The iPod Is Built Globally, But The Money Is Made In The US

from the world-music dept

Over at The New York Times, economist Hal Varian discusses a recent study that looked at the various countries involved in making an iPod. Not surprisingly, a large chunk of each iPod goes abroad, as companies in different countries are involved with its production, either as parts suppliers or manufacturers. The study is useful in showing the difficulty in measuring trade statistics, although the authors conclude that each iPod sold contributes $150 to the US trade deficit with China. Andy Kessler actually took up this exact issue a few years ago, examining the link between the iPod and the trade deficit. The key thing to realize is that while Apple receives a fairly modest cut of each iPod sold, it’s by far the most profitable chunk. The money made by the various chip makers and assemblers commands the low margins that are typical for their industries. Thus, while you could blame Apple for causing so many dollars to leave the US, you have to figure in the company’s exploding stock price post-iPod. When the iPod was launched in October, 2001, the company’s market cap was less than a tenth of what it is now ($105 billion). So any contribution to the trade deficit that the company might be responsible for is more than compensated by the $90+ billion that it’s added back to the US economy.

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Comments on “The iPod Is Built Globally, But The Money Is Made In The US”

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ReallyEvilCanine (profile) says:

I'm no mercantilist

But unless you can show that Apple’s foreign investors have sunk at least as much cash into Apple as Apple has sent outside the country then all you have is a shuffling of monies that would have gone elsewhere in the economy, perhaps (though unlikely) to domestically produced goods. Every iPod purchased has an opportunity cost, and if the next best good forgone didn’t contribute to the increasing trade deficit then the cost is even higher from the macro perspective.

EGR says:

The Future of the US Economy

Welcome to the future. People need not worry about falling investment in US manufacturing or falling enrollment in US engineering programs. The US doesn’t need those things. All we need are lawyers, guns and money. With those things we can get whatever we want from the rest of the world. So what if the iPod is made in China? Most of the MONEY from it is made here! How does that work? Simple. Apple’s LAWYERS make sure Apple owns the rights and the govt’s GUNS back them up.

I went to school and got an engineering degree but I would never make that mistake again. Law school is the way to go.

Anonymous Coward says:

Re: Re: The Future of the US Economy

And then when you have all shot the LAWYERS with the GUNS and move onto everyone else, the world will be laughing.

That won’t happen because the lawyers, through the govt., control the guns (police and military). Why do you think the US spends more on its military than the rest of the world combined?

Sanguine Dream says:

Now really....

So any contribution to the trade deficit that the company might be responsible for is more than compensated by the $90+ billion that it’s added back to the US economy.

How much of that that $90 billion being added back to the US economy and how much ends up in some executives bank account to insure that no one in his family line never has to work again?

Overcast says:

Well, if they are doing the work of putting them together, then payment is due of course.

What I hate to see, is Government’s like China’s reaping the rewards instead of their people.

If I would have thought of going to the next World Olympics, I would certainly change my mind considering that China more or less just threw the entire town out of their houses so they could ‘re-build’ it to look ‘good’. It’s a farce.

I would have RATHER went to the run down town and met with REAL Chinese. Not these mannequins the Chinese government will put out all ‘dollied’ up.

As for the people of the world, it’s good to see jobs and such go to them. If the government’s would just back off and allow people to entertain their own ambition the whole world would be such a better place.

Tom (profile) says:

Where is that $90 Billion

This is supposed to be a reasonbly intelligent column. That stupid remark about adding $90 billion to the US economy makes me rethink that. My basis is that, if I (and a bunch of other investors) bought a share of stock at $1 at an IPO and it went up 10,000% to $100, then what? If I (and all the other investors – and it has to be all of them to get to the supposed $90 billion) try to sell the stock and spend the money, then the price of the stock would crash (probably back to the $1).

The “capitalized” value of a company never “puts money in the economy”. It is nowhere near the amount of money that could be “put into the economy” even if all of the stock was sold. The price drops as it sells and to top it all off, the “exchange” between owners means that money is being taken out of the economy to buy the stock.

The economy is based on the purchase of consumables. Whereas, stock represents the ownership of a company. They are not the same thing.

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