Apple’s iPhone isn’t made in China, it’s made everywhere. Apple’s iPhone may be calculated as a Chinese import, because it is finished in China after a long procession around the world through Apple’s global supply chain, but most of the money that Americans spend on iPhones doesn’t travel far from home. Fred P. Hochberg uses iPhone as a prime example of how America’s trade deficit with China is artificially and substantially inflated, simply because China often happens to be place of final assembly.
The iPhone was invented and designed in America, is powered by Central African minerals and is brought to life by European and Asian technologies, but both the World Trade Organization and the U.S. nevertheless classify it as a 100% Chinese export… The iPhone’s assembly is largely handled by the Taiwanese company Foxconn Technology Group, the world’s largest contract manufacturer of electronics. According to Reuters, that final assembly is estimated to represent just 3-6% of the cost of building each phone, or about $10 to $20 for every iPhone X…
In 2017, just over 69 million iPhones were sold in America. Because the trade deficit is calculated using factory costs—an estimated $230 per iPhone — rather than retail prices, iPhones would contribute about $16 billion to the U.S. trade deficit with China…
Yet every time a $999 iPhone gets sold to a U.S. customer, that money doesn’t get wired directly to Beijing. The global information provider IHS Markit estimates that for every iPhone X that gets sold, $110 is sent to Samsung, the South Korean conglomerate that makes iPhone displays… Another $44.45 finds its way to the iPhone’s memory chip suppliers: Toshiba Corp. of Japan and SK Hynix Inc. of South Korea. A little money goes to Singapore; a little goes to Brazil; a little goes to Italy; and a little goes to Corning, N.Y. The vast majority of those dollars go to Apple Park in Cupertino, Calif., while China earns only an estimated $8.46 for the labor and parts that it supplies.
MacDailyNews Take: As Hochberg writes, “American audio chips, Korean batteries, Congolese minerals, Japanese cameras, German accelerometers: The iPhone may well be the most truly global product yet.”
In March 2018, John Wu, an economic analyst with a U.S.-based think tank, the Information & Innovation Foundation, told Reuters, “With an iPhone, where China is just the final assembler, most of the value (contributed by China) is just the labor rather than the components themselves.”
We are building things in the United States and it’s not true that the iPhone isn’t built in the United States… There are components of iPhone built in the United States. The glass is from Kentucky. Many chips, silicon chips, are made form all over the United States… The very sophisticated Face ID module… [is] made in the United States in Texas… We have always made many of the parts here. What people fixate on, because it think it’s just a misunderstanding, is that they just see where the final product is assembled and say “Oh, that is not done in the U.S.” In a global world you begin to do things in a variety of countries… We know that Apple could only have been created in the United States. This company would not have started in any other country in the world. It would not have flourished in any other country in the world… We love this country. We’re a patriot. This is our country. We want to create as many jobs as possible in the U.S. We don’t need any political pressure to do that. We’ve already been doing this. — Apple CEO Tim Cook, April 2018
I’m cognizant that in both the U.S. and China, there have been cases where everyone hasn’t benefited, where the benefit hasn’t been balanced. My belief is that one plus one equals three. The pie gets larger, working together. — Apple CEO Tim Cook, March 24, 2018
At least half of the popular fallacies about economics come from assuming that economic activity is a zero-sum game, in which what is gained by someone is lost by someone else. But transactions would not continue unless both sides gained, whether in international trade, employment, or renting an apartment. — Thomas Sowell, June 14, 2006