Here is Exhibit A. China is using Linux to mass-produce some very high-end mobile phones, due for launch next year.
As you can see from the picture (right, from LinuxDevices) this is a brick-type phone that looks like a cross between a Nokia and a Sony-Ericsson. But it's designed to run on a China-proprietary 3G network, it's got a camera that can do video, and there's a media player in there, too.
There's still some Western know-how in it. It runs on a TI chip, and the embedded Linux is Otopia, from Trolltech, which is based in Oslo. It will also run the Opera Web browser.
But here's the point. This is a Chinese design that's as good or better than anything an American company can come up with.
Linux offers a clean slate on which manufacturing efficiencies can be built without heavy payments for older software copyright. At that point victory goes to the most efficient engineering, and while I may be wrong it looks from here that our lead in that area is now gone.
But what is your view?