Markets and Business
Who Really Made Your Phone? A Look Into Global Value Chains
What It Is and How It Works
Do you know where this device you are reading this on was manufactured? How about the car you drove, or the shoes on your feet? You would say "China," or "Germany," or "the U.S." But the reality is more complex. Nowadays, a lot of products are manufactured across nations, with components designed, produced, and assembled globally. Your device is not manufactured in a single country, but through a Global Value Chain.
A value chain describes all of the activities in producing and selling a product, from design and manufacture to marketing and distribution. If these activities occur in multiple nations, we refer to them as a global value chain (GVC). It is more than the physical components like wires and chips (which would constitute a supply chain). The chain encompasses software, branding, logistics, and after-sales support. More value is added by some activities, and some nations (or firms) are far better placed in these chains.
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Why They Matter and Who Decides
Not all countries or companies play the same role in GVCs. Some control the design, branding, and key technologies, while others assemble or extract raw materials. This brings us to “governance” – who makes the critical decisions?
Generally, companies controlling rare or hard-to-copy resources (like advanced technology, strong brands, or access to big markets) are better positioned to lead the chain. These are often referred to as “producer-driven” (like Toyota or Apple) or “buyer-driven” (like Nike or Zara) chains. The “producer-driven” model relies on technical capacity, while the other model relies on brand and retail control.
This difference matters because it affects how much value each actor captures. The factory worker who assembles your phone earns a small wage as their work is less ‘unique’. The company that designs the chip or owns the brand captures a much bigger share.
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How Countries Can Move Up the Chain
Not all roles in a GVC are equal. “Upgrading” means trying to move into more valuable parts of the chain: improving processes, making more advanced products, moving from assembly to design, or even switching to a more profitable sector. For example, going from sewing clothes to designing them or assembling TVs to producing computer components.
Governments can play a role in this. In many cases, they try to attract foreign investment to plug into global chains. But plugging in is not enough. Suppose a country only participates in low-value parts of the chain, like extracting raw materials or assembling basic goods. In that case, it may remain stuck there unless it takes steps to support more advanced industries. This is where thoughtful industrial policy becomes crucial.
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Some Debates Among Economists
Some economists see GVCs as a powerful engine for development, giving countries access to new markets and technologies. Others argue they can lock economies into low-wage, low-value activities unless managed carefully. There is also concern that GVCs increase vulnerability: if one link breaks, because of war, a pandemic, or a blocked canal, the whole chain (and subsequently the world) can suffer.
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Real World Examples
COVID-19 and Supply Chain Disruptions (2020–2022): The pandemic showed how fragile global value chains can be. Lockdowns in one country affected factories worldwide, leading to shortages in goods from cars to electronics. Many countries are now reconsidering how much they depend on global chains.