Having been to China on many occasions in support of business in other industries, I have seen the other side of this discussion. The LED business is different in that it began and matured in 1/10th of the time that the electronic musical instrument industry did, but the pattern or formula is the same...
Here's how the copies and fakes happen...
Westerner looking for manufacturing brings product to China and says "Can you make this?" and more often than not, the amswer is yes. The westerner may be looking to make a legit good of his own, or a copy of something else, or an outright fake, the Chinese don't care - they make what is asked for.
Then, because of the extreme industriousness of the Chinese - they are light years more competitive and capitalist than the US by the way - other companies will see what Mfr A is making and think "I must do this too". If the Chinese are guilty copying anybody, it's usually other Chinese. There is a very "me too" mindset to manufacturing. If the first one has a flaw then the copies will too, for example.
Because manufacturing tools are cheap and plentiful and because they can quickly start a new factory - often with government subsidy or encouragement to create employment and trade - you get whole towns of "me too" factories.
To many, there is little difference in making an electric bass or a Fender counterfeit, it's the same thing - both are copies to their mind. Before the internet, it was much more difficult to find goods to copy and required the introduction by a western foreigner. This activity has been going on for several decades, but the new easy access to both designs and to customers through the internet is making it happen on a far more accelerated timeline than ever.
In any case, I need to make clear that China is capable of making any product in any quality level, including anything that meets or exceeds what we consider high quality... but they will only produce what they are paid for. If buyers go over there negotiating every penny out of the price of a good, they will be getting low cost and low quality goods that fill our western need for cheap, disposable goods.
If you go over there with money and demand for high quality product, you can get that too. It's breathtaking sometimes to go to China and see all the new airports and bridges and subway lines and shopping malls that would put America to shame, and I'm being dead serious. China can make extremely high tech, high quality items - but what they make and sell is exactly what the customer wants.
If there is no customer, there is no factory.
Now, there are many manufacturers who understand things like confidentiality, exclusivity of design, etc... and they work honorably because it's in their interest to do so. The factory making Fenders will not make you a Fender copy, nor will they sell them out the back door at night. Believe me, the knockoff Fenders and Gibsons and now the Nordy are NOT being made at the same factory as the real things, or at the Cort/Samick type factories that make licensed goods. These fakes are made in low tier factories that are not answerable to the known brands and could not lose their meal ticket by double dealing.
These 'wild west' private shops can make a range of goods from absolute crap to absolutely glorious guitars. Again, they make exactly what their customer wants. I have seen them first hand and many times had to shake my head at either the raw junk or the jaw dropping quality.
I'm sitting in an Asian hotel right now, in the 2nd country of this trip, and going to see I think my 8th factory tomorrow after attending a trade show where thousands of factories were showing off their goods. The big brand names were there, their subcontractors were there, and the "me too, wild west factories" were there as well. It's an eye opening thing when the curtain is pulled back and you get to see the inside of a particular trade or industry and realize your previous level of ignorance and naivete as a consumer.
In summary - even though I've probably forgotten many things I intended to include - it's really not reasonable for us to be on a high horse and expect them to stay poor at our expense. Rather than open up all borders to all people in order to create more equality and/or allow more people to live a higher standard of life, the better way is to allow globalization and trade to more slowly create more equilibrium of wealth by willing parties working from both ends towards the middle... but never to actually get there. Inequality is actually necessary, it just shouldn't be extreme.
This sounds terrible to those who dislike the erosion of their manufacturing base, their local jobs, etc... but things settle into a workable state at some point on their own whether it be between town, or states, or countries. Government protectionism or interference should be kept to an absolute minimum and closing borders in todays world would hurt a nation far more than it would help it. They key is to find some workable balance between domestic and offshore manufacturing and service. There will always be a strong market for the domestic good at a higher price and there will be an even larger market - in terms of volume if not in gross dollar value - of lower cost goods that allow all people to access goods to make their lives better.
If you've never bought a $99 cordless drill, $39 bed sheets or $9 baby toy then good for you. You are entitled to your high horse. I prefer not to pretend I'm too good for these things and look at the world in a more nuanced way. I make choices about shopping domestic vs offshore and I understand what those decisions mean, rather than take on some faux nationalistic pride only when it suits me to appear to be doing so. I drive a Ford made 10 miles from where I live, have about a dozen MIJ Fenders and my condo has several items from Ikea mixed in with the artisan type stuff I choose to furnish or decorate with. My building was designed by a Chinese architect who won a global competition.
It's a more complicated world than most people like to think.
/spiel
