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"How China Systematically Pries Technology From U.S. Companies" (WSJ)


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hey all:


This has been going for a lot longer than most people realize.




The ways it can be done are truly staggering.


For example, some years ago, I got some "fake" Cisco switch modules.  How in the world could somebody fake high tech circuit boards and related things?  At first, I though it was totally impossible.  I thought IP theft was Nigerians selling fake hats in Times Square and videotaping movies in theatres.


I was very wrong.


One thing that was truly impressive in it's wile was how the fake Cisco takes place...


One method is that mid level managers at the assembly company come in at midnight with a few trusted workers and will "work off the books".  When they do so, they take returns, defective goods, WIP that didn't pass quality control and such, and will rework it to the best of their abilities and then pass it off as "good" stuff.  Unless you are technician and know EXACTLY what to look for, you would not realize it until the piece craps out.


Some of the companies I dealt with had long ago moved most manufacturing to China...a few years ago, they even started moving product design and engineering there too.  A huge mistake I think...


American politicians and company management has been too weak minded & downright stupid for too long a period of time.

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These are really good stories to read and think about. 


I may dislike the Chinese for doing it, but I must admit that their strategy of trading domestic market access for IP with foreign firms was genius.  I’m reasonably certain that that was a significant, if not dominant, contributor to their recent economic success. 


Going forward though, I’d expect foreign firms (the best ones at least) to wisen up and come up with better ways of protecting their IP. 


This all reminds me of a moment (around 2011?) when I was looking at AAPL and had questions about how secure their IP really was from the Chinese, given how virtually all of their devices were assembled there.  But then I read a story somewhere about how Apple actually manufactures the most critical precision machines and tools that workers at Foxconn use to assemble their iPhones.  That adds a nice layer of protection.  It also helps that they have a number companies in Korea and Japan, as opposed to say one single company in China, produce their key components. 


I know Trump is trying to help with his tariffs and everything but in the long run I think the best American companies will do just fine even if his tactics fail. 

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Yes, a lot of high tech fakes from China are inside jobs. But who is to blame here, the Chinese government or the companies that have totally given up the control of their supply chain? The culture in China is well known and nothing new. For the most part, these companies have to blame themselves, imo.  This wouldn’t happen, if the companies outsourcing would control their suppliers and supply chain and lock them down. I think the Europeans understand this better. There is the issue with reverse engineered products (cars, luxury good ubiquitous fake watches etc.) that the Chinese government could restrict, but these inside jobs are the western companies fault, imo.

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But these are perfectly good reasons for retaliatory tariffs on China - as they do not protect US producers and have been

stealing US intellectual property for years, both here and in China.


If Chinese IP was stolen by US companies in the USA - the US company or individuals would be prosecuted and protected by our government.

We are a nation of laws and respect the rights of others.  The Chinese are not.


Trump is using his leverage and doing the right thing.

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