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The Distribution of Value in the

In: Business and Management

Submitted By steoteo
Words 9442
Pages 38
The Distribution of Value in the
Mobile Phone Supply Chain

Jason Dedrick, Kenneth L. Kraemer, Greg Linden*
Personal Computing Industry Center (PCIC)
University of California, Irvine
4100 Calit2 Building 325, Suite 4300
Irvine, California 92697-4650

October 2010

*Authors are listed alphabetically.
The Personal Computing Industry Center is supported by grants from the Alfred P. Sloan Foundation, the U.S.
National Science Foundation, industry sponsors, and University of California, Irvine (California Institute of
Information Technology and Telecommunications, The Paul Merage School of Business, and the Vice Chancellor for Research). Online at

The Distribution of Value in the
Mobile Phone Supply Chain
Jason Dedrick, Kenneth L. Kraemer, Greg Linden*
Personal Computing Industry Center, UC Irvine
4100 Calit2 Blgd. 325, Suite 4300
Irvine, CA 92697-4650
October 2010

The supply chains of the mobile phone industry span national and firm boundaries. To analyze how value is distributed among the participants, we apply a novel framework for analysis based on financial measures of value capture to three phone models introduced from 2004 to 2008. We find that carriers capture the greatest value (in terms of gross profit) from each handset, followed closely by handset makers, with suppliers a distant third. However, the situation is reversed in terms of operating profit. Carriers shoulder the burden of network installation, maintenance, and upgrading, which absorbs much of the value from their subscription fees. Handset maker nationality, which may also influence supplier choice, is a key determinant of the geographic distribution of value capture. We also use our results to estimate the relationship of handset subsidies to carrier profits, which has received attention from antitrust authorities in several...

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