In the turmoil that beset the world's markets last week the once maverick upstart Apple overtook Exxon Mobil to become the world's biggest company by stock market capitalisation. It was a brief victory, and by Friday night Exxon was back on top, though only just, with market cap of US$350.07 billion against Apple's US$349.5 billion. The Apple story has lessons far beyond its headquarters in Cupertino, California, or New York, where it and Exxon are quoted, the oil major on the New York Stock Exchange and Apple on Nasdaq. Some bullish analysts see Apple continuing to soar, in spite of the fragile health of its chief executive Steve Jobs, and predict a US$1 trillion company before too long. What marks Apple out from the crowd is that its sales growth is almost 10 times as fast as the average company and it sits on a US$76 billion pile of cash and investments. But the rise and rise of Apple also raises important questions about the role of markets and the shaping of modern capitalism, particularly in the hitherto most powerful economy of the world. Such is the special status of Apple that its major products, not just its computers but its iPod, iPhone and iPad, have become ubiquitous globally, and the iPod has become the subject of academic study into how the device is an exemplar of trends in globalisation. Three Americans, Greg Linden, Jason Dedrick and Kenneth Kraemer, all associated with the Personal Computing Industry Centre of the University of California, Irvine, writing in the Journal of International Commerce and Economics, use the iPod to examine the view of sceptics of globalisation that the benefits of lower consumer prices are offset by job losses, lower earnings for US workers and a potential loss of technology to foreign rivals. Their conclusion is that analysis of the manufacturing of the iPod, 'provides evidence that innovation by a US company at the head of a global value chain can benefit both the company and US workers.' Closer examination of the findings also reveals that there are major challenges for US society as well as employment and industry. The authors show that in spite of a dramatic outflow from the US of manufacturing in computers and peripherals, US companies continue to be leaders in personal computers, printers, networking equipment as well as in newer categories such as portable music players, tablets and smart phones. In the specific case of Apple's iPod, they break down the number of jobs supported by the iPod in the US and overseas according to production, nonprofessional and professional categories, and reach a total of 41,170 jobs, of which 13,920 are in the US and the rest scattered overseas, principally in China and the AsiaPacific region. Much of the mainstream manufacturing has migrated from the US: hard drives for the iPod are made in China and the Philippines, and their inputs come from China, the Philippines, Japan, Thailand and Singapore; flash memories come from South Korea and China; display panels and modules are made in Japan; the printed circuit board assembly and testing is done in China; and the final iPod assembly is done on the mainland with small amounts in Taiwan. But some key jobs remain in the US, principally the 700 engineers, who are exclusively American-based, plus almost all the 5,200 managers and professional staff, apart from 150, half of them in Singapore. Retail jobs are scattered throughout the world, but with a majority in the US. Altogether, the authors calculate that in 2006 workers received more than US$1 billion in earnings from iPod-related jobs, or about US$25 per unit sold. But of this total, almost US$750 million went to US workers, and only US$320 million to people working outside America. By country, Japan earned almost 30 per cent (US$102 million) of the non-US money, South Korea 12 per cent and China only 7.4 per cent (US$23.6 million), even though China had 12,270 iPod jobs, and Japan had only 1,840. The reason US workers take home most of the money from iPod production is that Apple's highly paid engineers and managers remain in the US. It is also why Japan and Korea earn more than China. In a previous study a few years back, the same authors had shown how global the iPod is, and how flawed are international trade statistics that give China US$150 in export earnings for every iPod sold. In reality, they claimed, the final assembly done in China added only US$4 to the value of the device. On the other hand, US$163 of the US$299 retail value of the iPod goes to American companies, of which Apple earns US$80. Japan contributes about US$26 of the value added, mainly through the Toshiba hard drive, though the Japanese company makes most of its hard drives in the Philippines and China. The two papers by these authors raise many questions to which politicians and business leaders should be alive. One major distraction is that markets' valuations are made in the blink of an eye or a computer calculation, and often seem to be based on whims and fantasies - witness the way that rumours about the health of Steve Jobs have caused Apple's stock price to gyrate - yet the decisions on the long-term well-being of the company are measured in years if not decades with development and marketing of new products. Politicians' time horizons, including China, are framed by elections or government changes that are rarely more than three years away, yet the societal changes that decide whether a country will grasp economic challenges or dissolve into rioting take between a 12-20 year education to a lifetime to create. The challenge for the US, as for the booming emerging markets, is to create educational opportunities that will allow people to grasp opportunities up the value chain quickly and efficiently enough to secure jobs before administrative, professional and engineering posts also get outsourced or are snatched by innovative entrepreneurs elsewhere. 20.34m The number of iPhones sold by Apple in the 2011 quarter ending on June 25, up 142 per cent from the third quarter in 2010
