Little value from global chains
The HinduO N December 12, in an outburst of suppressed anger, workers employed at a factory assembling iPhones in Narasapura near Bengaluru ransacked its premises and damaged parked vehicles. But the incident highlights certain characteristics of global production value chains and their implications for policies that attempt to expand domestic manufacturing by inserting India into segments of those chains. The low share of the final price accruing to offshored manufacturing in global value chains increases the pressure on vendors to keep wages down, maximise ‘productivity’ by lengthening the working day, and limit costs associated with ensuring better and safer working conditions. This has implications for countries such as India, where the government harbours ambitions of partly displacing China as a global manufacturing hub by integrating local manufacturing more closely with global value chains. Given the estimate by Kendrick et al, that labour in Chinese production facilities gets less that 2 per cent of the value of iPhone sales, this provision of 4-6 per cent of incremental sales value as an incentive to attract the vendor concerned seems to make little economic sense.
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