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Foxconn suicide turns spotlight on China counterfeiting
Thu Jul 30, 2009 8:31pm EDT
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By Don Durfee
HONG KONG (Reuters) - One week after the apparent suicide of a Chinese factory worker accused of stealing a carefully guarded Apple iPhone prototype, one question remains unanswered: what happened to the missing phone?
Sun Danyong, the 25-year-old suicide victim who worked at contract cellphone maker Foxconn International's massive gray and white factory complex in Dongguan, had 16 prototypes of Apple's new fourth-generation iPhone in his possession, according to the Taiwanese company.
When one went missing, Foxconn's security guards raided his apartment, according to a report in the People's Daily. The phone didn't turn up.
A likely answer, according to security experts, is that the device ended up in the hands of Shenzhen's notoriously entrepreneurial counterfeiters.
"The copying of prototypes certainly happens a lot in the electronics and IT industries," said Dane Chamorro, a regional general manager with Control Risks, a corporate investigations consulting firm. "You don't have to steal them, you just have to borrow one for a day."
A Foxconn representative wasn't available for comment. The company is a supplier to top brands such as Motorola, Nokia and Sony Ericsson.
In an earlier interview with the New York Times, Foxconn's general manager for China said that Mr. Sun had previously lost products "several times" before getting them back again.
Apple computer, whose popular iPhone is widely copied in China, isn't the only foreign handset maker to suffer at the hands of counterfeiters. Knock-offs of Samsung, Nokia and Motorola products are all sold openly throughout China.
According to U.S. Customs and Border Protection, 81 percent of all counterfeit goods seized at the U.S. border were from China. The value of those goods rose 40 percent in 2008, to $221.7 million.
"Mainland China is the riskiest place for foreign firms to introduce their leading-edge technologies," said Steve Vickers, president of Hong Kong-based FTI-International Risk. "It remains a major problem."
A recent visit to the Golconda Cyber Plaza, a sprawling electronics mall in Shenzhen, suggests the scale of the challenge. Hundreds of vendors were showing off their knock-off mobile phones, including counterfeit Nokia and Samsung handsets, and the latest Apple iPhone, which was selling for about US$63, far cheaper than the US$579 charged on Apple's Hong Kong online store.
"The iPhone quality is good and quite steady," said Li Jinhui, a salesperson with Shenzhen Guanghui Communication, one of the phone sellers, pointing at one of the counterfeit phones on display. "The real phone price is too expensive, so many people buy this instead."
The copying takes several forms. In some cases, companies copy phones already on the market. In others, local suppliers of foreign companies run extra shifts and sell the surplus goods on the side. Then there are the designs that get stolen even before production.
This last form may be the most damaging, since it undermines costly efforts to build anticipation about upcoming products. Continued...
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