because it conflicts with our religion, so no one here wants to bother going into science and engineering.

If we're not going to bother trying to do these technical jobs ourselves, we have no business criticizing another country which has adopted it wholeheartedly and is selling us products using this technology.

Re:Remember

[Anonymous Coward]

Give me a list of chinese "innovations" ? Here are 5 spaces...
1)
2)
3)
4)
5)

Re:Remember

[Piazzola]

Even people who can afford better often choose not to. I know people with six-figure salaries that still shop for certain items at Target and Wal-Mart.

Re:Remember

[blueskies]

People have to buy inexpensive goods because most of the good paying manufacturing jobs have gone overseas and they cannot afford better

And you can thank unions for that. They inflated the price of human resources way beyond the value of those human resources, so they closed up shop here. You can only stress a variable in the market so much before the market finds a more efficient solution.

Re:Remember

[Simon Brooke]

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 has to do with debt. 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:Remember

[Simon Brooke]

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 'intellectual property' are usually the same people as the people who decry big government, and government intervention in markets, and that sort of thing.

Shocking lack of intellectual rigour.

Re:Remember

[LoofWaffle]

I have to disagree with your fix. People always have the option of buying beyond their means so they aren't obligated to purchase inexpensive goods. In a very general sense, I think that most would rather get the best deal on whatever it is they're shopping for in order to stretch their purchasing power to other goods, necessary or not.

Re:Remember

[hobbit]

There's no need to give China all our wealth and in the process create a powerful competitor. There's no need, but most Americans believed what the right wing told them about infinite growth, and somehow thought they could get rich whilst everybody else did the hard work. Turns out even the American dream is beholden to the laws of physics, though.

Re:Remember

[PitaBred]

Money is a PLACEHOLDER for value. It is not an entity unto itself. If it comes to blows, I'm pretty sure the US can stand on it's own. They only "own" the United States as long as the US plays fair. And since China hasn't exactly done so in the past, I'm not sure I see a big reason for the US to do so, either.

Re:Remember

[kcelery]

yes, right, sell more sub-prime CDO to them.

Re:Remember

[Anonymous Coward]

Many thinks[sic] which aren't property are coveted; thy neighbours wife and thy neighbours ass, among others.

So? Not salient.

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 'intellectual property' are usually the same people as the people who decry big government, and government intervention in markets, and that sort of thing. Shocking lack of intellectual rigour.

K, genius - the fact is that if your "theory" became practice, there would be no new products. No research. No new drugs. No new technology.

In short, you're an asshat.

Re:Remember

[rickb928]

"people who defend 'intellectual property' are usually the same people as the people who decry big government,"

What? Are you insane? People on all ends of the political spectrum defend IP.

Shocking lack of truth.

Re:Remember

[Simon Brooke]

"people who defend 'intellectual property' are usually the same people as the people who decry big government,"

What? Are you insane? People on all ends of the political spectrum defend IP.

I don't think so. Very few people defend 'intellectual property', and they're almost exclusively on the hard right. A lot more people defend copyright, the limited, short term monopoly on copies granted to creators of new artistic works, and patents, the still more limited, short term monopoly granted to technical innovators. Neither of things remotely resemble property.

Shocking lack of truth.

Indeed. But not on my part.

Re:Remember

[Anonymous Coward]

1) chopsticks
2) gunpowder
3) pasta/noodles
4) Ketchup
5) beauracracy

Re:Remember

[Glock27]

There's no need, but most Americans believed what the right wing told them about infinite growth, and somehow thought they could get rich whilst everybody else did the hard work.

The right wing? You must mean the Clintons instead, the most China-friendly couple you'd ever want to meet. During their eight years in power, China and offshoring flourished. Vast right wing conspiracy indeed. Does Wal-Mart board of directors ring a bell?

Gladly, we won't be seeing them in the White House again. What we will be seeing may be worse, McCain. Obama is not electable in the gemeral election.

At any rate, we'll see how things play out. Bomb, bomb, bomb..bomb, bomb Iran! lol

Re:Remember

[Lars T.]

"people who defend 'intellectual property' are usually the same people as the people who decry big government,"

What? Are you insane? People on all ends of the political spectrum defend IP.

I don't think so. Very few people defend 'intellectual property', and they're almost exclusively on the hard right.

It's always easy to deny others property when you don't have a chance to ever own something. Even easier when intellect (or lack thereof) comes into play.

Re:Remember

[Lars T.]

There's no need, but most Americans believed what the right wing told them about infinite growth, and somehow thought they could get rich whilst everybody else did the hard work.

The right wing? You must mean the Clintons instead, the most China-friendly couple you'd ever want to meet. During their eight years in power, China and offshoring flourished. Vast right wing conspiracy indeed. Does Wal-Mart board of directors ring a bell?

Are you trying to prove that Republicans are all a bunch of liars? Or just those who are like you?

By the second half of the 1980s, China had become the sixteenth largest trading partner of the United States, and the United States was China's third largest; in addition, over 140 American firms had invested in China. High-level exchanges, such as Premier Zhao Ziyang's visit to the United States and President Ronald Reagan's trip to China, both in 1984, and President Li Xiannian's 1985 tour of the United States demonstrated the importance both sides accorded their relations.

Re:Remember

[Glock27]

All that happened under the watch of a Democratic Congress.

Face it, the Dems are no better, and further the liberals are generally the ones clamoring for more international trade, and internationalization in general.

McCain will probably not be a panacea, as he is about 51% Dem anyhow... ;-)

Re:Remember

[Simon Brooke]

"people who defend 'intellectual property' are usually the same people as the people who decry big government,"

What? Are you insane? People on all ends of the political spectrum defend IP.

I don't think so. Very few people defend 'intellectual property', and they're almost exclusively on the hard right.

It's always easy to deny others property when you don't have a chance to ever own something. Even easier when intellect (or lack thereof) comes into play.

I've made the whole of my living for the past twenty-five years out of copyright - so I know what I'm talking about. Do you?

Re:Remember

[hobbit]

The right wing? You must mean the Clintons instead Just because the Republicans are more right-wing than the Democrats doesn't make the latter anything other than right-wing.

Re:Remember

[amcjohnson]

It could definitely be because of Europe as well. There are tons around here!

