Apple iPhone Knock-Offs Become Big Business

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The Chinese seems to be quite good at copying Western products, and, as it turns out, the Apple (AAPL) iPhone is no exception.

Bloomberg found that some of the counterfeit handsets had been made in Taiwan using pictures of the iPhone that AAPL had posted online. The news service also found "the knockoff phones are produced in batches of 1,000 at a factory in Shenzhen, China."

The fake iPhone are apparently not very hard to build and priced well below the real thing. `The longer Apple delays, the more the pirates can rip the company off,” says Chialin Lu, an analyst at Yuanta Core Pacific Securities Co. in Taipei.

Bloomberg also notes that the fakes have an advantage: "While the knockoffs resemble iPhones, they don’t use Apple software. Ben says his phones have the advantage of working on any network, while iPhones connect only to AT&T Inc.’s system."

Apple may well find out that Asia, especially China, has a way of sucking huge profits out of many products sold globally. Microsoft (MSFT) estimates than more that 85% of the Window OS copies sold in China are counterfeit. Jobs & Co. will end up leaving a lot of money on the table there, but there is almost nothing that they can do.

Douglas A. McIntyre