HOW AMERICAN IS THE IPOD? - Global Trade Magazine
  May 18th, 2012 | Written by

HOW AMERICAN IS THE IPOD?

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WHEN HE VISITED THE UNITED KINGDOM IN 2009, PRESIDENT BARACK OBAMA OFFERED QUEEN ELIZABETH II A SYMBOL OF AMERICAN CULTURE AND ECONOMIC PROWESS: BROADWAY SHOW TUNES RECORDED ON AN IPOD, APPLE’S SMASH-HIT PORTABLE MEDIA PLAYER.

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The show tunes (including “76 Trombones” from The Music Man)? Undeniably American. But the iPod? That’s more complicated.

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Two years before the distribution of the royal iGift, three University of California Irvine researchers tracked the origins of the media player’s astonishing 451 parts (“Who Captures Value in a Global Innovation System? The case of Apple’s iPod”). Relying on a Portelligent product teardown report (available online for $1,950), the UCI researchers determined that the iPod is a truly global product: “China’s economy continues to play a surprisingly small role [in production] in comparison to the U.S., Korea, Japan and Taiwan.”

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Take, for example, the queen’s iPod: Its hard-drive was likely produced in Japan. But even that hard-drive was international, built as it was with components from (and assembly in) the Philippines and China. Since then, flash-memory storage has replaced hard-drives, and Toshiba lost its prized slot in iPod production. For that newer technology and for liquid-crystal displays (LCDs), Apple turned to such Korean firms as LG and Samsung, according to a 2011 update of the UCI study.

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Samsung’s LCD business began as a relatively modest line item in the company’s profit and loss statements. Not for long. Already focusing on the next evolutionary stage (organic light-emitting diodes, or OLED), Samsung spun off the display business on April 1. Samsung Display rolled off the showroom floor with about $20 billion in revenue, and 20,000 employees in five plants around the world, including the main Tangjung factory in South Korea’s bucolic Crystal Valley.

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Samsung workers in the Crystal Valley pump out liquid-crystal displays consisting of drive and control electronics; packaging and power supply . . . and glass. But “glass” hardly describes what we’re talking about here, which is stuff untroubled by the sorts of imperfections—moisture, ions—that make that cocktail holder so much fun and less expensive. And it’s not a single piece of glass, but two pieces of high-tech glass, like a glass sandwich, really, with a nice, thin layer of electrodes in the middle.

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Those electrodes are made from indium tin oxide. Oxide is so common we literally walk on it—it’s what makes up the earth’s crust—and we’ve been using tin almost as long as we’ve been living in towns; tinsmiths kicked off the Bronze Age and possibly the Canned Vegetable Epoch.

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But indium? Very rare. Scarcity didn’t always matter: As recently as 2001, a reporter for the United States Geological Survey Minerals Yearbook worried over worldwide “sluggish demand” and “traders with excessive stocks.” Now, we all live in iWorld, a universe of handheld devices with LCD screens, and demand for indium is so voracious that speculators are pitching ingots of the silver-white metal alongside gold, and governments (including South Korea’s) are subsidizing the global hunt for No. 49 on the Periodic Table of Elements.

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One notable intermediary in South Korea’s indium trade is global chemical giant Merck’s South Korea unit. The company sources many of the raw materials that go into the LCD, including indium—indium that is processed primarily in Belgium, Canada, China, France, Japan, Russia, and the U.S.

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Even that’s not the end of the liquid-crystal display trail. Swamped by Apple LCD demand, Samsung reportedly turned to Wujiang, China-based Radiant Opto-Electronics for additional production bandwidth. “Shipments of the finished components were marked with the Samsung logo, and even sealed with Samsung tape,” AppleInsider reported. Then, in a weird twist, the Samsung-labeled LCDs were shipped back “through customs to Samsung in South Korea” and then “passed on to Apple.” LCDs shipped to the Republic of Korea boomeranged back to the sprawling assembly campus of Apple’s controversial manufacturing partner, Foxconn.

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Final shipment of Apple’s Chinese-assembled product to the U.S. is something like the invasion of Normandy in 1944. Take the recent launch of the iPad 3: Apple watchers knew the product was ready to ship in early March when China-to-U.S. air-cargo prices “rose as much as 20 percent in one week as Apple has taken up available capacity at ‘premium rates,’” AppleInsider.com reported. Sources said DHL had won the business; others argued that Apple’s product movements are so “massive” that no single carrier could handle it all.

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So, is the iPod “American”? The bottom line may indeed be the bottom line: Despite the fact of its global origins and assembly, the UCI study notes, “Apple continues to capture the largest share of value” from sales of its products. The reason: Apple keeps “most of its product design, software development, product management, marketing and other high-wage functions in the U.S.”

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A product that can claim its origins are almost everywhere on the planet? With most the income flowing back to the U.S.? Why, that’s practically the definition of an “American.” Cue soundtrack: West Side Story’s “(I Want to Live in) America.”

 

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