Re:Remember

[Anonymous Coward]

the difference is in the profits. in one case nobody gets profit, and in the other someone other than the creator gets the profit. I think you'll find most people on /. are against sale of pirated cds, but have no issues with downloading for the same reason

You just can't repress anything these days

[explosivejared]

People in China are going to satisfy their demand for iphones one way or another. Not to bother with the ethics of the situation, but much like any other type of piracy, this is just a market at work. We truly live in a global economy now. Regional releases and other such nonsense just don't make sense any more. If you release a product with global demand, make sure you can supply it globally or it will be pirated, smuggled, etc. If Apple cares at all about the Chinese market, then they need to ink a deal fast, because someone will supply iphones in their stead if they don't get something done.

Re:You just can't repress anything these days

[HellYeahAutomaton]

The problem of Apple comes from within. Since their early days their mindset has been to always have a locked-down closed box, closed regime hardware. They aren't the world's biggest little monopoly for nuthin'.

Re:You just can't repress anything these days

[rilister]

well, I don't imagine Apple are too concerned about this, apart from .looking. concerned for the benefit of AT&T. I can't imagine that the future Apple want to live in is being trapped in the ghetto of AT&T. I bet that was just the only way into a deeply entrenched market.

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?

The presence of a grey market for iPhones proves that there's a pent-up demand ready for the day Apple have the strength to roll this thing out under their own banner. Apple .hate. being beholden to anyone else's marketing. HP & iPod? bah. Their whole deal is about owning the .experience. not the product.

They're making plenty enough money to justify the investment and keep the alliance with AT&T alive for now. All this does is make Apple stronger.

Re:You just can't repress anything these days

[DMoylan]

i wouldn't have thought it needed to be repressed.

* in the us the iphone is considered the state of the art.
* in europe iphones sales haven't been great by all accounts. a few folk i know who were initially interested decided not to go for the iphone as it was feature light. shoot video, 3g etc plus a terrible contract.
* i always thought asia was way ahead of both asia and europe in terms of mobile capability so i never would have thought it would have made a dent there. (i do see the asian tourists on public transport with some seriously cool devices.)

so my question is is it a prestige device in china were even a tiny precentage of the population equals millions of iphones or is the iphone touch interface enough of a reason to lose capabilities that other 'superior' phones have?

Re:You just can't repress anything these days

[hjf]

exactly! where is the "Think Locally, act Globally" premise of the Internet? So, Apple has this new thing everyone in the world wants BUT you can't have because you live in a piss-poor country. No, it's not a matter of wether you can afford it or not, it's just that we don't give a flying shit about you. I can understand that from Apple: limited supply, etc. But the sad thing is that it happens with Google too! For example, in latin america all we have is Google search. Nothing else. Oh yes, in Buenos Aires there are the google offices and all that crap: what for? No idea. google.com.ar still only has web search and nothing else. Why can't we have google local? Why can't we have google maps with maps and not just old satellite photos?

I'm still waiting for many other services, like tivo (there is one company here that sells tv guides, I contacted them and they were even going to release MythTV compatible guides. Tivo has everything ready here, they don't have to invest anything, and still, they don't care). It really pisses me of that we can't have that. Those cool services are just meant to first-world countries? Whatever: we can afford it. I know we can, it's amazing the amount of new BMWs in the street, and I live in probably the poorest city in my country. So, if you sell it, people will buy it. Why don't they sell it then? What's the risk?

Another classic: the itunes store, they just sell for a handful of countries (mine not included, of course!). Why? what the hell could be wrong with that? I mean, I can buy a CD from amazon.com and they send it over. What's the difference with downloading a song, then? They complain about piracy, but all we have here are extremely overpriced CDs.

I can only hope that the upcoming recession in the US will make companies try to expand around the world, instead of just declaring some Chapter whatever bankruptcy.

Re:You just can't repress anything these days

[Jeff DeMaagd]

While maybe Apple and its shareholders might consider it piracy, the phones them selves were purchased fair and square. It looks like Apple does make money on each one sold, activated or not.

I remember that Apple is supposedly working on a deal for China

Don't build in China

[Anonymous Coward]

If you do not want people to copy your product then do not have them made in China.

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

[mrxak]

Doesn't really matter where you build it, people can get something and reverse engineer it no matter what. It's really more of an issue of market forces meeting demand where there is no legal supply.

Re:Don't build in China

[wattrlz]

Perhaps, but you don't hear people whining about cheap westrn-European knockoffs, or mid-western-American knockoffs much.

Re:Don't build in China

[dvase]

Regardless of legality, market forces reward the least expensive goods. In a country where IP protection laws are commonly flaunted, it is far cheaper to outright copy another company's idea than do the R&D yourself.

Re:Don't build in China

[theheadlessrabbit]

"people can get something and reverse engineer it no matter what."

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:Don't build in China

[koblek]

I used to be a design engineer with a pro-audio company. We looked into having some of our manufacturing done in China, primarily PCB manufacture and stuffing. We had a small batch made and delivered to us, but we were very unhappy with the results. Even with the great cost savings of having the boards made and stuffed for dirt cheap, it was costing us an arm and a leg to test and fix the crap they produced so we decided to stayed with our US board and stuffing houses. About a year later, one of our Japanese distributors sent us a Chinese knockoff of the device we tried having made in China. They stole the board layout and bill of material and made exact replicas of our EQs with crappy Chinese parts. it sounded like crap, and looked cheap, but it had our name on it and there was nothing we could do. If you don't want your product copied by Chinese IP pirates, DON'T have your hardware made in China!

Re:Don't build in China

[MoonBuggy]

To me, at least, the physical interface and the software are really the only two reasons to pay the premium for Apple. If you want a functional MP3 player then there are hundreds of very cheap Chinese imports that didn't have to bother copying the look of the iPod. If there were copies that replicated the most important features of the Apple products I'd be much more interested, but as it is I'd just consider them another cheap but functional player that happens to be in an Apple-style casing rather than a true 'clone' of Apple's version.

Re:Don't build in China

[lhorn]

My impression is that the concept of owning ideas is neither respected nor understood by a lot of people, including me. A lot of countries give the inventor a temporary monopoly on a method (patent) or copying of a work of art (copyright), but the ideas and the culture belongs to us all.
WIPO aside, we are in for a bumpy ride when all nations compete in a information driven international marketplace, the pace of invention will be awesome, if DRM do not succed in stemming the free exchange of information.

Re:Don't build in China

[bkr1_2k]

Doesn't really matter where you build it, people can get something and reverse engineer it no matter what.

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 happens no matter where you manufacture.

