Thursday, June 28, 2007

Global Supply Chains and Trade Balances

. Thursday, June 28, 2007

Hal Varian has a great piece in the Times about where the Ipod is made. Turns out, because it contains components manufactured all over the world, it's hard to tell where it is made.

"This value added calculation illustrates the futility of summarizing such a complex manufacturing process by using conventional trade statistics. Even though Chinese workers contribute only about 1 percent of the value of the iPod, the export of a finished iPod to the United States directly contributes about $150 to our bilateral trade deficit with the Chinese.

Ultimately, there is no simple answer to who makes the iPod or where it is made. The iPod, like many other products, is made in several countries by dozens of companies, with each stage of production contributing a different amount to the final value.

The real value of the iPod doesn’t lie in its parts or even in putting those parts together. The bulk of the iPod’s value is in the conception and design of the iPod. That is why Apple gets $80 for each of these video iPods it sells, which is by far the largest piece of value added in the entire supply chain."

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Global Supply Chains and Trade Balances
 
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