LONDON – A plan for the giant manufacturing services provider Foxconn to make Apple iPad tablet computers in Brazil is "in doubt" according to a Reuters report that referenced unnamed government sources. The problem is "stagnant" negotiations over tax breaks for Foxconn and structural problems within Brazil, Reuters said again quoting government sources.
This is despite earlier reports that quoted Aloizio Mercadante, Brazilian Minister of Science, Technology and Innovation, saying that the first "Made in Brazil" iPads would be in the market place by December.
In April, Brazilian President Dilma Rousseff announced Foxconn was in talks with the government about spending up to $12 billion over five or six years to set up in Brazil. However, since then the start date for production of iPads has slipped from July to November prompting Mercadante's comment that the iPad's would arrive in December. Now it appears that project may not progress at all.
"The talks have been very difficult, and the project for a Brazilian iPad is in doubt," Reuters quoted an unnamed government source as saying. Reuters said the source added that Foxconn was making "crazy demands" for tax breaks and other concessions.
One of the problems with the plan is that the Brazilian government is insisting that Foxconn works with local partners but Foxconn claims the local partners do not have the technical capability, the workforce or the finances to scale up for such projects. Foxconn is also demanding priority treatment for incoming components from the Brazilian customs service, which is notoriously slow.
As a result the project may be scaled back from the $12 billion mentioned by President Rousseff in April and Foxconn or a Brazilian partner may be allowed to assemble foreign-made parts rather than being required to source a percentage of components locally, the report said.
Foxconn has been facing the pressure of rising wages in China for a several years. Last year's wave of employee suicide has forced it to move plants to poorer region in China and eventually it may run out of place to move inside China.
I question whether Governments should bend over backwards to satisfy the demands of these big firms. Assembling parts alone should not be seen as a triumph but sourcing a percentage of components locally is a good thing. You need to have a legacy for when Foxconn goes to the next cheap place....
Foxcon have been doing their manufacturing in China and have got used to the high quality of subsidiary support companies which provide crucial components and add to that the well oiled chinese export indutry, they would find it hard to get that level of comfort anywhere else, even US.
While I dont understand the logic of going to Brazil the expanding business and closer geographic proximity to US would make it an interesting opportunity.
I am not sure if Foxconn is justified in making crazy demands for tax breaks and other concession. May be for initial setup Brazilian government can give some tax concession but once its the plant is set Foxconn should pay taxes according to Brazil government rules.