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Global Sourcing Renders ‘Made In’ Stickers Meaningless

US Senator John McCain caused a bit of a kerfuffle this week when he said in an interview that Apple manufactures its iPads and iPhones in the United States.

McCain later claimed he misspoke. Critics ignored the backtrack, pointing out that not only does Apple do most of its manufacturing in China, the company's Chinese subcontractor received wide publicity last year after reports of deplorable working conditions.

But McCain's statement, while bone-headed, does point to a real issue. With supply lines lengthening, can we really define where something is “made” and should we even bother?

Within hours of McCain’s comments, and the subsequent piling-on, Clyde Prestowitz at Foreign Policy was making the argument that people working closer to the electronics supply chain already know. Prestowitz, citing an Asian Development Bank Institute study helpfully called “How iPhones are Produced,” pointed out that the hit device wasn't really “made” in any one place. According to ADBI, via Prestowitz:

    The battery chargers, camera lenses, and timing crystals all come from Taiwan. The screen is from Japan, the video processing chip from South Korea, and many of the other chips Taiwan's Taiwan Semiconductor Manufacturing Company. In all, over nine countries produce the parts and components that all head to final assembly in China. So, it is indeed, quite possible that the United States has a trade surplus with China qua China on the iPhone.

That doesn't mean McCain was right. But his critics were hardly more subtle. What the dustup, and Prestowitz's useful explanation, point up is that the whole debate about “sending jobs overseas” is a lot more complicated in the electronics industry, and perhaps many industries, than it seems.

The truth is that everybody makes the iPhone. And your car. And anyone who works on a supply chain knows this, because those parts are being sourced from all over. What's bizarre is that more than a decade after the advent of what we once called “globalism,” it's still common to hear rhetoric about factory jobs heading overseas.

That's not to minimize the effects of collapsing manufacturing economies — notably, in the United States. Rather, it's to say that the controversy over McCain's comments was a conversation from 1995, not 2011.

Everything we know about modern globalized electronics manufacturing tells us that interdependence between companies and employees in different parts of the world is extraordinarily high for many digital products. What's weird is that we're comfortable discussing how the use of these products can shrink the world, but not comfortable, at least in this case, noting how a similar effect transpires through their manufacturing.

In the McCain case, the two choices were either a factory in China, or one in the US. But if there are at least nine countries represented in one mobile product, the issue isn't a zero-sum debate between the value of a worker in California and one (or three) in China. The issue McCain and his critics could have been debating is about the vastly complicated chain of ideas and material that has to operate to get a phone into a store — and how much of the $500 sale price gets left in each place, as the device, moving from being nothing to being something, passes through each.

14 comments on “Global Sourcing Renders ‘Made In’ Stickers Meaningless

  1. t.alex
    March 11, 2011

    What is the definition of “Made in …” anyway? Each and every product we see is “Made in China”,  but  sometimes we do not know the original country.

  2. Adeniji Kayode
    March 11, 2011

    And what effect does it have on the price of this electronics if they have to pass through nine different countries before they can become useful?

  3. Clairvoyant
    March 11, 2011

    Are you meaning that we don't know where the product components are from? As far as I know, the 'Made in …' label is always for where the overall product was put together.

  4. Barbara Jorgensen
    March 11, 2011

    Well said, Marc. The “Made in” idea actually started back when Japanese automobiles became popluar in the US–and when they were still made in Japan. It's more of a nationalistic movement than informative at this point. I think there are criteria that help determine how the “Made in” product is labeled, but I couldn't point to them

  5. Marc Herman
    March 11, 2011

    To Adeniji's comment: The US senator's comment I referred to in the story was part of a televised interview, and he seemed to be talking about “Made in USA” as a jobs and economic concept. A bit simplistically, to my reading of it, he was saying — incorrectly as it turns out — that a factory or factories in the US was responsible for “making” various Apple products, and implying that the US was benifitting from this in the usual ways. Jobs for Americans, money for domestic subcontractors, etc. In fact that economic activity is spread over several national economies, with costs and benefits in each of those places along the supply and production chain. What I was asking, or trying to ask, was whether the concept of “made in” has any importance for modern electronics, when supply systems make it possible to spread the work, and the profits from the product, across many countries and economies.

    When I lived in Jakarta I knew a few people who worked at a textile plant making sleeves for shirts. Just the sleeves. They shipped them to Saipan, where they were sewn onto the torso portion of the garment, and then sent to US stores for sale. The sleeve factory was Singaporean owned. The tag in the shirt said “Made in Saipan.” Which it sorta was and sorta wasn't. The information on the tag was virtually meaningless in terms of understanding how that shirt got made. Same for the iPhone, at least for Senator McCain, it appears.

     

    Thanks as ever for commenting.

  6. SunitaT
    March 12, 2011

    Marc,

      What if we abolish the “Made in” sticker with something like “Packaged in”. It will clearly state where the product was packaged. If we want we can state something like “componenets manufactured in”  which will state where the each components were manufactured. Do you think this method will work ?

  7. Jay_Bond
    March 12, 2011

    Great post. Your article points out a very good topic that seems to be making headlines lately. Everybody is trying to claim products are made in certain countries in order to benefit their topic. I heard one person's response to a Honda being built in Ohio by American workers as “The engineering and the money still goes to Japan”.

    At this point how would you describe a product assembled in the U.S. that is using imported materials or vice versa?

