Girl vs Robot: Easy Money
For almost any product and brand you may have in your home, there is a Chinese clone out there somewhere in Asia. Common wisdom is that these are cheap knock-offs, but many of them are in fact exact duplicates that come from the exact same factories; a side-effect of offshoring.
Although one may first think of the last profits from these name-brand knock-offs, the real implications are much worse for American business than a few pirate iPhones.
Chinese started running shadow shifts in factories contracted to product name-brand products years ago. The factory starts running 24/7 but doesn’t ship finished product any faster than the agreed date. When the regular production stops inferior and sometimes even the exact same materials are used to create duplicates that are then sold in the extremely profitable and extremely large black market for cloned goods.
This sort of thing isn’t limited to simply excess capacity either. Entire factories have been duplicated and churn out exact duplicates of the brand name product with a name-plate change at best. In many cases the brand name stays the same, and consumers never know the difference.
This sort of thing used to only happen with components. There was a scandal a few years back when it was revealed a supplier for a major cellphone manufacturer had used counterfeit batteries of inferior quality, massive recalls followed. These days, you may buy a DVD player through a completely legitimate retailer who purchased it from a completely legitimate importer, who purchased it under false pretenses from a supplier.
In one extreme and brazen case, a company in China duplicated the entire operation of NEC, a computer component manufacturer. When the actual company started receiving complaints about types of products they didn’t even produce, they started digging and found factories with the NEC logo in giant lighted letters out front pumping out products in no way associated with the real NEC. The company responsible had build distribution networks, had NEC business cards and email addresses, and even charged royalties for NEC patented technology licensed to manufacturers.
Foreign companies have had difficulty dealing with this phenomena. NEC shut down the operation mentioned above, though counterfeit NEC products still flow. Chevy eventually struck a deal to have Chery produce a real version of a popular low-range sedan that Chery had been cloning. Some companies have tried offshoring just the non-vital parts of their products but cloners often duplicate what’s missing in a couple of months, writing software based on linux to mimic proprietary systems and reverse-engineering circuit boards based on purchased examples.
Mostly though, companies just accept it if the clones don’t enter the American and European markets. American industry still has a blind spot for the global market. They like to sell globally when it’s easy, but are amazed and surprised if a product ever takes off outside of the US and EU. Judging by the shocked tone and air of discovery infesting articles on global retail markets in popular business publications, most American businessmen consider the global market to be a mysterious and small pond, hardly worth real consideration.
Maybe this is why that despite the fact everyone knows about the cloning mentioned above, American companies still think it is a good long-term business move to offshore production and even engineering.
China recently announced a new state-owned company is being created to act as a competitor to Boeing and Airbus. The typical western business reaction ensued. "Analysts" were noted expressing skepticism that China could compete given its limited experience with big aircraft. At the same time, both Airbus and Boeing are moving more and more of their manufacture and even design to China. Put these to stories together and add in a dash of the information I provided above and I’m sure you can guess how much trouble China may or may not have producing aircraft equivalent to Airbus and Boeing.
So let’s all give a cheer for short-term profits and take bets on how long it will be before Chinese companies cut out the American executive "middle men" and start offering superior products are lower prices, having taken the best of the technology Americans have been giving to China on a silver platter.
It’s going to be the eighties and the Japanese scare all over again, but America has been slashing research and offshoring so much talent I don’t know that we can expect a new industry of our own creation to fill the void. Green tech? Space? Biologicals? Other areas are already breathing down our neck on all of those. As long as American business keeps chasing next-quarter’s profits instead of long-term stability and research, the outlook is dim.
links: China's iClone- - -Will Boeing move to Beijing?- - -China Establishes Boeing/Airbus Competitor