Tuesday, February 7, 2012

iPad: Profit runs wild

the Economist has an interesting article about the trade gap between America and China.  But most interesting is actually what the article was not about. The Economist writes:
The Economist estimates that iPads accounted for around $4 billion of America’s reported trade deficit with China in 2011; but if China’s exports were measured on a value-added basis, the deficit was only $150m.
The point they make is that most of the added value of an iPad is generated in the USA itself and in a number of other countries (e.g. South Korea and Taiwan). Therefore, the US repeated demand that China should appreciate the Yuan is misplaced to correct the imbalance in trade. A 20% increase of the yuan would mean less than 1% on the import price on an iPad. I am with the Economist in this discussion. 

However, the chart the Economist shows points to a much more interesting fact. Forty seven percent of the price of an iPad is actually PROFIT. The total cost of labour is just seven percent of which the Chinese workers get two percent.  I have managed several companies and I know that profits are needed. Yet, there is simply no justification for profits in this range.

And I certainly don't understand why so many "hip" people feel so much for such a greedy company, which also has a bad record on social responsibility.

related posts:
Stop pretending there are only winners in the global market
Capitalism: The right to extract wealth
Winners and losers



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