     

  8. Marc Herman
    March 13, 2011

    Thanks for the comment, Rich. It's not often I get called propogandistic, so that's good to get checked off my list. I suppose where we disagree is in tone more than content. At least to my reading. I'm not so much pushing a government policy or another – which I take to be the basic definition of progagandistic — but I am of the opinion that the debate over where a thing is made has become toxic. Certainly jobs are going overseas, and certainly currency policy, most obviously China's, has a role in that. The US is also keeping the Dollar low against the Euro, and as I imagine you know, the EU isn't so pleased with Washington over that. I recall when Addidas closed a shoe factory near Bandung, Indonesia in 2005 or so, people were pretty upset with Vietnam, which had convinced Addidas to move the operation to their shores. So, what it means for a job to go overseas seems to depend on which beach you're standing on, in my view. In the case of McCain's comment, he seemed to be saying that the US is successfully providing the world an innovation via a 20th century model: a thing vertically produced in the US, by American workers, under American laws. And he seemed to be saying that was a good thing. But we don't live in that world, and he wasn't even right about the example he chose. It isn't made in a vertical way by a US company in a US factory. It's made all over the place, by a globalized system. And as the FP item argues, that system may have produced more economic activity in the US than it did in China, despite much of the actual work happening overseas. My question is whether “Made in X or Y” is a useful construct for understanding the world. I have the feeling it may be in some cases. But more often, I see it used to describe a world that no longer exists, so as to assert ideas that tend toward the ugly, rather than the innovative.

    That is, I suspect “Made in USA” is becoming, indeed, a propaganda term, more than a descriptive one.

  9. Marc Herman
    March 13, 2011

    Could be that we don't make things. Could also be the Fed has pursued a weak Dollar policy for six years. I don't know. The WSJ has been shouting about this recently, in interesting ways.

    http://online.wsj.com/article/BT-CO-20110228-717698.html

    Thanks again for commenting. I suspect we'll have to agree to disagree about this. btw if there are holes in your Chinese shoes, buy Italian ones. They're reparable, though also imported.

  10. Kunmi
    March 13, 2011

    This is an issue that was not foreseen during the design of marketing across the globe. Who will share the manufactruing emblem of a product may appear irrelivant but it does. In the heart of the buyers, everyone respects quality, durability and precision. Outsourcing has watered down the consumers confidence to a certain degree. If Senator McCain claims that Apple products should bear made in USA, I will not dispute it; though it components may be manufactured in many other countries. One thing we need to keep at the back of our minds is that there are regulatory standards that governs all these products, so if for instance China is to manufacture one component, the company in China must adhere to the USA regulatory standards that governs the specific component otherwise it won't be accepted in the United states. I begin to wonder at times when you see millions of products tags “made in china”, even the chinese food that we eat in our neighborhoods are still made in China whereas prepared on USA soil. In my honest opinion, “Made in” can have great impact on the consumers response to buying electronic products due to thirst for quality, durability and precision which may be a household name of the country that stands to be the facilitator.

  11. Ariella
    March 14, 2011

    Actually a great deal of food is made in China. You may not always realize it because it usually makes forms a part of a product, so the product itself is not necessarily made in China — only its components.  But sometimes even a company that is fundamntally branded as American — like LL Bean that stresses its Maine origins — is actually selling products manufactured in Asia.  A Tweet alerted me to an article on LL Bean's success Note the first comment.

  12. Mydesign
    March 15, 2011

      Marc, as a part of globalization all most all the countries had opened their internal markets for foreign investment with red carpets & attractive soap facilities. Some of the key factors of globalization are they can take the advantages of economic growth, availability of skilled manpower, low labour cost, availability of raw materials etc. Since everybody wants to gain the advantage of these factors for their growth, companies had expanded their foot print outside the territory. China got much benefited from globalization because almost all companies started their production unit in china.

       We can say Electronics industries are much global because regional distinctions play major roles. Here the product life cycle is like US/Europe will come up with idea and investment plans, design is done either in India or China, Manufacturing is done in Singapore/Taiwan/China, packaging is done in China/Malaysia. That means, for the same product different process at happening at different countries. That means, for a single product components are manufactured at different countries and finally assembling at a common place. Normally they put the assembling place (country) name as Made in tag.  “Made in country” also have a great impact on sales due to thirst for quality, durability and precision.

  13. garyk
    March 16, 2011

    Most people would probably think Apple a USA company manufactures its iPad and iPhones in the USA. Yes Apple is very profitable. How profitable would they be if these units were manufactured in the USA? If you have bought an iPad or iPhone, base on the cheap labor in CHINA it would probably cost serveral thousand dallars, just kidding! Most likely just a little less profit. I think they call this USA GREED.

    Its a funny thing that alot of Countries are have economic problems that are caused by no manufacturing jobs! or lose of manufacturing in there country. Where did all the manufacturing go? There is large potion of the population in every country that needs manufacturing Jobs. Everyone can't be an ENGINEER or a BOSS. Even CHINA needs some manufacturing but not the whole worlds manufacturing.

  14. hwong
    March 22, 2011

    This “Made in” is nothing more than a marketing strategy. Has people noticed that even ladies shoes has a brand called “made in italy” even though the price, quality and material is really made in China?  They didn't really put made in china but it's too obvious.  They try to trick consumers into thinking that this “made in italy” comes with better design and quality. At first it also caught my attention but after close examination, forget it.

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