Apple Inc. (NASDAQ:AAPL) Winning Clone War in China

Police in Beijing have busted a factory that produced more than 41,000 fake Apple Inc. (NASDAQ:AAPL) iPhones worth as much as 120 million yuan (19 million), including some that reached the United States, and have arrested nine suspects in the counterfeiting operation. Apple Inc. (NASDAQ:AAPL) is one of the most popular brands in China, where authorities have stepped up efforts in recent years to dispel the country’s reputation for turning out counterfeit goods.

Officials have taken stiffer action to enforce intellectual property (IP) rights, pushed firms to apply for trademarks and patents and cracked down on fakes. Police arrested nine people, including a married couple who led the operation, after a raid in May on the factory, run under the guise of a gadget maintenance shop on the northern outskirts of the Chinese capital.

The details were revealed in a social media posting on Sunday by the public security bureau in Beijing. The group, headed by a 43-year old man, surnamed Yu, and his 40- year old wife, surnamed Xie, both from the southern hardware manufacturing city of Shenzhen, allegedly set up the Beijing factory with six assembly lines in January, the bureau said. They hired “hundreds” of workers to repackage second-hand smartphone components as Apple Inc. (NASDAQ:AAPL) iPhones for export, it added. Police seized 1,400 handsets and large quantities of accessories during the May 14 raid.

In the United States, the newest Apple Inc. (NASDAQ:AAPL) handsets can fetch 649, or more, depending on the model. Beijing police said their investigation followed a tip-off from U.S. authorities who seized some of the fake devices. The destination of the counterfeit phones, and how many made it there, remains unknown. Public security representatives declined to comment on Monday, telling Reuters they had no additional information. Apple also declined to comment, saying the investigation was ongoing. It is not the first time China has uncovered plots to exploit the popularity of Apple products.

In 2011, bloggers in the southwestern city of Kunming discovered more than a dozen unauthorized brick-and-mortar outlets that carefully replicated the interior decor, and even employee uniforms, used in genuine Apple stores. The viral pictures embarrassed officials, who vowed to do more to protect trademarks.

Apple Inc. (Apple), incorporated on January 3, 1977, designs, manufactures and markets mobile communication and media devices, personal computers and portable digital music players and sells a variety of related software, services, peripherals, networking solutions and third-party digital content and applications. The Company’s products and services include iPhone, iPad, Mac, iPod, Apple TV, a portfolio of consumer and professional software applications, the iOS and OS X operating systems, iCloud and a variety of accessory, service and support offerings. The Company offers a range of mobile communication and media devices, personal computing products and portable digital music players, as well as a variety of related software, services, peripherals, networking solutions and third-party hardware and software products. In addition, the Company offers its own software products, including iOS, the Company’s mobile operating system; OS X, the Company’s Mac operating system; and server and application software. The Company’s primary products include iPhone, iPad, Mac, iPod, iTunes, Mac App Store, iCloud, Operating System Software, Application Software and Other Application Software.

iPhone

iPhone combines a mobile phone, an iPod and an Internet communications device in a single handheld product. Based on the Company’s Multi-Touch user interface, iPhone features desktop-class email, Web browsing, searching and maps and is compatible with both Mac and Windows-based computers. iPhone automatically syncs content from users’ iTunes libraries, as well as contacts, bookmarks and email accounts. iPhone allows customers to access the iTunes Store to download audio and video files, as well as a variety of other digital content and applications. The Company launched iPhone 5, its latest version of iPhone. In addition to the Company’s own iPhone accessories, third-party iPhone compatible accessories are available through the Company’s online and retail stores and from third parties.

iPad

iPad is a multi-purpose mobile device for browsing the Web, reading and sending email, viewing photos, watching videos, listening to music, playing games, reading e-books and more. iPad is based on the Company’s Multi-Touch technology and allows customers to connect with their applications and content in a more interactive way. iPad allows customers to access the iTunes Store to download audio and video files, as well as a variety of other digital content and applications. In addition to the Company’s own iPad accessories, third-party iPad compatible accessories are available through the Company’s online and retail stores and from third parties.

