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84 SMT Magazine • July 2017 sistors from the distributer is 340 yuan (note: the yuan is the basic unit of the Chinese cur- rency that is called the Renminbi, literally "peo- ple's currency"). The current exchange rate between the USD and the yuan is: 1 USD = 6.8 yuan. Or 1 yuan is worth 0.147 USD. So, the reel of resistors will cost $50 USD. If the yuan depreciates with respect to the USD, what happens? Let's say a USD will now buy 10.0 yuan instead of only 6.8 yuan or 1 yuan is worth 0.100 USD instead of 0.147 USD. The yuan is depreciated or devaluated with re- spect to the USD by 32%. What is the impact on buying the reel of re- sistors? The price of the reel is still 340 yuan, but the price in USD is now $34.00 instead of $50 USD. The opposite is true if the yuan appreciates in value with respect to dollar. The material for the U.S. product assembler will cost more. The material purchased from distributors in the U.S. should be less expensive if the yuan is artificially kept down or devalued! So why has the U.S. government complained about a manipulated undervalued yuan? If a U.S. company wants to sell a product it manu- factures into China with the yuan at an artifi- cially low level, let's say at a price of 100 USD, the Chinese consumer will have to pay more yuan making the U.S. made product less com- petitive. But, here is the fallacy. Since the compo- nents made in China and purchased with USD costs less with a devalued or undervalued yuan, the U.S. assembler should be able to reduce the overall price of the product and make it more attractive to not only the Chinese consumer, but to consumers worldwide. This is especial- ly true with material being 70–90% of the total electronic product cost and most of that mate- rial coming out of Asia. This should be signifi- cant. But, the material is not less expensive when purchased for assembly in the States with a strong dollar and a weak yuan. Why? We will continue next month. Hey, what do YOU say? I'd like to hear your thoughts, reactions and opinions. SMT References 1. T. Borkes, "Electronic Product Assembly in the Global Marketplace: The Material Piece of the Competitive Puzzle," SMTA Internation- al Conference Proceedings, Orlando, Fl., Octo- ber 2010. 2. T. Borkes, "The STEM Trap," SMT Maga- zine, July 2016. 3. M. Gell-Mann, The Quark and the Jaguar: Adventures of the Simple and the Complex, Henry Holt, 1994. 4. T. Borkes, "Moving Beyond Paideia: Learn- ing for Earning," SMT Magazine, August 2016 Tom Borkes is the founder of the Jefferson Project and the forthcom- ing Jefferson Institute of Technolo- gy. To read past columns or to contact Borkes, click here. ANALYZING THE COST OF MATERIAL IN TODAY'S GLOBAL ECONOMY, PART 2 The U.S. Navy has awarded BAE Systems a $180.5 million contract to continue producing Advanced Pre- cision Kill Weapon System (APKWS) laser-guided rock- ets to meet the growing U.S. and international demand for the systems. APKWS rockets are seeing increasing use in theater because they deliver cost-effective precision strikes with reduced potential for collateral damage. The latest or- der, funded under the recently announced indefinite delivery/indefinite quantity contract, will help BAE Sys- tems to meet increased demand. APKWS laser-guided rockets allow militaries to le- verage existing munitions and weapons systems invest- ments with minimal effort and training. The APKWS mid-body guidance kit transforms standard unguided Hydra 70 (2.75-inch) rockets into highly accurate pre- cision munitions by easily screwing into place between the warhead and the motor. Growing Demand for Precision Weapons Prompts Order for Additional BAE Systems Laser-Guided Rockets

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