A little over a month ago I wrote about the booming counterfeit Macintosh industry overtaking China. Companies in China are not only producing faux Apple products, they are fabricating the whole Apple experience.
There are dozens of “Apple” stores in China that to the untrained eye appear to be authentic retailers selling bona fide Apple products. While often times the products in these stores are real (they are simply being sold illegally through a third-party retail without explicit permission from Apple), the main concern for Apple is that they are losing large amounts of revenue in one of their most significant emerging markets. According to CNN International: “Apple owns and operates four stores in China. The three in Beijing and the one in Shanghai are Apple’s highest trafficked and top grossing stores in the world.” Apple has a vested interest in ensuring that both their products and their branding remain unique.
A Wikileaks cable released today goes far to showcase the difficulties and challenges Apple is facing in attempting to combat intellectual property theft. The cable shows evidence that Apple was slow to act against the counterfeiting, even after they received credible intelligence that it was occurring. Recently, Apple formed a global security team composed of ex-Pfizer employees who had masterminded an international crackdown on the illegal production and selling of Viagra. This team has been tasked with the duty of finding those producing Apple products illegally and then attempting to sell them.
In an attempt to combat this phenomenon, Apple is sending their newly minted global security team to conduct low-profile raids. However, the success of these operations has been limited. There is a critically damaging number of fake iPods, iPhones and iPads floating around in either stores or makeshift street vending booths.
While the Chinese government was complicit with pharmaceutical companies, they are not affording the same privileges to those in the software and technology industries. According to CNN: “A defective pill could cause sickness or death, a shoddy iPod has less dire consequences.”
The Chinese authorities seem disinclined (to put it nicely) to do anything about these counterfeit product tech breaches, arguing that they are not fundamentally as harmful as counterfeit medicine. However, Apple has a significant problem on their hands. Counterfeit products and stores are continuously compromising a market that is potentially set to become their biggest source of revenue. What is the incentive of paying full price for a product that you can purchase for 50% or more less?
Apple is one of the biggest and flashiest tech retailers in the world, but if even they can’t control production, there are potential problems on the horizon for everyone.
Interactive voice response technology could be duplicated and fabricated by someone with the necessary coding and developer skills. Coupled with the threat of hacking, virtually every company operating in the technology sphere is susceptible to intellectual property theft. China has been thus far unwilling to seriously crack down on this type of technological counterfeiting, leaving the fight primarily in the hands of the companies who own the technology. Only time will tell how this plays out, but in the mean time the market may be potentially saturated with faux, subpar technology products.
