Trade Tensions: Explainer: How an iPhone case busts trade deficit myth
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It's often from his iPhone that US President Donald Trump tweets about pressuring China on trade. He's been pushing to do something about the trade surplus of almost 400 billion US dollars. But a closer look at the Apple smartphone reveals how this figure is being distorted. CGTN's Xu Mengqi has more.
Hey Siri, where are you from?-Like it says on the box. I was designed by Apple in California.
XU MENGQI ZHENGZHOU, HENAN "Designed in California, but made in China. Like many American brands, Apple has outsourced its production to global suppliers. The different parts are then assembled here in China and shipped around the world, including back to the US. So the question becomes: where does the value of Apple products belong?"
Take the iPhone as an example. According to a Reuters report, manufacturing a 64 GB iphone X costs a total of $378. Of that, 29% goes to the display modules by Samsung in South Korea, another 9% goes to memory chips by Japan's Toshiba and South Korea's SK Hynix, WHILE contract manufacturers in China like Foxconn, represent only an estimated 3 to 6 percent of the manufacturing cost.
XU MENGQI ZHENGZHOU, HENAN "Roughly half of the world's iPhones are made right here behind me, in these Foxconn factories. But China is simply the final assembler of the iPhone. Counting the cost of all the intermediate goods into China's export numbers simply skews the trade deficit. By how much? Research from Counterpoint and IHS Markit shows that Apple shipped 61 million China-assembled iPhone 7 and 7 Pluses to the United States last year. With an average cost of about $260 each unit, that's roughly 16 billion added to China's export and about 4.4 percent of the total US trade deficit with China."
The inflation of the trade deficit number does not stop with how the manufacturing cost is calculated.
XU MENGQI ZHENGZHOU, HENAN "US official trade data shows nearly the full value of an iphone belongs to China."
"The number also largely ignores the intellectual property value Apple adds through engineering and design work done in its US headquarters as well as margins taken by distributors.As Siri said, she was designed in California. So is the trade deficit as massive as the US claims? Well, think again. Xu Mengqi, CGTN, Zhengzhou, Henan province."