I recently wrote a post about a January 21, 2012 N.Y. Times article regarding Apple’s need to be in China. The Times reporters took at face value a statement from a “former high-ranking Apple executive” that “The entire supply chain is in China now. You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.” After reading that statement, readers of the NY Times might have said to themselves “well fair enough, since Apple’s contractor Foxconn manufactures iPhones in China, Foxconn must need instant access to gaskets and screws in its manufacturing process. That’s why Apple has to manufacture iPhones in China.” But as I pointed out in my post, Foxconn doesn’t manufacture iPhones in China, it merely assembles iPhones there. So the allegedly vital supply chain mentioned by the “former high-ranking Apple executive” is not really vital at all. And it appears that my position is fairly close to the mark, at least according to three U.S. professors.
A China Daily US article, that came out about a week after the Times article, documented that about the only value added to the iPhone in China is $10 or less in direct labor wages that is paid to Chinese workers at Foxconn. That is about the amount of Chinese value added that I said went into the iPhone in my earlier post on Foxconn’s assembly activities and why those activities could be done in this country. The China Daily article cited to a Alfred P. Sloan Foundation study from 2008, Who Profits from Innovation in Global Value Chains? A Study of the iPod and notebook PCs, written by three American professors, Jason Dedrick, Kenneth L. Kraemer and Greg Linden.
Kraemer, a professor from the University of California, is quoted in the China Daily US article. He states, “They (people who think China’s role is bigger in the production of Apple products) focus only on the trade deficit with China, and therefore they think China has a bigger role. What they don’t understand is that China gets all sorts of input from other countries from Japan, the US, Malaysia and so on. So China’s contribution is really a small amount of labor. They think China’s role is bigger simply because they don’t understand how global supply chains work. They think everything from an iPad and iPhone is made in China rather than just shipped (components) and assembled there.”
Now I don’t mean to be unkind, but if you were a reporter for the N.Y. Times and you were going to write an article on why iPhones aren’t “made” in the U.S., wouldn’t you have done a Google search and tried to discover if there were any professor types who had looked into this issue. Then you would have discovered the Who Profits from Innovation in Global Value Chains? A Study of the iPod and notebook PCs study. And then you might have actually interviewed those professors to understand what it really was going on with Apple and Foxconn. Because if you had interviewed Professor Kraemer, he would have told you that all the parts for an iPhone are “just shipped (components) and assembled there.” Armed with that knowledge, when a “former high-ranking Apple executive” told you that the entire supply chain necessary to “manufacture” an iPhone was in China, you could have said to him, “I’m sorry, but I believe you may be full of shit.”
Look, if Apple wants to hire Foxconn to have its workers assemble components made outside China into an iPhone in China because it can pay Chinese workers $1.00 an hour to do it, fine. But let’s be clear about why it is that iPhones are made in China. This clarity is reduced when unnamed “former high-ranking Apple executive” are allowed to spout off about the vital Chinese supply chain necessary for “manufacturing” iPhones in the paper of record for this country and then not even be challenged on the accuracy of those statements. It doesn’t take a rocket scientist to understand why these alternative reasons for being in China are put forward by Apple. If they aren’t, it keeps the focus exclusively on the labor practices of Apple’s contractor Foxconn, and that is somewhat problematic from a PR standpoint. But what do I know? I mean, I don’t write for the NY Times do I?