Global Value Chains: Who Makes a Smartphone?

Few complex products today are made in a single country. A smartphone may be designed in California or Seoul, use chips manufactured in Taiwan or South Korea, a display from South Korea or Japan, minerals mined in Africa, Latin America or Australia, and be assembled in China, India or Vietnam. Economists call these networks global value chains. The value captured at each stage differs enormously: one study of an early iPhone estimated that assembly in China added only about $6.

50 to a product costing about $179 to manufacture, while design, branding and key components captured far more. This pattern is sometimes drawn as a 'smile curve', with high value at the research and marketing ends and lower value in assembly. Value chains let developing countries join manufacturing by doing one task rather than building whole industries, but upgrading to higher-value stages is difficult. They also mean that standard trade statistics, which credit the full value to the final exporter, can exaggerate bilateral trade imbalances.