$3 multi-core ARM with 8MB RAM and 4MB EEPROM?

At qty 1, you can buy a Mediatek multi-core ARM chip with 4 dies for $3 in Shenzhen, China. So how do you compete with that?

Watch this quite interesting talk by Bunnie, who explains how the Chinese view on IP makes this possible and how this could (theoretically) be transferred to the west:

Very interesting talk. Highly recommended as inspiration. This $3 multi-core ARM processor is really just an example, but it shows what we are up against.

There is a text version of the same thing on his blog.

China is both a very strong competitor and great for inspiration – we need to work with China but also need to learn how to deal with China in a way that is for the benefit of all. We need a much more open discussion about this and how we can use the things that happen below our professional radar in a clever way. There is more “ARM inspiration” here, among other things, if you are in the mood for thinking along these lines.

Let me know what you think? Can we in the west compete while playing by the traditional IP rules, or do we need to revise that?