Re:Don't build in China

[Jeff DeMaagd]

Perhaps, but you don't hear people whining about cheap westrn-European knockoffs, or mid-western-American knockoffs much.

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.

Re:Don't build in China

[Anonymous Coward]

Nor do you hear about people mass-manufacturing electronic trinkets at all in mid-western America...

Re:Don't build in China

[fermion]

this is not so much about reverse engineering. It is about process engineering. To have some build something for you you have to give away many more secrets than they can get by re. Suppliers, forming, etc Building in china is giving away the store, but I guess it is cheap it can't be helped. I think the Chinese price it that way

funny math

[Anonymous Coward]

costing the company as much as $1 billion over the next three years "Costing"? This sounds like funny math to me (pioneered by record labels and Hollywood). Since Apple doesn't sell the iPhone at a loss, any sale (even without contract) is a net profit. They are not losing money from all the people who are buying it without getting a contract. Sure, they might have expected higher sales... but they have not lost anything.

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.

Re:funny math

[matazar]

are you suprised though. They all seem to have this approach.

What I can't understand is why the iPhone? There are so many better phones that can do more, I don't get what the appeal is.

Re:funny math

[Rocketship Underpant]

Apparently, there aren't so many phones that do more and do it better. For example, no other mobile phone browser seems to hold a candle to mobile Safari.

Re:funny math

[Amouth]

i would tend to agree with you on the browser part BUT only if you limit it to the browser that is included on the phone. I have a Cingular 8525 (remarked HTC) and yes the built in IE blows ass.. BUT Opera for WM5/6 is extreamly nice and much prefer it to Safari on the iPhone.. the thing is you have to buy Opera it isn't given free and i undertand that 99% of people arn't goingto buy a phone and then go buy a browser for it.

the iphone is nice... but the lack of copy/cut/paste is frustrating - being edge only sucks very very very bad.. it's imap client leaves alot to be wanted.. but the no 3g and no bluetooth theathering for laptops is the deal killer for me...

but damn is it slick

Re:funny math

[wsuschmitt]

"Costing" should be reworded as "opportunity cost". Opportunity costs are counted in business because they are looked at as legitimate markers and goals that a business can look towards when deciding actions in markets and setting budgets.
If you are to believe what Piper Jaffray has to say, then AT&T Wireless is sending ~$9/month to Apple on a two year contract after giving $150 for the initial sale. That's $9*24 months*1.4 million non registered subscribers*3 years= ONE BEEEELION DOLLARS (Thank you Dr. Evil).
By going the route that is suggested, the glass is half full and you're satisfied with what you've got. If you see this as a glass-half-empty scenario and realize that you're losing a billion dollars, you're going to do your best with your shareholders' invested money and figure out how to get a chunk of that back into the pockets of your investors.
That's business folks...

Re:funny math

[Gorbag]

Yes, note that the government uses the same kind of funny math when they talk about tax cuts "costing" the government money. The point is, everything is relative.

Re:funny math

[barocco]

For a publicly traded, high-profile company, having a less than expected profit is as bad as (or sometimes even worse than) losing the difference This is not about funny math it's about super-capitalism

Re:funny math

[delinear]

It seems like they've only got themselves to blame for the loss of additional revenue streams by trying to lock everyone in to contracts with certain carriers anyway. The evidence is in the sheer number of phones being unlocked, if they just made it easier to own the phone on any network, they'd lose some control but generate more revenue.

Re:funny math

[tlhIngan]

i would tend to agree with you on the browser part BUT only if you limit it to the browser that is included on the phone. I have a Cingular 8525 (remarked HTC) and yes the built in IE blows ass.. BUT Opera for WM5/6 is extreamly nice and much prefer it to Safari on the iPhone.. the thing is you have to buy Opera it isn't given free and i undertand that 99% of people arn't goingto buy a phone and then go buy a browser for it.

Also understand that in Asia, phones aren't subsidized so heavily, and people are willing to pay for phones. North Americans may balk at paying $400 for an iPhone, but to Asians, that's chump change compared to the other WinMo phones out there. They're used to paying full price, and anything that looks "hip" and "trendy". It's partly why there are a ton more WinMo devices out there in Asia - the market wants functional phones with capability. So if you're an Asian, and you've got a choice between the iPhone at $600, or some bunch of WinMo phones also costing around $600, well, the iPhone starts to look pretty damn good.

Or heck, if a regular cellphone costs $200, even the iPhone doesn't seem too big an investment anymore. Only in North America does it seem that $400 is a lot for a cellphone.

Re:funny math

[srussia]

New /. business plan:

1. Come up with new idea.

2. Tell someone about it.

3. ...

4. LOSS!

Re:funny math

[Anonymous Coward]

Sorry guys. but your missing the amazingly not difficult math.

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.

Re:funny math

[Confuzzled]

I hate seeing these same canned responses in slashdot:

Analysts predict a number (aka pull it out of their asses) taking into account whatever information they have (aka actual numbers) and whatever they can project from the market (aka toss dice). If they expect you to make $600 million, and you only make $200 million, they say that based on their observations you've "lost" $400 million and the stock market will hit you as such (wag the dog).

Now i'm not saying this makes sense in any way, but its the lingo. Analysts (or dumb reporters) will state it that way because: "Y company failed to make an extra $200 million" doesn't have the same ring to it.

cfz

The theft market will continue until

[Anonymous Coward]

companies learn to not do manufactuering in China. The amazing thing is that NOW is the time to get out of china. Why? Because, China is about to have no choice BUT to either free the yuen or to raise it against the dollar. But companies like Apple will continue to lose their company as the chinese just keep stealing their plans and produce copies.

Isn't that theft?

[MouseR]

Someone needs to explain how distribution channels can legally divert these phones away.

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?

[will_die]

From what I heard in another report people are purchasing the phone from legal sources but not doing the activation. Since activation is a seperate step it is easy to bypass. They then apply the various hacks and use them on thier networks.
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:Isn't that theft?

[LynnwoodRooster]

I've been working with and in China for 10 years now, this is how it works...

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...

Re:Isn't that theft?

[wvmarle]

Probably exactly the same way as it happens with the tobacco.
Where do all the illegal cigarettes come from? From legal factories who sell to traders who resell in the grey markets. And then it ends up duty-not-paid on the streets.
Apple KNOWS there are more phones produced than locked in AT&T's network. These phones are simply sold through the official channels to the retailers, who sell them to buyers, who in turn re-sell the phone uncontrolled on the grey market. Very simple.
The second shift as another respondant indicates is also an issue, but not the case here. More in reply to that comment.

