iPad smuggling highlights tech disparity in Asia

Recent reports of opportunists snapping up the new iPad to sell them for a profit in China only serves to highlight the tech disparity in parts of Asia.

A wire story on Reuters made its rounds over the weekend, narrating an account of how opportunists are queuing up to purchase the new Apple iPad on launch day. Once acquired, the latest iteration of Apple's wildly popular tablet is immediately shipped to China - where the tablet is not yet available. According to the report, an entry-level 16GB iPad that costs about $540 in San Francisco (including tax) can be sold for more than $1,000 in Shanghai the next day.

That's a pretty hefty payoff, considering that each smuggler will typically pay others to stand in line at Apple stores to purchase dozens of tablets; each tablet is then shipped back for as little as $12 via a Chinese shipping agent. Multiply the profits by a thousand units or so, and it is easy to see why the Chinese customs has imposed a 10% import duty on it.

A matter of product availability

If anything, this ironical return of a product manufactured in China and shipped to the U.S. underscores the issue of tech disparity in Asia. Despite rapid modernization, it often takes some time for the latest IT hardware or gear to make its way to less urbanized swathes of the region - outside of certain countries such as Japan, South Korea, Taiwan and Singapore, that is. In many cases, they never become available. This leads to a double blow as the reduced selection actually drive prices upwards.

The reason for the higher prices varies, and range from the lack of demand to local retailers who try to maximize their profit margins. For the former, the most likely scenario is like that of unaffordability, which may discourage manufacturers from shipping to a particular region, or curtail the units they can expect to sell - both of which results in a higher markup.  For example, when I purchased an Ergotron monitor arm (Subsequently reviewed on TechRepublic) in Singapore a couple of years back, I was quoted prices almost twice what was offered on Amazon.

Thriving second hand market

The high prices mean that users are more amenable to the purchase of used goods, which are often traded without any warranty other than the word of the person who sold it to you. This has resulted in a burgeoning market for the buying and selling of consumer gadgets with short-life spans - especially smartphones and mobile phones. On the first few days after the iPhone 4S was launched in Singapore for example, resale channels were offering to buy them at rates of up to 10% higher than official retail prices. I was told that these smartphones are in turn acquired by an exporter who will ship them to neighboring regions - and still make a profit from their sales.

While the huge amount of interest generated by the iPhone and iPad served to cast the spotlight on the movements of tech hardware, the situation is certainly not limited to Apple products. As noted in my anecdote above, gaps in availability is fueling a trade in high-tech consumer products. Indeed, spend a day strolling through the departure halls of the Singapore Changi Airport and you will see scores of tourists carting off various electronic devices and gadgets. And yes, 40-inch LCD televisions are a particular favorite.


The lesson here for businesses setting up branches in Asia is that they must be cognizant about the varying availability of the latest tech products across various countries in Asia - or even provinces within the same country. And unlike the United States where free shipping is widely available, the same is not generally true in Asia.

Ultimately, the infiltration of technology is an inexorable process, and you can expect it to eventually make its way into even the most remote regions. Till then, expect to pay higher prices, or be content with buying from resale channels.