An Unusual Example of Currency Decline Harming Exports

In Macro 101 they teach you that when your currency drops, exports become cheaper, so they increase — this is one of the major factors that works to stop currency free fall. But here's an I hope unusual account of a circumstance in which one sort of export, albeit one based largely on imported parts, shrinks as a result of a currency decline:

Boing Boing: Danger, high voltage: It's common for people living in Europe to buy computer hardware in the US where prices are lower and the Euro is strong. Just don't try it with the new iMacs. An article in today's International Herald Tribune points out that the G5 iMacs sold in the US are strictly 100-110 volt, unlike every other Apple machine on the market with the exception of the eMac. Plug a new iMac into a standard 220-240 European outlet without a transformer and your motherboard will fry. From the IHT article:

It was a sudden, unexpected and little publicized change for Apple…

I asked Apple why and have not received an answer. Postings on Internet discussion boards are thick with speculation. The most likely reason is that limiting the reach of U.S. and Japanese computers is meant to help preserve European sales, where PC sales are relatively strong but the economy is weak. A company also gains if its revenue is in a more valuable currency than the one its costs are in.

Link.

This entry was posted in Econ & Money. Bookmark the permalink.

4 Responses to An Unusual Example of Currency Decline Harming Exports

  1. Evelyn Blaine says:

    Strange that the article suggests buying a transformer – a rather awkward workaround – when it would seem easier just to replace the power supply. It would void the warranty, but the warranty’s no good outside the country of purchase any way. In any case, I wouldn’t be surprised if more and more companies do this with desktops to try to protect the European market. Obviously, it would be a sales disaster with laptops, as much of the market consists of people who travel internationally.

  2. Ravi says:

    I don’t know if it would be a sales disaster, but it would be completely ineffective. Laptops already (structurally) come with replaceable power supplies so if people don’t like them, they will replace them. I remember the days when laptop power supplies didn’t automatically accept varying voltages (I think because it was notably more expensive to do it that way). I quickly wound up getting a more flexible AC-DC converter that would accept 110 and 220 and could be persuaded to give my laptop the power it wanted.

  3. nick says:

    Strange that the article suggests buying a transformer – a rather awkward workaround – when it would seem easier just to replace the power supply

    That wouldn’t work with the G5 iMac, though. We’re talking about a tightly-packed box, with a power-supply that isn’t going to be easy to find — or replace.

    Apple’s European pricing has always been tantamount to gouging. Even when you subtract VAT, there’s usually a 20-30% markup, which means you can fly to New York and buy an Apple laptop (or iPod), and still save money with the cost of air fare and accommodation thrown in. At a tech conference in San Diego last year, when the £ was $1.90ish, as it is now, the Brits were lining up outside the Apple Store: I’d guess that around $10,000 changed hands in a matter of days.

    But, as has been mentioned, laptops have to be switchable by design: it’d be unacceptable to sell a non-switchable adapter. This is meant to challenge grey market imports of the new iMac, a desktop machine which has the form factor of a laptop: something that appears to have grown quite common on eBay. But the way to get round this is to source them from SE Asia, where 240V is the standard. The iMac G5 costs $SGD 2,488 in Singapore, which is around £800, compared to £919 from Apple UK. (The US price is $1299 before tax, which converts to £667 right now. )

  4. Evelyn Blaine says:

    Ok, looking at it, replacing the power supply in a G5 wouldn’t be a lot of fun. Still, I’m very wary of using a step-down transformer to feed 220V/50Hz line into a 110V/60Hz power supply for sensitive electronic equipment; living in England about a decade ago, I knew a lot of Americans who damaged or destroyed printers or CD players that they had brought with them by trying to do that. There are probably filtered, regulated transformers specially designed for electronic devices, but I wouldn’t trust the off-the-shelf kind you get at the local hardware store.

Leave a Reply

Your email address will not be published. Required fields are marked *