Question
With the rise of globalization, supply chains now spread across the world. Consider the following simplified stages of production for a smartphone: a) The U.S.-based
With the rise of globalization, supply chains now spread across the world. Consider the following simplified stages of production for a smartphone: a) The U.S.-based smartphone company develops the designs for the new smartphone. It programs and uploads the software. Any updates from previous versions of the software are available for existing phone owners as a free download. b) A rare minerals broker in China buys $15 billion worth of minerals from around the world, including $6 billion from U.S. mines (who pays $1 billion worth of intermediate goods). c) A microchip producer in Japan buys half of these minerals for $10 billion; a camera and screen producer in South Korea buys the other half for $10 billion. d) A manufacturing factory in China buys the microchip, cameras, and screens for $22 billion; it obtains the rest of the assembly materials domestically for $3 billion. e) The U.S.-based smartphone company pays the factory $27 billion for the manufactured phones. f) The U.S.-based smartphone company keeps $10 billion worth of smartphones in inventory, then sells the rest to U.S. retailers for $16 billion and Chinese retailers for $10 billion. g) The U.S. retailers sell the phones in the United States, for a total of $21 billion in revenue.
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