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Tuesday, February 25, 2020

iPhone and US-China trade

Yuqing Xing in Vox documents the changing nature of Chinese value addition to iPhones. 

This is a list of the tasks performed by Chinese firms in iPhones 3G and X. 
This compares the Chinese share of the value added and retail prices of the two phones.
In other words,
The bill of materials of the iPhone X is estimated at $409.25, of which the Chinese firms jointly contribute $104, about 25.4%. Chinese value-added in the iPhone X is dramatically higher than the $6.5 captured in the iPhone 3G. The retail price of the iPhone X is $1,000; the Chinese firms together gain 10.4% of the total value added of every iPhone X sold on the global market... The teardown data reveals that the total value of the parts imported from the US for assembly of the iPhone X is $76.5. Hence, importing one iPhone X from China generates a $332.75 ($409.25–$76.5) trade deficit for the US. That is the conventional approach to calculating bilateral trade balances. However, Korea, Japan, and other countries are also involved in the production of the iPhone X and supply more than 45% of the parts and components. In other words, the $332.75 consists of not only value-added originating in China but also that contributed by Korea, Japan, and other non-US countries.
And in the aggregate, iPhone alone contributes a non-trivial share to the US trade deficit with China, 
In terms of value-added, the US deficit with China for the import of one iPhone X is only $104, less than one-third of the figure based on gross value. For every iPhone X imported by the US, current trade statistics mistakenly add $228.75 to its trade deficit with China. In 2017, American consumers bought 42.2 million iPhones units. Using that figure as a reference, the iPhone trade alone exaggerated US trade deficit with China in 2018 by $9.65 billion, about 2.3% of its total deficit with China.

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