From today's Wall Street Journal:
"One widely touted solution for current U.S. economic woes is for America to produce more of the high tech gadgets that the rest of the world craves.
Yet two academic researchers have found that Apple Inc.'s iPhone – one of the most iconic U.S. technology products – actually added $1.9 billion to the U.S. trade deficit with China last year.
How is this possible? Though the iPhone is entirely designed and owned by a U.S. company, and is made largely with parts produced by other countries, it is physically assembled in China. … So a U.S. consumer who buys what is often considered an American product will add to the U.S. trade deficit with China."
How can this possibly be news to anyone – let alone to the leading business and finance publication in the world?
The guy who wrote this, Andrew Batson, is the Wall Street Journal's China correspondent. I would like to think that one has to be fairly bright to hold such a job. But then again it took Wikileaks for the Wall Street Journal's man on the scene to realize the economic data China spouts is pure fiction – so maybe not. But just the same – this is the Wall Street Journal – winner of 33 Pulitzer Prizes. How can this possibly come as news to them? How can they possibly not have know that manufacturing American inventions in China adds to the trade deficit?
And this 'news' arises from a report cranked out by the Asian Development Bank Institute. The head of this 'think tank' has a resume that should impress anyone – BA, MBA, PhD, World bank, Japan Finance Ministry, Brookings Institute, International Monetary Fund, Federal Reserve, Stanford University. yet his organization paid for research that led to this stunning insight into the obvious?
If I were to report today in Evolving Excellence some bit of 'news' – say for instance I reported the 'news' that the Republicans were going to take over control of Congress in January - it would be a fair assumption on your part that everything I have written from the time that became a fact until now was written in blind ignorance of that which I would hope all of you have known for quite a while. You would be quite right to question my credibility if it turned out that I was so hopelessly ignorant of such a widely known, important fact.
I can only make the same assumption with the Wall Street Journal. If this is actually news, then I can only assume that every article, and every OpEd piece the Journal has written to date was written in gross ignorance of the basic fact that manufacturing American innovations in China increases the trade imbalance with China.
95% of Americans have known that. Sadly, the 5% who determine US economic policy rely on the Wall Street Journal to do so. How can we possibly have a meanignful and necessary discussion in this country about the state of our economy and the future of manufacturing when so many of the folks needed to hold that discussion are so incredibly out of touch with reality?
Graham Rankin says
Thanks Bill for being one of the few consultants willing to criticise Apple. It’s added $1.9bn to the trade deficit, but it’s also amassed $46bn in its bank account. So I guess that’ll keep its shareholders happy and Jobs in a job for years to come. It also pays for a lot of advertising accounts, and even liberal newspapers in Europe like The Guardian publish advertorial garbage on Apple’s behalf regularly. The consequences of their production in China is never mentioned. So there’s a quite a bit of journalistic self-censorship going on too. It’s not all ignorance.
Doug says
The other big issue with Apple is that they have a massive single-point supply vulnerability:
Foxconn’s factory cities in Shenzhen. It’s where Apple’s stuff is made (with few exceptions).
If Foxconn goes belly-up, or decides to renegotiate with Apple based on their sole-supplier status, or has supply chain disruptions of it’s own, or if Shenzhen gets hit by a quake, or the ports get hit by a tsunami, or any number of things, then Apple is hosed.
They have no supply chain diversity.
Apple is profoundly disconnected from their primary markets (US, Europe, and even Japan), and perhaps even from principle Chinese markets, given the distance from Guangdong Province to Beijing and Shanghai.
That is what would worry me most about Apple, were I invested.
I would like to see Apple open a plant in the US. Even if production numbers were low, it would be a good start, and Apple could dominate US government sales with the only Made-in-USA smart phone. The price difference between US and PRC made phones would be almost entirely due to currency manipulation, as I suspect shipping savings would cancel any possible labor cost increase.