Peter Sabilla, an adjunct professor of Operations and Supply Chain Management at the Marriott School of Management at Brigham Young University runs a blog called shmula.com. On that blog, I found an interesting article that has a high-level map of the Apple iPhone supply chain.
Many of the iPhone components are built in Shenzhen, China and in Taiwan. Below is the high-level image:
So the materials built for the iPhone by the suppliers and sub-tier suppliers are relatively cheap. The reason why Apple is a large company today is because of the profit margins made by products like the Mac, iPhone, and iPod in the U.S.
In order to make even more money, the iPhone needs to go global but must be affordable to make sales in other countries. This is why the rumor that China Mobile Ltd. (NYSE:CHL) subsidizing the Apple Inc. (NASDAQ:AAPL) the iPhone makes sense. Many of the components that are being built for the iPhone is already being done overseas already.
According to the JLM Pacific Epoch, “The would-be mobile partners are nearing the end of talks that aim to
avoid passing on the relatively high price of iPhones to Chinese consumers by having Mobile subsidize the phones, said the insider.” The source of the news is a China Mobile insider.