Of the $237.45 attributed to China as an import, China gets $8.46. That includes a battery supplied by a Chinese company and the labor used for assembly. Of the factory-cost estimate of $237.45 from IHS Markit at the time the iPhone 7 was released in late 2016, we calculate that all that’s earned in China is about $8.46, or 3.6 percent of the total. So what about all of those famous factories in China with millions of workers making iPhones? The companies that own those factories, including Foxconn, are all based in Taiwan. Apple buys the components and has them shipped to China then they leave China inside an iPhone. Almost none of them are manufactured in China. They come from a mix of U.S., Japanese, Korean and Taiwanese companies, such as Intel, Sony, Samsung and Foxconn. Start with the most valuable components that make up an iPhone: the touch screen display, memory chips, microprocessors and so on. Thanks to the globe-spanning supply chains that run through China, trade deficits in the modern economy are not always what they seem. IPhone imports look like a big loss to the U.S., at least to the president, who argues that “China has been taking out $500 billion a year out of our country and rebuilding China.” One estimate suggests that imports of the iPhone 7 and 7 Plus contributed $15.7 billion to last year’s trade deficit with China.īut, as our research on the breakdown of an iPhone’s costs show, this number does not reflect the reality of how much value China actually gets from its iPhone exports – or from many of the brand-name electronics goods it ships to the U.S. When an iPhone arrives in the U.S., it is recorded as an import at its factory cost of about $240, which is added to the massive U.S.-China bilateral trade deficit. The Conversation reports We estimate China only makes $8.46 from an iPhone – and that’s why Trump’s trade war is futile. But a growing number are no doubt drawing up backup plans that look a lot like Harley’s. Businesses still hope the protectionist wave burns itself out, and the logic of globalization reasserts itself. Of course, supply chains that took years to take shape won’t change location overnight. When, under pressure from the Obama administration, it began assembling computers in Austin, Texas, it encountered numerous quality-control and workforce headaches. out of American-made components would add up to $100 to its cost, according to a 2016 article in MIT Technology Review. This assumes, of course, Apple successfully relocates its supply chain. Those competitors now have a 25% cost advantage.Īssembling an iPhone entirely in the U.S. “There are only foreign competitors to what we do,” Morrison Carter, the company’s chief executive, says. By continuously improving its production process, it has avoided price increases and now sells all over the world.īut that arrangement has been endangered by the 25% tariff on imported steel, the dominant input into Beckett’s products. originated in the U.S., according to Bruegel, a Brussels-based think tank.īeckett Gas Inc., family-owned manufacturer of components for boilers, furnaces and water heaters, has over the years shifted production from abroad to its Cleveland-area factories. ![]() About 17% of the value of Mexican-made cars exported to the U.S. ![]() Routine, blue-collar jobs do get outsourced but high-end research, marketing and design work gravitates to the U.S.Ĭanadian steel uses iron ore from Minnesota, so Mr. ![]() While globalization is routinely portrayed as bad for U.S. Please consider That Noise You Hear Is the Sound of Globalization Going Into Reverse by Greg Ip. As trade barriers break up, world-wide supply chains, the real costs are higher prices and fewer choices for consumers says Greg IP, my favorite WSJ author.
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