Designed in California, made in China: how the iPhone skews US trade deficit – Tech News

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Apple Inc's iPhone illustrates how a big portion of that trade imbalance is due to imports of American-branded products – many of which use global suppliers for parts but are put together in China and shipped around the world. — Reuters

SHANGHAI: US President Donald Trump often tweets from his iPhone about pressuring China to address its US $ 375bil (RM1.46tril) trade surplus with the United States. But a closer look at the Apple smartphone reveals how the headline figure is distorted.

The big trade imbalance – at the heart of a potential trade war, with Trump expected to impose. of electrical goods and technology, the biggest US import item from China.

Apple Inc's iPhone, however, beautiful (19659002) Take I look at the iPhone X. IHS Markit estimates its components for a total of US $ 370.25 (RM1,449.16). Of that, US $ 110 (RM430.54) goes to Samsung Electronics in South Korea for supplying displays. Another US $ 44.45 (RM173.98) goes to Japan's Toshiba Corp and South Korea's SK Hynix for memory chips.

Other suppliers from Taiwan, the United States and Europe Foxconn, represents only an estimated 3% to 6% of the manufacturing cost.

Current trade statistics, however, most of the manufacturing cost in China's export numbers, which has been prompted by global bodies like the World Trade Organization that includes where value is added.

The impact on export data of just the iPhone could be major.

Apple shipped 61 million iPhones to the United States last year, data from researchers Counterpoint and IHS Markit show, spending US $ 258 (RM1,009.81) on average to make each iPhone 7 and 7 Plus.

Using a rough calculation, that implied the iPhone 7 series added US $ 15.7bil (RM61.45bil) to the US trade deficit with China last year, abou t 4.4% of the total. That's also about 22% of the US $ 70bil (RM274.02bil) in cellphones and household goods the US imported from China.

“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, “said John Wu, an economic analyst with the US-based think tank, the Information & Innovation Foundation.

Louis Kuijs, head of Asia economics at Oxford Economics, notes that US companies' using global supply chains to manufacture products in China means other economies would be caught in the crossfire of a trade war.

“That is an important reason why US-China trade friction will cause 'collateral damage,' especially other Asian economies, “he said, adding that in value added terms, the US trade deficit with China was only US $ 239bil (RM935.58bil) last year, 36% lower than the headline number.

For its part, Apple has responded to Trump's concerns with a pledge to bring some su ppliers to the United States. It was planned to pay US $ 55bil (RM215.30bil) to US suppliers this year.

Designed in California

Over the last decade, Apple shipped 373 million iPhones, worth US $ 101bil (RM395.37bil ) by manufacturing value, in the United States, according to the researcher StrategyAnalytics.

The iPhone's contribution to the US trade deficit is almost certain to have grown sharply alongside higher retail prices and shipments.

But the manufacturing value does not include the intellectual property value Cupertino, California, as well as margins.

The iPhone X has a manufacturing cost of about US $ 400 (RM1,565), an US $ 800 (RM3,131) wholesale cost, and a US $ 1,200 (RM4, 697) retail unsubsidized cost, according to analysts.

Siri, Apple's “digital assistant,” reflects the challenge of knowing exactly where the value of an iPhone comes from – even if it's put together in China. If users ask Siri where she is from, the response is: “Like it says on the box … I was designed by Apple in California.”

The closely intertwined manufacturing environment has had to be warned that a trade war would be painful for all sides.

Forty-five US trade unions representing some of the largest US tariffs on China , warning it would be “particularly harmful” to the US economy and consumers.

Retailers and shoemakers, including Wal-Mart Inc and Nike Inc, also sounded the alarm on March 19.

A 10% tariff levied on US $ 163bil (RM637.83bil) over the next 10 years, and a 25% The tariff would slow down by US $ 332bil (RM1.29tril ), according to the Information Technology & Innovation Foundation.

Kuijs wrote that both sides would likely show restraint. All-out economic war, he added, “would cause major economic damage globally.” – Reuters


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