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Apple a day keeps Asia healthy

Designed in California but manufactured in China and indonesia, with components sourced worldwide, the iPad and its siblings go a long way to keep the global economy humming

Image Credit: Corbis
Circle of evolution: The iPad’s components are mainly manufactured and the final product assembled by companies based outside the US such as this Foxconn plant in Shenzen, China
GN Focus

A tablet is made of thousands of tiny complex parts that are sourced from around the globe. While it is unclear how many hands, factories, test centres and dealers these sections go through before they form a composite whole, it is fairly well known that these components are usually assembled at warehouses in far-flung industrial areas.

Apple is the greatest champion of the global production value chain in the gadget sector by far. The California-based company does not own a single factory; it merely develops, designs and markets its products. Here’s a rundown of the components that make up one of the most popular Apple products — the iPad, the most iconic tablet computer — on the market today.

Outsourcing options

The processors used in the iPad 2 to 4 series are made by Samsung, Apple’s strongest competitor in the tablet market. Apple is, besides Sony, Samsung Electronics’ main customer for semiconductors, produced by manufacturing plants in South Korea, China, the Philippines, and Austin (Texas).

The processor for the new iPad mini is produced by Taiwan Semiconductors Manufacturing Company, the world’s largest chip producer and the third-biggest semiconductor developer and manufacturer after Intel and Samsung. The company produces chips for Apple in Taiwan, Shanghai and Singapore.

Hard drives for the iPad are mainly delivered by Japan’s Toshiba, but they do not originate in Japan. They are manufactured at plants in the Philippines, Shenzhen (China), and until the end of 2011 — before the plant was hit by floods — in Thailand.

Suppliers of flash memory are companies such as Elpida Memory, which has a factory in Hiroshima, Japan, and SK Hynix, which produces in South Korea, China and Oregon (US).

The iPad’s most expensive component, the touch-screen display, is mainly made by LG Display, at factories in South Korea, China and Poland. But Apple also sources from lesser-known companies such as ChiMei Innolux, a panel maker that produces in Taiwan, China, the Netherlands and Czech Republic, as well as TPK Holdings, whose main production is in Xiamen (China) and Wintek, a Taiwanese company with plants in China, India and Vietnam. Asahi Glass delivers impact-resistant glass that is manufactured in Japan.

Another major component of the iPad, its wireless chip, is mainly supplied by California-based Qualcomm, which outsources production to Taiwan Semiconductors and Samsung Electronics. Other component makers are TriQuint Semiconductor, whose factories are in the US and Costa Rica, Skyworks Solutions, a US company with operations in Mexico, and Japan’s Murata Manufacturing Company, which has a factory in the Philippines.

Value addition

Other suppliers for the iPad include AKM Semiconductor, Broadcom, Texas Instruments and Analog Devices, all US companies with plants across Asia and Europe, notably Ireland.

“Given that the product is manufactured overseas, one might assume that most of the value goes there,” says Jason Dedrick, researcher at the Personal Computing Industry Centre, University of California. “In fact, Apple reaps a substantial portion of the returns. When iPods are shipped to the US for sale, 55 per cent of the purchase price comes back,” he says.

The value added to the products, for example, in China, and the money earned by low-cost production assemblers is around 1 per cent of the actual pre-tax sales price in the West, making it a perfect example of a globally innovated product in a value cycle that most favours the developer.

However, a delicate issue is the use of rare materials for the production of the iPad’s lithium-ion polymer batteries that require lanthanum, an element that occurs in certain metals found in India, Brazil, Africa, Australia, Sweden, and China. It is said to be environmentally harmful and cannot be used in the US or Europe without adhering to strict environmental regulations.

Neodymium, another such material, is a core component of the iPad’s side magnets. Most of the world’s neodymium can be found in China. Ceric oxide, which is used to polish the tablet’s glass surface, is a component of granitic monazite that is mined in Brazil and Bolivia.

In the near future Apple will need to change the label made in China on the products to made in Indonesia. Foxconn, the world’s largest contract manufacturer and the final assembler for core Apple products, will relocate most of the production for iPads and iPhones to Indonesia. It plans to invest more than $1 billion (about Dh3.67 billion) and employ 300,000 workers there.

“Apple’s iPads — and with it many other tech gadgets that require complex components — are truly global products,” says Tanapong Potipiti, Assistant Professor at the Computer Research Centre at Bangkok’s Chulalongkorn University, in an interview with GN Focus. “I am not even sure if they produce the software in California, but most likely they do.”