Re:Isn't that theft?

[wvmarle]

Ah, the infamous second shift. Production continues after the actual order has been fulfilled, to sell the products under the own brand. Yes a very familiar issue in the China market. I'm not working directly with the factories (located in Hong Kong, I sell raw materials for recycling to China), but close enough to know quite a bit about it.
The issue here is NOT a second shift. Apple KNOWS those phones are produced, actually released the sales numbers so this is the actual production as ordered by Apple. A lot of them are just not registered to the official partner networks, instead unlocked and resold or whatever people are doing with it.
Preventing a second shift is, in case you have a truly unique product, quite simple: keep the production of a key component in your own hand. A self-designed chip for example, that is really tough to copy. Then the OEM can not produce more than the chips you supply. Otherwise, no matter how good the policing, you will be copied. And more often than not the copycats get their products to market sooner than the original. Sad but true.

Re:Isn't that theft?

[Rogerborg]

Hey, here's a big bag of rubies. If you count them and tell me how many there are, then I'll give you three of them.

Ahem. If they police and monitor the Chinese market, how reliable is their information?

Re:Isn't that theft?

[CodeBuster]

Someone needs to explain how distribution channels can legally divert these phones away. The real world, and particularly the world outside of North America, the British Isles, and Western Europe, is not very much concerned about what the laws say, but rather where to make a profit and how much. In many of those other parts of the world the only laws are the law of the gun and the law of money. How can they legally divert the phones away? They just do it and don't worry about the legality of the matter. What is Apple going to do? Move production away from China? Where else would they move it to that is even remotely as profitable for them even with the knockoffs, smuggling, and all of the rest?

Re:Isn't that theft?

[LynnwoodRooster]

Better for both of us - me and my partner factories in China - than just me by myself...

Re:Isn't that theft?

[LynnwoodRooster]

Based upon the number of iPhones available for sale in Shanghai, Nanjing, and Beijing I'm pretty sure there's a lot of extra production going on...

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).

Re:Isn't that theft?

[lelitsch]

I RTFA (so what, take away my geek card). According to the NYT, these phones are not being diverted by the manufacturing plants, but just bought in the US and shipped or carried back. Given that everyone I know who traveled outside the US has been asked to bring at least two iPhones to their destination by friends or acquaintances, I this this can easily account for millions. I could have brought 20 on my last trip to Europe and sold them at the first conference I went to in minutes.

About 10% of the Germans at the tech conferences I went to had iPhones. IIRC think none of them came from T-Mobile, the only authorized reseller in Germany.

Re:Isn't that theft?

[Anonymous Coward]

And BOM stands for what?

Re:Isn't that theft?

[fliptout]

Step 1: I bought an iphone in Dallas, TX.
Step 2: I sent it via US mail to my friend in Shanghai.

Neato, eh?

Re:Isn't that theft?

[segedunum]

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...

You've got no chance mate. Which do you think is most important to whom? Your need to get low costs and wages in China, or their desire to get their hands on your IP? Western companies like you queuing up to get low costs, low wages, no pensions, no health and safety etc. are two a penny to the Chinese. Uh, huh. The Chinese companies will also pass the parcel with you. If you move to a new factory and company it makes no difference. If they have an opportunity to make money on the side then they'll do so, and they will share information between themselves to do it. You're really no big loss.

That's the price you pay for cutting your costs to the bone. If your IP really is important to you, make your products in a country that doesn't have that culture and those incentives. No? I thought not.

Re:Isn't that theft?

[PitaBred]

And as soon as you find out they've taken the whole bag, they lose their contract, and get NO more rubies from you. The bulk of their business is still tied to the demand of the manufacturing company, not the second-shift production. It's cutting off your nose to spite your face if you value the second-shift production more than a good first-shift production. The Chinese aren't stupid... far from it. They just have very little respect for you, so you need to give them a reason to do so.

Re:Isn't that theft?

[MouseR]

Oh I understand that.

Mine got purchased by a friend in NC.

But, 400,000 phones? Damn. That's a lot of friends.

Re:Isn't that theft?

[topnob]

I live in China(I'm an Australian), and according to the locals(and some expats I know) the rule is 10% of your product(depending what it is, but it must be a percent) MUST be sold domestically, thats why you see so much stuff here. The parent companies used to just consider it the cost of making the products and in the past, didn't worry about marketing them. These days its slightly different as all the parent companies are actively promoting their products domestically, but many a Chinese national made his first million by selling that 10% with a nice markup. Of course thats over simplified, but thats how it is.

Re:Isn't that theft?

[MichaelSmith]

A co-worker of mine here in Australia has an iPhone. He uses it with his Australian SIM and a hardware unlocking device. He bought it on eBay. I can't see him going to jail for theft any time soon. He hasn't signed any contracts with US phone companies and is not obligated to them.

Re:Isn't that theft?

[Rogerborg]

If you have any bags of rubies that you need counting, send them my way. I assure you that I won't take all of them.

Before you bash Apple

[alexhmit01]

If you notice, we haven't heard ANYTHING from Apple. Apple looks like they are preventing this, because why would AT&T give them a cut if everyone else can carry the iPhone with unlocked iPhones. Apple seems to enjoy the extra sales and profits, but doesn't want to jeopardize the AT&T gravy train.

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:Before you bash Apple

[Mr. Punch]

I never really got it before, and now it totally makes sense. I'll still consider it weaseling if people talk about it as a hardship, but if it's just matter-of-fact from numbers nerds, cool.

Thank you for explaining this so well.

I would never steal.

[emj]

The analyst might have said Y*1M in "lost revenue", I think that makes it better. But my english isn't good enough too say.

They're all in hong kong

[Slotty]

I think that all the iPhones being smuggled back in are in every mobile phone vendor in HK. I was there a few weeks ago and every mobile vendor I walked past was offering an iPhone unlocked to whatever firmware version their sim tricks work and selling them for about $650AUD

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.

iClones

[arizwebfoot]

Since China clones everything, are they gonna start cloning us?

Re:iClones

[internetcommie]

When we become cool enough to be attractive on the grey market?

failed projections and "costs"

[Speare]

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.

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.

Re:failed projections and "costs"

[Shados]

say they LOST a billion dollars because people who were never going to buy the product ended up not buying the product

While they ARE usually very skewed, you know how these reports work, yes? Hint: they don't count the amount of pirated products, multiply it by the cost, and come up with a figure. A lot of people WOULD have bought the thing if they couldn't pirate it, and there ARE ways to -estimate- how many.

