In these days of iPhone hysteria, talking about the iPod seems hopelessly retro. But since the genesis of the How the World Works blog can be traced back to a feature I wrote almost two years ago exploring globalization and the iPod, it was impossible not to take notice this morning of a discussion in the New York Times of a new academic paper looking at the question "Who makes the iPod?" Even more so since I quoted one of the three authors, Greg Linden, in my piece.
The purpose of the paper is try to figure out how much "value" is "captured" by the various contributors to a 30-gigabyte video iPod. Who profits from the success of what used to be one of the world's -- pre-iPhone -- most-lusted-after consumer gizmos? Apple, unsurprisingly, gets the lion's share, even though it doesn't actually "make" any of the iPod's pieces. But design, marketing, and brand count for a lot in the global economy. Next up is Toshiba, for the hard drive. And so on.
Perhaps the most important takeaway from the paper is its insight into trade statistics.
...trade statistics can mislead as much as inform. For every $300 iPod sold in the U.S., the politically volatile U.S. trade deficit with China increased by about $150 (the factory cost). Yet, the value added to the product through assembly in China is probably a few dollars at most. While Appleb
The same observation is true for just about any high technology consumer device manufactured in China. China may be the factory of the world, but it is not the profit center of the world. The intellectual property embedded in the various pieces of the iPod is owned by companies in Taiwan, Japan, the U.K., the U.S, and Korea, just for starters. Those FedEx 747s packed with iPods flying out of Shanghai evoke a zero-sum metaphor -- manufacturing moved offshore from the U.S. to China, but the truth is far more complex and far more distributed.
And of course, whatever is true for the iPod will be true for the iPhone, only more so.
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