Psst! Want an iPhone real cheap?

At the end of an alley in Taiwan's most violent city, a black Mercedes-Benz sedan blocks a sliding- glass door that opens only from within. Inside, technophiles can buy iPhone knockoffs for two-thirds the legitimate price.

With a touch-screen and Apple Inc.'s logo on the back, the ``iClones'' look just like the real thing. Apple won't offer iPhones -- which combine a phone, music and video player with wireless Internet -- in Asia until 2008. The owner of the shop in Sanchung, near Taipei, says he began selling ``aifungs'' in December, six months before the iPhone went on sale in the U.S.

``We can't ignore iPhone because it's so hot,'' says Ben, who spoke on condition he be identified only by his first name because selling pirated phones is illegal.

The clones show how fast Asian counterfeiters move. Ben says his company designed the fakes from pictures posted on the Internet before Apple Chief Executive Officer Steve Jobs unveiled the iPhone in January. Knockoffs cost the global economy $650 billion annually, the U.S. Chamber of Commerce estimates. Apple spokeswoman Jennifer Bowcock wouldn't discuss how much the company loses as a result of phony products.

``The longer Apple delays, the more the pirates can rip the company off,'' says Chialin Lu, an analyst at Yuanta Core Pacific Securities Co. in Taipei.

jobs hasn't explained the delay. Kevin Chang, an analyst at JPMorgan Chase & Co., says carriers need time to modify their networks for the iPhone's technology.

Cupertino, California-based Apple, which said yesterday it sold its millionth iPhone, intends to fight back.

``We are committed to pursuing counterfeiters and others who steal from us and deceive our customers,'' Bowcock says. On its Web site, Apple asks consumers to report fake hardware to counterfeit@apple.com .

The knockoff phones are produced in batches of 1,000 at a factory in Shenzhen, China, across the border from Hong Kong, says Ben, 26. He advertises his phones on the Internet and sells them for NT$8,900 ($270). On Sept. 5, Jobs cut the price of the top iPhone to $399, a $200 reduction.

Ben says his operation has sold more than 100,000 clones in China, Hong Kong, Singapore, Malaysia, Australia and the U.S.

http://www.bloomberg.com/apps/news?pid=20601109&sid=a7K_I.ifMcEA&refer=exclusive