Chart of the Day

UPDATE: below


From K. Kraemer, G. Linden and J. Dedrick, "Capturing Value in Global Networks: Apple’s iPad and iPhone" (July 2011):


source: iPad/iPhone study at 5

The study explains (at 6; footnote omitted):

[T]he main financial benefit to China takes the form of wages paid for the assembly of the product or for manufacturing of some of the inputs. Many components, such as batteries and touchscreens, receive their final processing in China in factories owned by foreign firms. Although hard facts are scarce, we estimate that only $10 or less in direct labor wages that go into an iPhone or iPad is paid to China workers. So while each unit sold in the U.S. adds from $229 to $275 to the U.S.-China trade deficit (the estimated factory costs of an iPhone or iPad), the portion retained in China's economy is a tiny fraction of that amount.

The authors conclude (at 7-8; footnotes omitted):

This study also confirms our earlier finding that trade statistics can mislead as much as inform. . . Statistical agencies are developing tools to gain a more accurate breakdown of the origins of traded goods by value added, which will be attributed based on the location of processing, not on the location of ownership. This will eventually provide a clearer picture of who our trading partners really are, but, while this lengthy process unfolds, countries will still be arguing based on misleading data.

Finally, our study also shows that "manufacturing" is not necessarily the path back to "good jobs". The need for the U.S. to rebuild its manufacturing base has gotten greater attention lately from both pundits and policymakers, including a newly launched "Advanced Manufacturing Partnership".

Those who decry the decline of U.S. manufacturing too often point at the offshoring of assembly for electronics goods like the iPhone. Our analysis here and elsewhere makes clear that there is simply little value in electronics assembly. The gradual concentration of electronics manufacturing in Asia over the past 30 years cannot be reversed in the short- to medium-term without undermining the relatively free flow of goods, capital, and people that provides the basis for the global economy.

Told you so.

MORE:

From a Federal Reserve Bank of San Francisco report titled "The U.S. Content of 'Made in China'":

Figure 2 shows the share of U.S. PCE [personal consumption expenditures] based on where goods were produced, taking into account intermediate goods production, and the domestic and foreign content of imports. Of the 2.7% of U.S. consumer purchases going to goods labeled "Made in China," only 1.2% actually represents China-produced content. If we take into account imported intermediate goods, about 13.9% of U.S. consumer spending is attributable to imports, including 1.9% imported from China.


source: FRBSF report at 4

(via Carpe Diem)