Slashdot Mirror
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."
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.
I got a catholic block.
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!
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.
-mrxak
Onions Will Kill You
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.
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.
I don't read replies by ACs.
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...
Galileo: "The Earth revolves around the Sun!"
Score: -1 100% Flamebait
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?
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.
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!
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.
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.
[
Vide the Apple I, ][, ///, ...
It's post-Mac that Apple culture became locked-down.
It's better to be the foot on the boot than the face on the pavement. ~~ tkx Kadin2048
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.
It's better to be the foot on the boot than the face on the pavement. ~~ tkx Kadin2048
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.
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.
Support NYCountryLawyer RIAA vs People
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.
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.)
If I have nothing to hide, don't search me
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.
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.
[
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.
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.
"Action without philosophy is a lethal weapon; philosophy without action is worthless."
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.
"how can they call it a MINE if everything here is THEIRS?!?!" -Straight Jacket
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?
music lover since 1969
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.
"Growing old is inevitable; growing up is optional."
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
"It's not whether you win or lose, it's how drunk you get." -- H. J. Simpson
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.
I'm old enough to remember when discussions on Slashdot were well informed.
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.
I'm old enough to remember when discussions on Slashdot were well informed.
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.
Previously: "Linux... Toward the Sunrise..." Now: "Linux... Toward the-- No, now, part of Every Sunrise"
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.
http://michaelsmith.id.au