Domestic Value Added of Chinese Brand Mobile Phones

Yuqing Xing and Yuzhen He
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Yuzhen He: University of International Business and Economics, Beijing, China

No 18-09, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: In this paper, we evaluate the domestic value added of Chinese brand mobile phones using the teardown data of two sample phones: Xiaomi MIX 2 and OPPO R11s. For calculation of the distribution of value added by country, we adopt two benchmarks: production cost and retail price. In terms of the production cost of the sample phones, which consists of bill of materials, manufacturing cost and royalty, Chinese domestic value added embedded in the MIX 2 is 15.4% and 16.7% in the R11s. The teardown analysis reveals that no indigenous Chinese firms are involved in the manufacture of the printed circuit board assembly, which explains the relatively low Chinese domestic value added. Using retail price to measure total value added, we find that the domestic value added of the MIX 2 to be 41.7% while that of the R11s to be 45.3%. The cost of retail services and gross marginal profits contribute most to the increase, which implies that nurturing mobile phone brands has not only enabled the Chinese mobile phone industry to move up ladder of value chains, but also to improve domestic value added.

Pages: 20 pages
Date: 2018-09
New Economics Papers: this item is included in nep-cna, nep-ipr, nep-pay and nep-tra
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