Mac

The Company offers a range of personal computing products, including desktop and portable computers, related devices and peripherals and third-party hardware products. The Company’s Mac desktop and portable systems feature Intel microprocessors, the OS X operating system and the iLife suite of software for creation and management of digital photography, music, movies, DVDs and Websites. The Company’s desktop computers include iMac, Mac Pro and Mac mini. The Company’s portable computers include MacBook Pro and MacBook Air.

iPod

The Company’s iPod line of portable digital music and media players includes iPod touch, iPod nano, iPod shuffle and iPod classic. All iPods work with iTunes. In addition to the Company’s own iPod accessories, third-party iPod-compatible accessories are available through the Company’s online and retail stores and from third parties. The iPod touch, based on iOS, is a flash-memory-based iPod with a widescreen Retina display, a Multi-Touch user interface and built-in iSight camera. iPod touch allows customers to access the iTunes Store to download audio and video content, as well as a variety of digital applications. The iPod nano is a flash-memory-based iPod that features the Company’s Multi-Touch interface allowing customers to navigate their music collection by tapping or swiping the display and built-in Bluetooth for wireless listening. The iPod shuffle is a flash-memory- based iPod that features a clickable control pad to control music playback and VoiceOver technology enabling customers to hear song titles, artists and playlist names. The iPod classic is a hard-drive based portable digital music and video player.

iTunes

iTunes is an application that supports the purchase, download, organization and playback of digital audio and video files and is available for both Mac and Windows-based computers. iTunes features integration with iCloud, AirPlay wireless music playback, Genius Mixes, Home Sharing and syncing functionality with iOS devices. iTunes is integrated with the iTunes Store, a service that allows customers to discover, purchase, rent and download digital content and applications. The iTunes Store includes the App Store and iBookstore.

Mac App Store

The Mac App Store allows customers to discover, download and install Mac applications. The Mac App Store offers applications in education, games, graphics and design, lifestyle, productivity, utilities and other categories. The Company’s OS X operating system software and its iLife, iWork and other application software titles are also available on the Mac App Store.

iCloud

iCloud is the Company’s cloud service, which stores music, photos, applications, contacts, calendars and documents and wirelessly pushes them to multiple iOS devices, Mac and Windows-based computers. iCloud’s features include iTunes in the Cloud, Photo Stream, Documents in the Cloud, Contacts, Calendar, Mail, automatic downloads and purchase history for applications and iBooks and iCloud Backup. Users can sign up for free access to iCloud using a device running qualifying versions of iOS or OS X. Software Products and Operating System Software The Company offers a range of software products for consumers and for SMB, education, enterprise and government customers, including the Company’s iOS and OS X operating system software; server software; professional application software; and consumer, education and business oriented application software. iOS is the Company’s mobile operating system that serves as the foundation for iOS devices. iOS supports iCloud and includes features, such as Notification Center, a way to view and manage notifications in one place; iMessage, a messaging service that allows users to send text messages, photos and videos between iOS devices and Maps, with turn-by-turn navigation. iOS supports Siri, a voice activated intelligent assistant, which is available on qualifying iOS devices. OS X, the Company’s Mac operating system, is built on an open-source UNIX-based foundation. Application Software iLife is the Company’s consumer-oriented digital lifestyle application suite included with all Mac computers. iLife features iPhoto, iMovie, iDigital Versatile Disc (DVD), GarageBand and iWeb. iPhoto is the Company’s consumer-oriented digital photo application and iMovie is the Company’s consumer-oriented digital video editing software application. iDVD is the Company’s consumer-oriented software application that enables customers to turn iMovie files, QuickTime files and digital pictures into interactive DVDs. GarageBand is the Company’s consumer-oriented music creation application that allows customers to play, record and create music. iWeb allows customers to create online photo albums, blogs and podcasts and to customize websites using editing tools. iWork is the Company’s integrated productivity suite designed to help users create, present and publish documents, presentations and spreadsheets. iWork includes Pages for word processing and page layout, Keynote for presentations and Numbers for spreadsheets. The Company also has a Multi-Touch version of each iWork application designed specifically for use on iOS devices.

Other Application Software

The Company also sells various other application software including Final Cut Pro, Logic Studio, Logic Pro and its FileMaker Pro database software. The Company manufactures the Apple LED Cinema Display and Thunderbolt Display. The Company also sells a range of Apple-branded and third-party Mac-compatible and iOS-compatible peripheral products, including printers, storage devices, computer memory, digital video and still cameras and various other computing products and supplies. Apple TV allows customers to watch movies and television shows on their high definition television. Content from iTunes, Netflix, YouTube and Flickr, as well as music, photos, videos and podcasts from a Mac or Windows-based computer can also be wirelessly streamed to a television through Apple TV.

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