Are all those figures showing China’s huge trade surplus real? A new US study reveals that, when a $300 Apple iPod is exported from China, where final assembly is carried out, the value is recorded in China’s export statistics as $144, but the actual value added in China is only $4.
This conclusion comes from a study by the University of California.
The $144 figure is made up of the sum total paid for all the 451 different parts in an iPod plus the assembly cost.
Who takes the rest of the $144 cost is complicated. For instance, the most valuable component in the $300 iPod is storage, says the study, which Toshiba supplies for $74. But Toshiba uses parts bought in from elsewhere, so reducing Toshiba’s value add to $19.45.
Apple’s success in making highly innovative consumer products from a horizontal manufacturing model, is raising questions in Japan over the preference of the Japanese consumer electronics industry for a vertical manufacturing model in which they make
everything, or as much as possible, themselves.
Does a vertical manufacturing model impede innovation? Does a horizontal manufacturing model reduce quality?
Yes and Yes.
Japan-made goods are of superb quality and reliability. Apple’s products, as innovative as they are, seem only to be built to last a year or two.
You pays your money, you takes your choice.
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