Apple Isn’t Trying To Buy A Japanese Smartphone Factory

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Despite what The Times says this isn’t true:

Apple looks to buy Japanese smartphone factory

Firstly, there aren’t any smartphone factories in Japan. They’re all in China. Secondly, if Apple was about to buy a smartphone factory in a high cost country like Japan then that would presage their ability to build smartphones in the US, wouldn’t it? And that just ain’t gonna happen.

So, what is happening?

Apple is considering the joint purchase of a Japanese smartphone screen factory for as much as $820 million.

It’s a factory that makes the screens. Which is fine and logical. But which also shows us why it doesn’t matter a damn that iPhones are made in China. Because all the expensive stuff isn’t. The screens, memory, processing chips, software – all the stuff that adds value – is made elsewhere and shipped into China to be assembled. China actually adding perhaps $10 in value to the assembled kit by doing the assembling.

And, of course, this therefore shows why it doesn’t matter a damn that the iPhone isn’t “made” in the US, because in terms of value it already is. By far the most valuable part is the Apple brand and that’s definitely made in America, isn’t it?

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Tim WorstallGavin LongmuirChester DrawsSpikeMr Yan Recent comment authors
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Mr Yan
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Mr Yan

All fine and dandy until the Chinese companies start stealing the IPR (the value) and making competing products. Huawei networking devices had Cisco code in them early on for example. Making them play by the rules is where Trump is at.

Gavin Longmuir
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Gavin Longmuir

Several debatable points about this, but let’s start with the non-debatable point — who benefits from this? Apple has a gross mark-up of about $400 on an iPhone — which hardly benefits the Western consumer. Chinese workers benefits from the jobs, of course. It is a secondary matter to Apple if it assembles its iPhone in China at an asserted cost of $10 or in Scunthorpe at perhaps 2-3 times the cost. Most of the cost-saving benefits of building the phone in China accrue to wealthy Apple shareholders and management, while the unemployed workers in Scunthorpe (or Flint MI) have… Read more »

Spike
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Spike

Who benefits from trans-border trade? Why, Apple and everyone in the supply chain. Apple’s $400 mark-up does not result from refusing to pay Scunthorpe workers twice the wage, but because its reputation, customer service, and fashion let it set a high price. Flint workers “have lots of time to study Adam Smith” because of luxurious unemployment compensation; in the absence of that, they might study an occupation in which they could outcompete the Chinese. Free trade, domestically and globally, means you might not be the best at something, in which you get better or find a different business.

Gavin Longmuir
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Gavin Longmuir

There is no question that specialization (and associated trade) is a key contributor to economic progress — whether that specialization is within a country or across a border. The part which gets lost in over-simplified economic models is that the process of specialization & trade is not frictionless. In addition to long-term benefits for everyone, there can be heavy short-term costs for substantial groups within a country’s population. Unless “Free Traders” get more realistic about the need to ameliorate those short-term frictional costs of adjustment as part of the price of securing the benefits of trade, they are going to… Read more »