20 November 2017
Intangible capital, such as branding, design and technology, is increasingly determining success in the marketplace, as nearly one third of the value of manufactured products comes from such capital, a study conducted by the United Nations intellectual property agency has revealed.
“Intangible capital will increasingly determine the fate and fortune,’of firms in today’s global value chains. It is behind the look, feel, functionality and general appeal of the products we buy and it determines success in the marketplace,” said Francis Gurry, Director General of the World Intellectual Property Organization (WIPO).
“Intellectual property, in turn, is the means by which companies secure the competitive advantage flowing from their intangible capital,” he added.
The WIPO’s study, ‘World Intellectual Property Report 2017: Intangible Capital in Global Value Chains,’ released on Monday, looks at how much income is credited to labor, tangible capital and intangible capital in global value chain production across all manufacturing activities.
The report finds that intangible capital accounted, on average, for 30.4 percent of the total value of manufactured goods sold throughout 2000-2014. Overall, income from intangibles increased by 75 per cent from 2000 to 2014 in real terms, amounting to $5.9 trillion in 2014, twice as much as tangible capital, such as buildings and machinery, contributed to the total value of manufactured goods.
In the case of high-end smartphones, crucial intangible assets include technology, the design of hardware and software, and branding. Smartphone firms and technology providers rely heavily on patents, trademarks and industrial designs, generating a high return on their intangible capital.
For every iPhone 7 that Apple sells for about $810, about 42 per cent of the sales price derives from intangibles. Huawei and Samsung also capture significant value in their top-end smartphone models.
Indeed, in the domain of patents, up to 35 per cent of all first filings worldwide may relate to smartphones. The report finds that the 4th-generation (4G) cellular standard used today is associated with close to four times more patents than the 2nd-generation standard.
Photo:Customers in Rome, Italy, browsing products on sale inside an Italian gourmet food.