Will China Mobile Deal Lead to More Fake iPhones?

Consumer Electronics

Published: December 23, 2013 6:41 am

Its deal with China Mobile done, Apple Inc. (NASDAQ: AAPL) and its new carrier partner no doubt will begin a tremendous marketing campaign to press consumer demand for the world’s most famous smartphone. In the process, it will help fake iPhones flourish, which will cost Apple millions, if not tens of millions of dollars. The Apple product is about to become the hot consumer electronics product in the world’s largest nation by population. Why shouldn’t counterfeiters ride along?

Apple has not said what the price of the iPhone will be in China. If its practice in other countries is any evidence, the iPhone will be sold to the high end of the market. The new iPhone 5c will be offered as a lower cost alternative, but based on the retail prices elsewhere, it will not be much of a discount to the iPhone 5s.

Fake versions of the iPhone 5s were available in China long before the actual product was launched, a testament to the ingenuity of the counterfeiters. GooPhone had one of the earliest of these. Ironically, the fake ran Google Inc.’s (NASDAQ: GOOG) Android software, the single most powerful competition to Apple’s iOS. And fake iPhones and their chargers caused a string of injuries earlier this year. Apple reminded Chinese consumers that these products were not its own and actually poised dangers to people who used the bogus products: “Apple always puts the user’s safety first, so all of our products are subject to stringent safety and reliability testing.”

A fake product is almost certainly harder to market when consumers know that the real product is not even available. At that point, fake has to be fake. As real iPhones reach the Chinese market, and sell in the millions, counterfeit versions will allow people to claim they own the iconic product, probably at a fraction of the price of the real one.

There is no single large U.S. electronics or software company selling products in China that has not been the victim of massive counterfeiting. Apple, already facing the practice, will find it even harder to keep fakes out of the market when the real version is available en masse.

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