Feds Seize $78M of Bogus Chinese Cisco Gear

Ian Lamont writes "The IDG News Service is reporting that US and Canadian authorities have made more than 400 seizures of counterfeit Cisco hardware from China in an ongoing investigation that started in 2005. The most recent seizure was last Friday in Toronto, where the RCMP charged two people and a company with distributing large quantities of counterfeit network components to companies in the US through the Internet. The RCMP seized approximately 1,600 pieces of counterfeit network hardware with an estimated value of $2 million, says the report. According to another source, bogus Cisco gear from China typically includes network modules, WAN interface cards, gigabit interface converters, and less expensive routers."

Comments

Not really counterfeit

[seanadams.com]

I rather doubt that much of this equipment is truly "counterfeit", at least in the usual sense of a cloned design such as the iClone. Rather, what happens is that the contract manufacturer will buy extra parts and make more units than Cisco actually ordered, and then those units go out the back door after hours. They might have illegitimate serial numbers or might be missing the authenticity stickers on some internal chips, but they are otherwise identical.

It's a very difficult problem to manage unless you have trusted people overseeing the entire manufacturing operation. The amount of gross margin in Cisco gear makes this activity extremely profitable.

Re:Not really counterfeit

[Feyr]

have you checked the cisco price list for a standard power cable? do it sometimes, you'll get a kick :)

(hint: it's around 80$. same cable that comes with every power supply)

Why make *anything* in China, then?

[Scareduck]

The attractiveness of low cost manufacturing in China seems to be inevitably offset by some other negative, whether it be the creation of instant competitors once the contract manufacturer figures out how to reach their customers' customers, or ersatz ingredients (melamine in dog food last year for instance). Remind me again, why is free trade with China such a great deal for the developed world?

Re:Why make *anything* in China, then?

[emilper]

Hate to blow a hole in your argument, but it's about labour availability, not about labour price. I am sure there might be 100000 competent and unemployed developers and 500000 unemployed blue collar workers in US, but if Cisco would want to build a factory in [insert random US location here] he won't find the 2000 employees needed to get things started.

The cause of offshoring/outsourcing is not labour cost, but labour mobility: the price of labour in electronics is very low, around 5%, but you cannot do without people. Giving better salaries is not a solution. It was tried during the IT bubble but it did not work: the companies got more expensive workers but not in greater numbers, since all competed over the same number of workers, and due to the limitations on immigration the game was a zero sum game. This problem is much more grave in EU than in US (imagine needing a Green Card in order to leave California and find work in Florida) so factories are moved not only to China or Eastern Europe, but even to US.

Of course in the long run it gets you into trouble, but in order to have a "long run", the companies that moved their operations in other countries attempted to have a "short run" first: they would be already dead without the ability to expand.

What's the Difference?

[Doc Ruby]

Other than the brand name on the boxes being fraudulent, what is the difference between this HW and the real Cisco products? If they're even close in quality, then catching these fraudsters will move Chinese manufacturers to market them under their own brands. Then they'll just be violating patents, not trademarks (and copyrights in the manuals). But then they'll be pressured to actually create their own better ways of doing it. Which is actual progress, even if not quite as profitable as the ripoff.

If Chinese counterfeits can get marketed under their own brands, we'll actually have some price competition. And maybe when some American companies get killed by their OEM factories like Japanese manufacturers did to cameras and consumer electronics in the 1970s-80s, we'll see some more caution in shipping all their tech expertise overseas to create their competitors. They might be more likely to consider the less immediate costs of outsourcing from a country where the law (usually) protects things like intellectual property, contracts, labor and the environment.

Or maybe every generation is doomed to watch America squander its hard-won tech leads for the sake of a few years of cheap manufacturing that then eats the parent for lunch.

yeah, right.

[peccary]

One of the operation's goals is to protect the public from network infrastructure failures associated with the counterfeits, the DOJ said. As opposed to network infrastructure failure caused by ships dragging their anchors through the Mediterranean. Or Verizon techs installing crap on their toplevel DNS servers.
No, I think the goal is to protect the corporation. Not that I completely object to these actions, just that it's getting pretty tiresome to see the police always trotting out the public safety angle.