Intermediate Goods

Intermediate goods is a term that refers to materials or products that are used as inputs to create a final product.

They can also sometimes be referred to as semi-finished products, intermediate inputs or producer goods.

Depending on how a supply chain is structures or the business nature of a company, what constitutes to intermediate goods vary from company to company.

Rare earth for instance, might be categorized as intermediate goods by electronics manufacturers but classified as finished goods by miners.

However, intermediate goods should not be confused as raw materials.

The former is almost always at a phase after the latter.

A semi-conductor chips manufacturer might require raw materials and intermediate goods to produce their chips to supply factories in the supply chain. These chips are the company’s finished goods. But for the another factory, the chips would be their intermediate goods which are used to built smart phones and tablets.

In some industries, services can also be a form of intermediate good.

Back to the previous example, the smart phone manufacturer might hire third party services for quality assurance and certification of the semi-finished products.

These services can also be classified as intermediate goods.

In the formulation of GDP, only the value of finished products are counted towards the figure.

This is for the simple reason of avoiding double counting.

For example, if intermediate goods of $100 is taken into account on top of the $200 value of the finished product, then the total accounted for would be $300. This is when the final product sold to end-users is in reality, only $200.

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