Recently I bought an iPod Touch. iPod is the signature trademark of Apple, Inc., Cupertino, California, USA. I began to wonder where the iPod was manufactured. According to Hal Varian, the chief economist at Google, all of 451 parts that make up the iPod are outsourced. The most expensive part of the iPod is the hard drive that sells for $73. The rest of the mp3 player contains parts like screws that have razor slim profits because the components are produced in markets where the profits have been competed away. Mr. Varian studied an iPod that had a retail cost of $299. The total cost of making the iPod touch including labor is approximately $100. What remains after Apple sells the iPod is a profit nearly twice as much as the cost of manufacturing. The profit accrues to the American entity, Apple, Inc. Almost all of the value that is imputed into the product is given by the consuming American public. Another point is that all of the iPod is made overseas except for the idea.
One would be challenged to find any product that does have outsourced parts that are produced in markets where the profit margin is razor slim. One estimate on a GM auto shows that 65% of the GM car was produced in foreign markets. Robert Carbaugh writes that when passengers travel in a Boeing 777 they are riding in a jet where about 35% of the parts are manufactured in foreign nations. It is interesting to note that European Airbus manufactures its jet using about 40% American made parts. This means that many Americans make a living working for a foreign corporation. The implication of this statement is that if America wants to retain its competitiveness, it must develop the skills of its people and not worry about where the corporation is located.