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European Report on Economic Effects of Counterfeit Smart Phones

The European Observatory on infringements of Intellectual Property Rights – the EUIPO – recently published its report studying the economic effects of counterfeit smart phones in the legitimate sector (the Report). The Report was prepared with the collaboration of the United Nations’ specialist agency on information and communication technologies, namely the International Telecommunication Union.

As an overview of the global smartphone market, the Report indicates that 1.3 billion smartphones were sold in 2015 globally. Sales in mainland China represented 30% of worldwide sales and 385 million units, while in Europe 150 million units were sold in 2015. The global value of devices sold in 2015 amounted to € 352 billion with an average nonsubsidised price of € 275 per unit.

The Report estimates that counterfeiting caused the legitimate industry in Europe 14 million smartphone sales fewer in 2015, which is equivalent to a value of € 4.2 billion and a volume of 8.3% of the sector’s total sales across the region.

Among the EU Member States, Romania and Bulgaria faced the biggest percentage of lost sales, by 19.1% and 17.2%, respectively. Least affected countries, on the other hand, were Denmark (4.9%) and the Netherlands (5%).

In absolute terms, the greatest impact was observed in Italy, the UK and Germany, where estimated lost sales amounted to € 885 million, € 660 million, and € 564 million, respectively.

Moreover, the loss amounted to € 45.3 billion worldwide, translated to 12.9% of total sales, in 2015. In the Asia-Pacific region (except mainland China) and the ASEAN countries, the losses represented 11.8% and 16.9% of total sales, respectively. Lost sales in mainland China, in its turn, were 15.6% of total sales therein, which also accounted for 36% of worldwide lost sales. In other European countries that are not members of the EU, lost sales represented 12.9% of the total sales.

The Report also outlines the non-economic consequences of counterfeit smartphones. In this respect, the Report makes reference to a recent study prepared by the International Telecommunication Union which draws attention to the following non-economic effects of counterfeit mobile devices:

  • Lowering the quality of service of mobile telecommunication services;
  • Creating a safety hazard for consumers due to use of defective or inadequate components or materials;
  • Concerns due to cybersecurity-related threats, consumer privacy, and the safety of digital transactions;
  • Non-provision of warranties to consumers and violation of consumer law rules;
  • Concerns relating to environmental damage and consumer health due to the use of hazardous substances in manufacturing.

The Report also emphasises that these effects pose particular threats in Africa since many consumers rely on smartphones to a greater extent when compared with Europe and North America. Moreover, smartphones are often the only way for internet access and banking services for that region.

The Report’s findings are even more important considering that the EUIPO published  a recent study, prepared in collaboration with the European Patent Office, in which IPR-intensive industries are estimated to generate, in approximate terms, 42% of total economic activity and 28% of all employment in the EU.

Please click on the following links to access the full version of the Report.

Content provided by Picture: HKTDC Research
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