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What the iPod Tells Us About the World Economy
Hugh Pickens writes "Edmund Conway has an interesting article in the Telegraph where he analyzes where the money goes when you buy a complex electronic device marked 'Made in China,' and why a developed economy doesn't need a trade surplus in order to survive. For his example, Conway chooses a 30GB video iPod 'manufactured' in China in 2006. Each iPod, sold in the US for $299, provides China with an export value of about $150, but as it turns out, Chinese producers really only 'earned' around $4 on each unit. 'China, you see, is really just the place where most of the other components that go inside the iPod are shipped and assembled.' Conway says that when you work out the overall US balance of payments, it shows that most of the cash for high tech inventions has flowed back to the United States as a direct result of the intellectual property companies own in their products. 'While the iPod is manufactured offshore and has a global roster of suppliers, the greatest benefits from this innovation go to Apple, an American company, with predominantly American employees and stockholders who reap the benefits,' writes Conway. 'As long as the US market remains dynamic, with innovative firms and risk-taking entrepreneurs, global innovation should continue to create value for American investors and well-paid jobs for knowledge workers. But if those companies get complacent or lose focus, there are plenty of foreign competitors ready to take their places.'"
This is the same with most cloned CE products. Knock-off Zunes use a custom firmware, knock-off iPods have their own OS, and so on. The hardware may be the same, but the firmware is usually a custom version, and it's almost always optimized for the Chinese market (being Mandarin with English or other languages a typically-poorly implemented afterthought).
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
didn't the US gladly turn a blind eye to infringers when it was to their benefit ?
In fact historically we basically stole British manufacturing and business capabilities from them:
http://en.wikipedia.org/wiki/Samuel_Slater
He's just one guy who did something amazing, but there was a trend behind him, and plenty of other examples. Ultimately it was in our best interests to stop being Britain's hunter/gatherers. By this point Britain was long past being able to stop us. China already realizes being our contract manufacturer isn't good for them, and already makes deals requiring we transfer some amount of our R&D work along with manufacturing. I daresay we can't really stop them either.
IP doesn't historically have a lot of strength behind it. It's easy to steal, it "doesn't hurt anyone" when it's stolen (sure it hurts some guy we don't know or care about!), and it's hard to put a price on it. The military might of planet earth isn't going to get raised in arms because someone stole the plans for the iPhone 4G, or even a semiconductor fab. Too abstract, why do I care, let them eat cake? Blah blah blah.