The iPhone is the invention of an American company, Apple, and ought to benefit our nation's economy. Why, then, is it contributing $1.9 billion to the U.S. trade deficit?
That figure comes from a working paper by researchers at the Asian Development Bank Institute in Tokyo, and was spotted by Mother Jones. A paltry minority of the components of the iPhone are actually made in the U.S.—equivalent to only 6 percent of the phone's $179 wholesale cost. The great bulk of the parts are made by Japanese, German, and Korean companies; they're then funneled through China, where they're assembled at Foxconn, and sent out at an inflated price.
According to the study authors, Yuqing Xing and Neal Detert: "Global production networks and highly specialized production processes apparently reverse trade patterns: developing countries such as the PRC [People's Republic of China] export high-tech goods—like the iPhone—while industrialized countries such as the US import the high-tech goods they themselves invented."
The authors offer a scenario in which Apple suddenly decides not to pursue profit maximization, dumps the oft-criticized Foxconn, and decides to pursue a model of corporate responsibility and patriotic we're-in-it-togetherness. It's true that U.S. workers fetch about 10 times as much as Chinese workers, and the manufacturing costs would rise to $68 per phone from about $6.50 per phone. But if Apple sold the phones at an average of $500 (already the asking price for some models), they say, it would still clear a 50% profit margin.
"If all iPhones were assembled in the US, the $1.9 billion trade deficit in iPhone trade with PRC would not exist," reckon the authors. "Moreover, 11.4 million units of iPhone sold in the non-US market in 2009 would add $5.7 billion to US exports."
Of course, the same applies to any high-tech device manufactured abroad (check out these troubling stats via the National Science Foundation here)—the authors are simply holding up the iPhone as an important symptom of a wider trade phenomenon.
[Image: Flickr user mager]