Capturing Value in Global Networks:
Apple’s iPad and iPhone

Kenneth L. Kraemer, Greg Linden, and Jason Dedrick1
University of California, Irvine, University of California, Berkeley and Syracuse University

July 2011

1 Acknowledgement: This research has been supported by grants from the Alfred P. Sloan Foundation and the U.S. National Science Foundation (CISE/IIS). Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the Sloan Foundation or the National Science Foundation.

Abstract

This article analyzes the distribution of value from innovation in the global supply chains of the Apple iPad and iPhone. We find that Apple continues to capture the largest share of value from these innovations. While these products, including most of their components, are manufactured in China, the primary benefits go to the U.S. economy as Apple continues to keep most of its product design, software development, product management, marketing and other high-wage functions in the U.S. China’s role is much smaller than most casual observers would think. A key finding for managers is that they need to beware of relying too heavily on single customers. With its control over the supply chain, Apple has the power to make and break the fortunes of many of its suppliers. A key finding for policymakers is that there is little value in electronics assembly. Bringing high-volume electronics assembly back to the U.S. is not the path to “good jobs” or economic growth.

Capturing Value in Global Networks:
Apple’s iPad and iPhone

In an earlier article in Communications of the ACM [7], we conducted a micro-level economic analysis of Apple’s iPod as a way of better understanding who captures the value in global innovation networks in the information and communications