Again, not saying its not skewed...but saying "people involved in piracy would have never bought it anyway!!" is even MORE skewed.

Re:failed projections and "costs"

[Rogerborg]

saying "people involved in piracy would have never bought it anyway!!" is even MORE skewed.

However, you can often say with confidence that they would never have bought it at the full retail price, because if they would have bought it, then they would have bought it.

Granted, not in this case, but that's simple because the product isn't legally available anyway. And here we can definitely say that Apple haven't "lost" anything in the Chinese market, because the cost of their products in China is $0.

Re:failed projections and "costs"

[Shados]

Well, two things.

then they would have bought it

Not really. If you talk with a lot of "pirates" honestly (that is, not when they're in panic mode trying to justify themselves), what you'll hear (sometimes in nicer words) is "Anyone would be a retard to buy something they can get for free". The main difference, is when you see someone with 250 PS2 games. Well, obviously they wouldn't have bought that many...but its fairly safe to expect they would have been somewhere around the usual attach rate of the console if they hadn't. Like I said. Someone who pirated 20 games wouldn't have bought 20 games. You need to compute the ratio and make estimations. "Hey, which DS games do you have?" "Oh, too many to count, I use an R4. Used to buy douzans of games, but then I discovered R4s!". Thats just an example of a recent conversation I had with someone...and the guy is single, no car, with an income in the 6 digits. And thats fairly common (though an extreme case).

I mean, someone who -doesn't pirate- is much more likely to "not care" about game and be among the casuals who buy ZERO game beyond Wii Sport...so it averages out with the pirates who would have bought 0 game if not for piracy...

My point really was: there are ways to estimate that. Thinking that someone who pirated something would never have bought it (even at full price), is lunacy. They wouldn't have bought ALL of them, not all pirates would have bought any...but there is still a ratio that can be estimated.

For the chinese market, again, they lost something (as in potential purchases). Now, I'm not as knowledgeable there, but my entire family in law is chinese, most living actually in China, and I've still seen quite a bit how these people think (or don't think sometimes). A certain percentage of the copies would have been real sales and so on. But its probably insignificant, yes.

What it probably did hurt is the negotiations with the chinese phone providers, where perception is everything. "Why would we do business with you if everyone is going to buy unlocked fakes?"

Note: I hate Apple so I'm giggling at this event, and I hate locked phones even more, so I'm laughing my ass off and I'm quite delighted at this turn of event. So its not like the above arguments come from a "OH NOES POOR APPLE IS GETTING SCREWED!" side of me.

Re:failed projections and "costs"

[hummassa]

Not really. If you talk with a lot of "pirates" honestly (that is, not when they're in panic mode trying to justify themselves), what you'll hear (sometimes in nicer words) is "Anyone would be a retard to buy something they can get for free". The main difference, is when you see someone with 250 PS2 games. Well, obviously they wouldn't have bought that many...but its fairly safe to expect they would have been somewhere around the usual attach rate of the console if they hadn't. Like I said. Someone who pirated 20 games wouldn't have bought 20 games. You need to compute the ratio and make estimations. "Hey, which DS games do you have?" "Oh, too many to count, I use an R4. Used to buy douzans of games, but then I discovered R4s!". Thats just an example of a recent conversation I had with someone...and the guy is single, no car, with an income in the 6 digits. And thats fairly common (though an extreme case). It seems to me that you know a lot of dishonest people, period.

I live in an underdeveloped country. Minimum wage here is $200/month. What I can say to you is, about the people that buy "pirated" stuff here:

1. People that buy a PS2 here (yes, not a PS3) wouldn't buy the console if they had not access to pirate games. They could not affort the price console+games.

corollaries to 1: they wouldn't buy the non-pirated games, nor they would buy the console.

2. People I know that buy pirated movies, in general, pay the $2.50 for the pirate version because: (a) they can't pay the $20 for the original version and (b) they can't pay the $10/person it costs to go to a theatre and (c) then don't think it's worth to pay the $1 it costs to rent the movie if for $2.50 they can have it to watch whenever they want.

corollaries to 2: they wouldn't buy the movie; they _might_ rent 2.5 times less movies, for a total loss of sales of ( 1 / 2.5 ) / 500 = .0008 movies/"pirate" (the person would have 2.5 times less money to rent the movie, each copy of the movie serves 500 people in the rental shop -- YMMV, but my video-club has 500 people and many movies have just one copy)

3. People I know that use pirated computer programs could not afford them at all, at best they would use OSS/FS or bundled-with-the-computer software.

4. People I know that buy "rip-off/fake" branded merchandise (adidas, DG, Nike, etc) cannot afford the "real thing".

Every person I know that can afford buying CDs, DVDs, console games, etc BUYS them (including myself -- owner of a PSP and 4 games) (and there is a less-than-pure-honesty social explanation, too... it's a status symbol here to have the "originals" and not the "fakes")....

Re:failed projections and "costs"

[Shados]

I live in north america. The only stopping most people of doing anything is the fear of getting caught. If there isn't a fear of getting caught, things automatically become "right", or even MORE than right, because they are "sticking it to the man".

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 :)

Re:failed projections and "costs"

[lx_xl]

Our world is not on a flat ground. You cannot simply apply the whole moral system of a rich world into a poorer one. You must admit that people in this world are naturally UNFAIR in terms of the accessibility to a good living standard. While rich people in this world or people who lives in the rich countries tend to think they are enjoying the fair share of the world's source because they paid for it. They keep telling/teaching people born in a poorer country: "Hey! Why you try to get more enjoyment of life that beyond your purchase power? That is immoral! If I was as poor as you I would just live with it." I was grown up in a developing country and then immigrated to a developed country. I also work for an IT company in North America. Actually I found new immigrants from developing world tend to be more competitive (both in school and real job) in a well developed country compare to the local citizen there. For the whole early stage of my life, I have heard enough things like your opinion. Americans think they deserve to enjoy more than 20% of the world's natural source with less than 5% of the world's population. Not because they are 4~5 times smarter than people in the developing world, just because their countries get industrialized earlier and they are just so much richer. "If we couldn't afford something, we didn't buy it." That is because you and your friends and co-workers are in the SAME economic system! You get what you earn - it is correct ONLY WITHIN that economic system! There are many people on this world who are as smart as you and are working much harder than you but earning less than 1/10 of your salary! So if you want to talk about fairness, tell me why they should not have the right to enjoy what you can have in your life? "You said you lived in an underdeveloped country. Is it illegal in your country to pirate US-made stuff" Haha... so lucky they can still breathe because the local air is not marked "Property of US, we have paid for it with US dollar!". Thanks for your mercy.

