The iPod Is Built Globally, But The Money Is Made In The US

Over at The New York Times, economist Hal Varian discusses a recent study that looked at the various countries involved in making an iPod. Not surprisingly, a large chunk of each iPod goes abroad, as companies in different countries are involved with its production, either as parts suppliers or manufacturers. The study is useful in showing the difficulty in measuring trade statistics, although the authors conclude that each iPod sold contributes $150 to the US trade deficit with China. Andy Kessler actually took up this exact issue a few years ago, examining the link between the iPod and the trade deficit. The key thing to realize is that while Apple receives a fairly modest cut of each iPod sold, it's by far the most profitable chunk. The money made by the various chip makers and assemblers commands the low margins that are typical for their industries. Thus, while you could blame Apple for causing so many dollars to leave the US, you have to figure in the company's exploding stock price post-iPod. When the iPod was launched in October, 2001, the company's market cap was less than a tenth of what it is now ($105 billion). So any contribution to the trade deficit that the company might be responsible for is more than compensated by the $90+ billion that it's added back to the US economy.