A new study by the US Congress on US-China trade provides a rare detailed glimpse into Taiwan’s role in the global supply chain.
“Many US companies sign contracts with Taiwanese firms to have their products manufactured (mainly in China), and then shipped to the US where they are sold by US firms under their own brand name,” the study says.
Written by specialist in Asian trade and finance Wayne Morrison and published this week by the Congressional Research Service, the study says that in many instances, the level of value added to a specific item in China can be quite small relative to the retail price of the final product.
Researchers at the University of California looked at the production of an Apple iPod, which was made in China by Foxconn, a Taiwanese company using parts produced globally, but mainly in Asia.
The university estimated that it cost about US$144 to make each iPod.
Of this amount, only US$4, 2.8 percent of the total cost, was attributed to the Chinese workers who assembled the iPod.
The rest of the costs were attributable to the numerous firms involved in making the parts — for example, Japanese firms provided the highest-value components: the main storage and the display.
However, US trade data recorded each iPod unit as originating from China and logged each unit as a US$144 Chinese import.
In fact, China was responsible for only a small fraction of the unit. The congressional study says that the iPod was sold in the US for US$299 meaning there was a mark-up of about US$155 per unit, which was attributable to transportation costs, retail and distributor margins, and Apple’s profits.
University researchers estimated that Apple earned at least US$80 on each unit sold in its stores, making it the single largest beneficiary in terms of gross profit.
Taiwan, through Foxconn, pulled the global supply chain together, the report said.
“Apple’s innovation in developing and engineering the iPod and its ability to source most of its production to low-cost countries, such as China, has helped enable it to become a highly competitive and profitable firm as well as a source for high-paying jobs in the US,” the study says.
It says the iPod example illustrated that the rapidly changing nature of global supply chains has made it increasingly difficult to interpret the implications of US trade data.
Such data may show where products are being imported from, but they often fail to reflect who benefits from that trade, the study says.
In many instances, US imports that are recorded as coming from China should really be marked as imports from other countries, including Taiwan, the report says.
An increase in Taiwanese boats using China-made automatic identification systems (AIS) could confuse coast guards patrolling waters off Taiwan’s southwest coast and become a loophole in the national security system, sources familiar with the matter said yesterday. Taiwan ADIZ, a Facebook page created by enthusiasts who monitor Chinese military activities in airspace and waters off Taiwan’s southwest coast, on Saturday identified what seemed to be a Chinese cargo container ship near Penghu County. The Coast Guard Administration went to the location after receiving the tip and found that it was a Taiwanese yacht, which had a Chinese AIS installed. Similar instances had also
GOOD DIPLOMACY: The KMT has maintained close contact with representative offices in Taiwan and had extended an invitation to Russia as well, the KMT said The Chinese Nationalist Party (KMT) would “appropriately handle” the fallout from an invitation it had extended to Russia’s representative to Taipei to attend its international banquet last month, KMT Chairman Eric Chu (朱立倫) said yesterday. US and EU representatives in Taiwan boycotted the event, and only later agreed to attend after the KMT rescinded its invitation to the Russian representative. The KMT has maintained long-term close contact with all representative offices and embassies in Taiwan, and had extended the invitation as a practice of good diplomacy, Chu said. “Some EU countries have expressed their opinions of Russia, and the KMT respects that,” he
AMENDMENT: Contact with certain individuals in China, Hong Kong and Macau must be reported, and failure to comply could result in a prison sentence, the proposal stated The Chinese Nationalist Party (KMT) and the Taiwan People’s Party (TPP) yesterday voted against a proposed bill by Democratic Progressive Party (DPP) lawmakers that would require elected officials to seek approval before visiting China. DPP Legislator Puma Shen’s (沈伯洋) proposed amendments to the Act Governing Relations Between the People of the Taiwan Area and the Mainland Area (臺灣地區與大陸地區人民關係條例), stipulate that contact with certain individuals in China, Hong Kong and Macau should be reported, while failure to comply would be punishable by prison sentences of up to three years, alongside a fine of NT$10 million (US$309,041). Fifty-six voted with the TPP in opposition
VIGILANCE: The military is paying close attention to actions that might damage peace and stability in the region, the deputy minister of national defense said The People’s Republic of China (PRC) might consider initiating a hack on Taiwanese networks on May 20, the day of the inauguration ceremony of president-elect William Lai (賴清德), sources familiar with cross-strait issues said. While US Secretary of State Anthony Blinken’s statement of the US expectation “that all sides will conduct themselves with restraint and prudence in the period ahead” would prevent military actions by China, Beijing could still try to sabotage Taiwan’s inauguration ceremony, the source said. China might gain access to the video screens outside of the Presidential Office Building and display embarrassing messages from Beijing, such as congratulating Lai