Re:failed projections and "costs"

[lx_xl]

How come I cannot edit my post? A better formated version: Our world is not on a flat ground. You cannot simply apply the whole moral system of a rich world into a poorer one. You must admit that people in this world are naturally UNFAIR in terms of the accessibility to a good living standard. While rich people in this world or people who lives in the rich countries tend to think they are enjoying the fair share of the world's source because they paid for it. They keep telling/teaching people born in a poorer country: "Hey! Why you try to get more enjoyment of life that beyond your purchase power? That is immoral! If I was as poor as you I would just live with it."
I was grown up in a developing country and then immigrated to a developed country. I also work for an IT company in North America. Actually I found new immigrants from developing world tend to be more competitive (both in school and real job) in a well developed country compare to the local citizen there. For the whole early stage of my life, I have heard enough things like your opinion. Americans think they deserve to enjoy more than 20% of the world's natural source with less than 5% of the world's population. Not because they are 4~5 times smarter than people in the developing world, just because their countries get industrialized earlier and they are just so much richer.
"If we couldn't afford something, we didn't buy it." That is because you and your friends and co-workers are in the SAME economic system! You get what you earn - it is correct ONLY WITHIN that economy system! There are many people on this world who are as smart as you and are working much harder than you but earning less than 1/10 of your salary! So if you want to talk about fairness, tell me why they should not have the right to enjoy what you can have in your life?
"You said you lived in an underdeveloped country. Is it illegal in your country to pirate US-made stuff" Haha... so lucky they can still breathe because the local air is not marked "Property of US, we have paid for it with US dollar!". Thanks for your mercy.

Actually, they started pretty much open...

[hummassa]

Vide the Apple I, ][, ///, ...
It's post-Mac that Apple culture became locked-down.

Re:Actually, they started pretty much open...

[bhtooefr]

Actually, the Lisa (pre-Mac) was rather closed...

Re:Closed source = Not interested

[AndGodSed]

Hold on... I have a spare tinfoil hat here someplace...

Product "makeup":

[hummassa]

That is the name we give here to fraudulently making the consumer think the product is cheaper (or has a greater value) than it's being paid. One example is making a package that has 180g of cookies (and sell it for, say, $1.90) at the same size of the package that has 200g ($2.00). The consumer is tricked to buy the "cheaper" package because (s)he evaluates only the general size of the packages and the price, without seeing that the other one is actually 5% cheaper.

That is what Apple is doing with the iPhone: dummies buy the iPhone, activate it with AT&T and spend $800 in a product that Apple advertises as costing $400.

Re:Product "makeup":

[Speare]

Erm, no, it's more like advertising a box of ACME cake mix as being great with AJAX icing, and also offering a box of AJAX icing (under a deal where AJAX promises a kickback to ACME), and then nobody wants or likes the AJAX icing. The coupons may say there's a certain bundled price, but if customers don't want to bundle them, that is not a cost or a loss of revenue. It's a failed proposition. This isn't about a certain amount of grams per dollar. This is about failing to sell a secondary component in a flavor that people just don't like.

Re:Product "makeup":

[EastCoastSurfer]

The ATT iphone plans aren't that bad. It seems that ATT has eaten much of the cost of Apple's cut. You can get unlimited iPhone data added to your existing ATT plan for only $20/month, which seems reasonable compared to other cell data plans.

The EU plans on the other hand are crazy. You can almost see a 1 for 1 relationship between a normal phone plan costing $x and a plan with the Apple tax added (x$ + Apple Tax).

Still haven't seen a genuine clone

[simong]

Lots of superficial lookalikes, yes, but none that approach the spec of the real thing. I seem to have grown immune to the Reality Distortion Field and have no real interest in the iPhone, but with the exception of the HTC Touch, I haven't seen one that's anything but cosmetic. And if anyone mentions the Neo 1973, I'll screw their pelvis to a cake stand.

Re:Still haven't seen a genuine clone

[Anonymous Coward]

And if anyone mentions the Neo 1973, I'll screw their pelvis to a cake stand

How about if we mention Spiny Norman instead?

Re:Still haven't seen a genuine clone

[trongey]

And if anyone mentions the Neo 1973, I'll screw their pelvis to a cake stand. OOH, Ooh! Can I be next?
Neo 1973 Neo 1973 Neo 1973

Re:Closed source = Not interested

[TheRaven64]

it uses a BSD based kernel (which is in turn based on Linux) Silly troll. You almost had me until that line. Please try harder next time.

Is this that bad for them?

[Stopher2475]

Yeah I know they don't make as much as their sweet AT&T deal but they still sold a $500 phone. Most companies would love the margin they get from that alone.

Having worked with apple since the late 80s

[GlobalColding]

Apple always known about the gray market, Apple always supported the gray market, Apple always whined about the gray market. The truth is they always wanted and needed all the incremental revenue they could get. On the front end I remember them going out to the gray resellers and collecting serial numbers swearing they will get to the bottom of their source. On the back end they continued to pump millions of MDF dollars into known gray resellers to subsidise their low margins and to encourage them to keep up the volume. With the dollar being low and economy sucking eggs at home they are happy to offload as many units overseas with or without subscriptions. This gets rid of inventories that they will eventually have to price-protect at disti or super-retailer levels, and frees up purchasers to buy the new better/bigger products. The Spice Must Flow.

Sorry, but you are wrong because

[hummassa]

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".

Re:Sorry, but you are wrong because

[Speare]

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 reflash the device to work on a different network. As long as I'm not making digital copies of Apple's product available against their copyrights, I'm all good.

Best Buy employees in Best Buy stores say to you when you buy a television (at least, they said it to me): "You HAVE to let me inspect your packages and receipt before you walk out the door". Erm, no, I'll walk where I please with my tangible property, I'll leave how I please, and if you don't like it, don't invite me in the store tomorrow.

Mary said that you just HAVE to try the custard if you're going to order the pork chops. Same weight. No contract signed, I can do whatever I want (and not do what I don't want).

