Apple iPhone Adds $1.9 Billion To US Trade Deficit

by Mike on December 18, 2010

The iPhone was invented by Apple, a US company and so one would expect that the iPhone would go a long ways to helping out the US economy, but this is no the case. In fact, the smartphone actually adds $1.9 billion to the US Trade deficit.

You may be wonder how so, but the information comes by way of a recent study that was done by the Asian Development Bank Institute. We all know that in the world economy, the big word is outsourcing and Apple is no stranger to this process. A good portion of the parts that go into making an iPhone are made outside of the US. In fact, estimates indicate that only 6% of the iPhone components are made within the US and that works out to about $10.74 of the iPhone’s wholesale cost of $179. The vast majority of the parts come from overseas from companies in Germany, Korea and Japan. All the parts that these foreign companies create are sent to China where they are assembled into a working iPhone at Foxconn and then subsequently shipped out at retail prices.

The researchers involved with this paper, Neal Detert and Yuqing Xing state “lobal 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.”

If Apple were to forgo the concept of maximum profit and instead move twoards social responsibility, they would eliminate Foxconn from the equation and hire US workers instead of Chinese workers. This would mean that manufacturing costs would increase by just over ten times to $68 for each phone made, but if Apple sold the phones for around $500, they would still make almost 50% profit.

If the phones were all assembled in the US, say goodbye to the $1.9 billion trade deficit and in fact, say hello to the $5.7 billion added to US exports as these US made iPhones would now have to be exported overseas.

Via: Fast Company