In a move that could signal a shift in strategy away from Asia, iPad-maker Foxconn mulls investing in Brazil

on Tuesday, April 12, 2011

In a move that could signal a shift in strategy away from Asia, iPad-maker Foxconn mulls investing in Brazil  Apple contracts firms throughout Asia and the rest of the world to supply components for and assemble its product lineup. Foxconn Technology Group is responsible for a majority of the Apple's manufacturing operations and according to a recently published report, the company is considering investing $12 billion in Brazil.

If Foxconn were to open manufacturing facilities in the South American country, it could benefit Apple, which many analysts assert is looking to break into Brazil. Currently, Brazil is the world's 8th biggest economy, but it has experienced massive growth over the past decade thanks to its rich supply of natural resources; Apple hopes to tap into the growing consumer spending in the country.

Brazil levies hefty import tariffs on products entering the country and by establishing a manufacturing center there, Foxconn could help technology companies it supplies parts for sidestep the added costs of doing business there. The Taiwan-based Foxconn has shifted some of its production capacity to more rural parts of China where labor is less expensive, but a move into Brazil could mark a significant turning point in the the way companies manufacture goods, some analysts contend.

Though Asian countries have mostly benefited from the influx of businesses looking to capitalize on cheap labor, South, Central and Latin American countries have witnessed an uptick in foreign investment over the past few years as labor costs in those Asian economies inevitably begin to rise as workers demand a bigger piece of revenue.

Brazilian president Dilma Rousseff said Tuesday her government is studying Foxconn's investment plan. Industry watchers assert the move by Foxconn could extend the reach and influence of foreign goods in Brazil. For example, Apple's cheapest iPad retails for about $400 in the U.S., but costs a whopping $860 in the South American country. If companies like Apple are able to sidestep such steep tariffs, they stand to reap great financial rewards.

"You've got an ample range of investments that go from $300 to $400 million to $12 billion over five to six years in the case of Foxconn," Rousseff told reporters about her discussions with various technology companies looking to move manufacturing to the country. "They're proposing a partnership. They came to us and said we want to invest in Brazil."

One thing is for sure: Apple wants Foxconn to set up the new manufacturing facilities in Brazil. Analysts and Rousseff herself has publicly said that tablet computers - a market Apple is predicted to dominate for at least the next four years - present a relatively inexpensive medium through which Brazil's quickly expanding lower middle class could access the Internet. That segment of the population comprises nearly 100 million people - and a lot of dollar signs.

Last year, Apple chief executive Steve Jobs publicly lamented Brazil's strict import tariff laws and its tax system, which he contends isn't conducive to business. In an email Jobs reportedly sent to a Brazilian official who asked him to open one of the company's flagship stores in the country, Jobs lambasted the country's anti-business policies. "We can't even export our products because of Brazil's crazy politics of high taxation," he purportedly said in the email. "That makes investing in the country very unattractive. Many high tech companies feel this way."

Foxconn and Apple have not commented on the talks. If they do begin production in Brazil, it could result in a big jump in revenue for U.S. technology giants - and perhaps signal a shift in manufacturing strategy from the East to the South.

0 comments:

Post a Comment