Re:Sorry, but you are wrong because

[hummassa]

That is exactly my point when I say the extra $400 are gotten from the dummies fraudulently. The "go-with-the-flow" folk just sign up with AT&T and live happily forever after, exactly like the "go-with-the-flow" folk buys the $1.90 package that is more expensive than the $2 package. The definition of "product makeup" is: "making the consumer pay more for something that has less value, fraudulently, by (a) making it believe that it is really paying less or (b) making it believe that the price is really one when it ends up being other". The script for Apple employees even includes saying that it's "illegal" to unlock your iPhone (so you have no other "legal" option but use AT&T). But the ads and Apple website don't say "iPhone for a total of $2000, $400 upfront and $50/month for two years" -- it says "iPhone for $400". And lots of consumers (the homo medium AKA Joe Sikspak) fall for it, configuring the fraud.

OT: I hated the policy of stating prices w/o taxes: in Florida, my iPhone costed $440 or so... down here, the prices must include all taxes in advertising.

Re:Sorry, but you are wrong because

[meringuoid]

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".

But as it turns out, they're wrong.

half the iPhone profit is ATT kickback

[peter303]

Stock is taking a beating if a third of iPhones dont have ATT kickback profit.

Re:half the iPhone profit is ATT kickback

[GlobalColding]

The problem is they are commited to a minimum product velocity with or without subscriptions. Stocks will tank even more if they sit on a bunch of old hardware. Owners of Frys Electronics used to say "Treat everything like tomatoes, when its fresh and new everyone wants it, few days later you have to mark down to move it, later still you can sell it for pennies on the dollar for ketchup, after that it has no value". In manufacturing and in retail - the Inventory has to move. Ideally Apple would want it sold with subscriptions, but realistically they will settle for moving units which will still maintain their BRANDING. Apple would rather have their units out there even without ATT kickback. As far as their stock goes, I remember it being in the ten buck range, I think they are doing alright these days... Its called cost averaging.

I wouldn't classify...

[hummassa]

the Lisa as "pre-Mac"... I consider it to be the "alpha-quality Mac"...

Also available in Hong Kong

[wvmarle]

Monday, while shopping for a simple mobile phone, I saw the iPhone on display in a mobile phone shop here in Hong Kong. I didn't ask for the price or so (I was looking for a simple phone, just for making phone calls), actually I wonder whether it is cheaper or more expensive than in the USA. And about two months ago I saw one "in the wild", a friend showed it off at a party. Also in Hong Kong of course.
Oh and of course no SIM lock.

Unrealized gain != Loss

[corsec67]

An easy way to summarize that:
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:Unrealized gain != Loss

[Anonymous Coward]

What you refer to is not an unrealised gain. If you were expecting to make money which you don't make, it is a loss.

If iPhone demand exceeds iPhone supply then it is a loss for Apple, since those phones, which have been sold to grey buyers, would have been sold to people buying AT&T contracts.

Not exactly news ... or news worthy

[Sepiraph]

People are going to get the iPhone one way or another if Apple doesn't release it. Same thing happened in Canada where Apple didn't even bother to release it. As for the reverse-engineering, that happens everywhere to everything... not just in China.

funny journalism

[Udo Schmitz]

sounds like funny math to me

Who cares? The whole thing sounds like funny journalism to me anyway. Mr. Markoff doesn't tell us about his source. One could think somebody pulled an anti Apple story out of his ass ...

Re:Closed source = Not interested

[boast]

thanks for the lulz

Another piece of purposedly planted misinformation

[LanceUppercut]

There's never been any negotiations between Apple and China Mobile. Needless to say, they have never broken down, since there was nothing to break down.

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.

you are joking right?

[enjahova]

An economic embargo to force China to play nice in the ways that western governments deem nice will work

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.

Re:you are joking right?

[Anonymous Coward]

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?

You are thinking like a politician, very short term. US is still doing relatively ok because of the past. As GDP and the dollar drops, the days of sitting there reading /. all day on the easy chair are numbered.
You can not maintain an economy for long on nothing but the IP you once had. Even with the WTO and the US congress pushing the extending of IP rights, that well will run dry. Then the previous large IP owners will be suffering with the rest of us that can not make a living off of IP now.
Maybe past generations had the same thoughts but I feel that there is many things in the way from my kids being "better off" or having a higher standard of living than me.
After the cheap imports make the complete rounds through the economy, what will be next in order to maintain the profits and economy?

Again, short term decisions are being made right now. Not a single politician has an agenda or a long term plan extending past 10 years for the future of the US. It is even more distressing is no one in the popular news is even asking about long terms goals.

*rolling eyes*

[Anonymous Coward]

The only difference between Steve Jobs and another other CEO is that Steve wears black turtlenecks. That's the *ONLY* difference.

Anal(c)ysts

[Anonymous Coward]

costing the company as much as $1 billion over the next three years, according to some analysts Isn't this exactly the thing most analysts say these days to get "noted"? Does it really matter if it's true or not?

Apple wants this to happen

[mveloso]

How can you tell that Apple wants this thriving grey market to happen? Because it sells phones without a contract.

Think about it. Apple could have sold phones (1) only at AT&T stores, or (2) only with activation. It didn't. Why? Because it wants iPhones out there.

Everyone with a brain can see that more phones in the market = better for the manufacturer. Why? Simple.

In the case of Apple, lots of unlocked phones on your network = better business in the future. Imagine that there are 400k unlocked phones on China Mobile's network. That's $16m USD worth of phones. China Mobile would have gotten a big chunk of that - if they had sold the phones instead of Apple. Plus, unlockers are a small percentage of the potential users; there's a lot more demand for legit iPhones. Who really wants to deal with your iPhone getting locked after every update? Only early adopters want to deal with this.

Plus, the experience is better on a supported network. Visual Voicemail is pretty useful, and having your network set up automagically is nice, though setting it up on other networks isn't that hard - but grandpa isn't going to do that.

Re:Apple wants this to happen

[MouseR]

Well, think about it. If these extra phones are not sold BY Apple but rather than by the manufacturer's own extra (un-contracted) production run, doesn't that make the manufacturer a thief in the story, keeping profits for itself rather than let Apple sell the products?

If I had contracted 1m phones to find out that 400k other ones were build without my consent, I'd be majorly pissed at my contractor for having stolen a potential 400k*399$ in revenues.

Re:Closed source = Not interested

[bkr1_2k]

Okay, while I think your post is an outright troll I'll respond because I occasionally think you have something insightful to say. I would ask for some references for your statement that iPhones have reduced quality when calling any other phone, or that they can be hacked with just whistled tones.

