Cisco Systems has raided a major counterfeiter of its networking products in Guangzhou, seizing more than 400 to 500 router modules worth more than US$1 million.

Officers from the Technical Service and Public Security bureaus, acting in concert with Hong Kong-based private investigators employed by Cisco, raided factories in three locations in Guangzhou on Tuesday.

Two people were arrested.

In June, raids on seven factories in Shenzhen and Guangzhou resulted in the seizure of more than US$2 million worth of pirated products. Terry Alberstein, Cisco's Asia-Pacific corporate affairs director, confirmed the raids yesterday, saying "a significant amount of counterfeit Cisco hardware was seized by the mainland authorities".

"We are very pleased with the support we've been receiving from the authorities there. They seem to be taking the matter seriously," Mr Alberstein said. "It's all part of an increased effort on our part to eliminate the counterfeiting of our products.

"As long as counterfeiting activity takes place, we'll be keenly interested in finding out about it and doing anything we can to eliminate it."

The raided factories were operated by a well-organised Chinese pirating syndicate, similar to one that was busted in June and that turned out high-quality network hardware, manuals and packaging.

The syndicate sold the products to established Cisco customers on the mainland - and even extended them guarantees.

Investigators believe that about 5 per cent of the pirated production was exported to other markets.

"It was a neat operation," said an investigative source involved in the raids. "If there was anything wrong with the modules, buyers could bring them back to the factory for repair."

The syndicate, which is believed to have made US$1 million to $3 million a year selling pirated Cisco products over the past three years, marketed the products over the Internet.

It sold them at Cisco prices to customers who did not recognise the fraud and at discounts to customers who knew exactly what they were buying.

Customers included companies of every size and even local hospitals. "The quality of the products was quite good," said the investigator. "Some customers were not able to tell the difference until something went wrong and they brought the modules in for repair."