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.

Does that mean the iPhone is a good solution? I don't happen to think so, but I have no reason to think an open source solution will be any better. Despite your beliefs there are definitely reasons for closing your source just as there are reasons to open it.

MOD PARENT UP

[businessnerd]

Once again, no one on /. understands what opportunity cost is. The parent is absolutely right and the grand parent has no accounting background.

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 less than if we do X. Or in more real world terms, should we use our extra profit on employee bonuses, or should we expand the company? If we were to expand the company, what is our potential revenue? If we instead go the bonuses route, then the potential revenue from expansion, is the opportunity cost. This helps you decide which route to take.

It is also important in industrial insurance policies. If a hurricane hits a factory in Puerto Rico, there is the physical loss (property damage, lost inventory, rebuilding) and then there is the opportunity cost of not being able to produce more of the product while rebuilding taking place. Instead of making X widgets, we can only make X-Y widgets, which means less revenue. This is factored into the insurance payout in the event of a such an occurance.

Similarly, Apple has produced 1.4 million iPhones that will not be registered(thus preventing the registration revenue). It was Apples intent to have these phones registered, yet smugglers and un-lockers have stopped this from happening. The expected revenue may even have already been earmarked for something else (i.e. paying off a loan, extra R&D money, etc.) This is a loss and this loss is costing Apple money

Re:MOD PARENT UP

[complete loony]

If iPhones could not be unlocked, many people would not buy them. I would argue that if all iPhones sold also had AT&T contracts, there would be less iPhones sold. Not more revenue from AT&T contracts.

USians are scared of China

[Chicken_Kickers]

and this is a good thing. Since the fall of the USSR, the US government, and to some extent, their citizens, have been throwing their weight around too much. I interpret this emerging Sino-phobia as the first symptoms of USians realizing that the party is over. China has 1 billion people versus 300 million of the US, so it will win any war of attrition. China is rapidly modernizing, what they can't innovate, they will buy or steal. China is nuclear capable and have taken the first steps to space. With its rapidly growing economy comes wealth, which will and have been used to buy influence and support from other countries. Despite wishful thinking by Western doom sayers, China will probably reclaim their historical role of regional superpower in the next 10 years and a global one in 20 years. From the standpoint of a muslim and non-USian, a strong China is just what the world needs to balance the power of the USA. Couple this with a resurgent Russia, we will see a return to the US stepping more carefully instead of stamping their boots around the world.

Re:you are joking right? I second that not all is

[davidsyes]

cheap crap coming out of China.

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

Location decisions of Japanese new manufacturing plants in China ...
http://ideas.repec.org/a/spr/anresc/v40y2006i2p369-387.html

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

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:You just can't repress anything Ghetto?

[davidsyes]

"in the ghetto of AT&T"

I can just see an ad now... "AT&T, the GHETTO CHOICE..."

That's uninformed hogwash. Sorry.

[weeeeed]

This may be true for some backyard manufacturer producing bolts and washers, but (AFAIK) Foxconn is producing Apple stuff and they have better things to do than cheating their customers. PS, it's a Taiwanese company. Most of the iPhones come from all around the USA, a port of it may fall of the delivery truck. If i remember correctly there was news report about a container full of iphones "falling off" a cargo ship in Hong Kong few months ago.

If Apple really were that concerned...

[andrewm_za]

...they'd be selling the iPhone internationally. It's not just China that sells them gray, it's almost everywhere, including here in South Africa. If the iPhone had been launched here (and China) soon after the US launch, there'd be plenty of legit Apple customers by now. Since they didn't bother, what choice do we have if we want the latest gadget? Its the same story with movies and TV series, our air dates are always months/years after the US air date, so instead of waiting, many people choose to download illegal copies to keep up-to-date with the rest of the world, when these could've been legitimate sales if the series's had been marketed properly. Its high time US companies started treating their global customers the same as their US customers, because we are not stupid - know what we're missing out on, and willing to pay for the items, and if we can't do so legally then we'll find another way. Instead of complaining about "lost sales" Apple should be complaining about lost opportunities.

Don't buy in China? Only China can make iPhone...

[justvisit]

There are probably less than 3 factories in the world has the capability to meet iPhone's quality standard, target cost and quantity demand, unfortunately they are all located in China. iPhone are manufactured in Foxconn factory in ShenZhen, China. It is probably the biggest and most advanced electronic manufacturing facility in the world. They are also making Xbox360, Sony PS3 and Nintendo wii in the exact same place.

Smuggled back??

[dirtyforker]

Smuggled back into China? Rubbish! Far, far more likely is that the factory that makes them is making a hell of a lot more than they are reporting to apple and selling these on the sly.

Re:Smuggled back??

[Lars T.]

Smuggled back into China? Rubbish! Far, far more likely is that the factory that makes them is making a hell of a lot more than they are reporting to apple and selling these on the sly. So what is your explanation for the "missing" iPhones Apple sold but where not activated nor jailbroken? Alien collectors?

Re:Closed source = Not interested

[MichaelSmith]

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.

The answer to your question

[hummassa]

IThe 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!). I live in Brasil. We are signataries of the Geneva convention. We do have (somewhat strict) copyright laws, but no DMCA-like laws, nor software (and business-methods) patents.

Basically, you can go to jail (two to six years [*]) for copying and distributing in exchange for money copyrighted material, and you'll get more jail time if you are doing so in a big scale. People who buy bootleg movies on the street are not liable, but people who sell them are. People downloading torrents are in a gray zone (because they are uploading too), but no effort was made against them yet. People (and companies) who pirate software and get caught usually can pay a fine up to 1000 times the price of the software and avoid jail (it's usually settled for less). Time/space/media-shifting is fine by our legislation.

[*] our jail times are particularly small (the philosophy of our legislation is that jail time should recover the person and get it back as a productive member of the society -- not that it works a lot in practice): 2-6 years for theft, 2-8 for aggravated assault, 6-20 for murder, 20-30 for robbery with murder.

An interesting perspective on this

[hummassa]

In Sao Paulo, 10M inhabitants:

60% of people buy pirated goods at least once a month.
33.6% of people spend less than $5 in pirated goods per month.
18% of people spend $5 to $15 in pirated goods per month.
8.4% of people spend more than $15 in pirated goods per month.

Source: http://info.abril.com.br/aberto/infonews/022008/21022008-3.shl