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Foxconn Eyes Brazil

The world's biggest electronics manufacturing services (EMS) provider wants to help its OEM clients serve their customers in South America, and it's willing to invest as much as $12 billion on that effort.

The way {complink 2125|Foxconn Electronics Inc.} sees it, mulling over plans to invest in manufacturing plants in Brazil is in line with the company's strategy of “being where the market is” — and Brazil is ripe for expansion in the fast-growing market for electronic devices.

Today, April 13, Foxconn issued a statement that was sparse on details but noted that Brazil had “tremendous economic development potential” and was “strategically positioned to meet the needs of growing markets throughout Latin America.”

If all goes well, and Foxconn invests $12 billion in Brazil to establish manufacturing facilities there, the move will have significant implications for high-tech manufacturing because companies like Apple, Dell, Cisco, and Hewlett-Packard could piggyback on Foxconn’s Brazilian operations to circumvent the burdensome import tariffs on products sold in the country.

Brazilian president Dilma Rousseff, who is visiting China on her first state visit since taking office in January, reportedly said on Tuesday that her government is studying Foxconn's investment plan, which would give high-tech companies a launching pad to manufacture and sell products in Brazil, one of the fastest-growing countries of the BRIC (Brazil, Russia, India, and China) group.

Giving her assessment of discussions with various technology companies, Rousseff told reporters: “You've got an ample range of investments that go from $300 to $400 million to $12 billion over 5 to 6 years in the case of Foxconn. They're proposing a partnership. They came to us and said we want to invest in Brazil.”

Plans seem to be far along. Reports are that Foxconn, which manufactures Apple’s iPod, iPhone, and iPad at its Shenzhen, China, factories, has been in discussions for three months, and the Brazilian government and Foxconn are now negotiating a range of details, including the location of facilities, financing, taxes, broadband infrastructure, and logistics.

Brazil's science and technology minister, Aloizio Mercadante, told reporters that Foxconn is planning to begin assembling Apple's iPad tablet PC at its plants in Brazil by the end of November. It would appear that Foxconn, a Taiwanese company that is part of Hon Hai, is having a better time engaging with Brazil than {complink 379|Apple Inc.} CEO Steve Jobs.

IfoAppleStore.com, a website dedicated to following Apple's retail news, reported last year that Steve Jobs allegedly told a Brazilian government official in an email that there were no plans to open a retail store in the country because of its “super crazy” import taxes.

In light of Foxconn's plans, Jobs may change his mind. A Foxconn factory that enjoys the benefits of being considered a local Brazilian manufacturing facility producing Apple products would bypass import taxes, take advantage of local tax incentives, and spur the sale of iPads, iPhones, and iPods. Currently, Apple's cheapest iPad sells for about $860 in Brazil, but iPad prices could be reduced if a Foxconn manufacturing facility is established.

Furthermore, a Brazilian manufacturing plant could bring the electronics supply chain closer to the US, in addition to fueling sales among Brazil's burgeoning middle class, many of them first-time buyers of personal computers and other high-end consumer electronic products.

By all accounts, while Foxconn has had its own problems — namely, the recent spate of suicides among company employees — the Brazilian authorities are welcoming the company with open arms.

It's not surprising that China and Brazil would want to adopt a much more expansive trading relationship in the high-tech sector. Last year, the flow of trade between the two countries reached $56 billion, a growth of 52 percent from 2009, which was the year when China usurped the US to become Brazil's largest trading partner.

If Foxconn does establish operations in Brazil, it will be part of a growing trade phenomenon between two countries that are high-tech powerhouses. It will be interesting to see what impact this will have on high-tech OEMs' sourcing plans and distribution strategies.

13 comments on “Foxconn Eyes Brazil

  1. AnalyzeThis
    April 13, 2011

    I sincerely doubt that many EBN readers think that Foxconn expanding into Brazil is not a smart move.

    It absolutely makes sense and you mentioned just a few of the numerous reasons why.

    In my mind, there are very few concerns or potential issues here. As you mention, Brazil doesn't seem particularly concerned by the treatment-of-workers issues and conversely, it doesn't seem that Foxconn has concerns over the quality of the labor force available in Brazil.

    I don't see how they expect to be assembling iPads in Brazil by November, but long-term, I can certainly see some significant manufacturing production and investment in that region.

  2. The Source
    April 13, 2011

    DennisQ

    There’s no doubt about it, Foxconn knows that there are a lot of advantages to setting up a manufacturing  plant in Brazil.  As Foxconn expands its global manufacturing facilities in a whole new regions of the world, I’m wondering what impact this will have on those companies that don’t have agreements with Foxconn?  How will Foxconn impact OEMs and their Latin American growth strategy?  It will be so interesting to see how this all plays out.

    Thanks for your comment, DennisQ

  3. eemom
    April 13, 2011

    This is a very smart move for Foxconn.  They along with their customers that utilize their services stand to gain from the new manufacturing facility.  I am left to wonder what the fall out will be from such a move.  How will it impact the competitive field for tablets as well as portable audio devices?  Also, concern is raised for the people who will be employed by Foxconn as to their treatment and working conditions.  I am not suggesting that they will be sub-par, I am hoping that they will set the standard.  I also feel that November is a very ambitious date to get the facility up and running.

  4. Jay_Bond
    April 14, 2011

    This is a great move for Foxconn. Setting up a manufacturing plant in one of the fastest growing countries will allow for many advantages. It is sure to cause other large companies to follow suit. I find it hard to believe that by November they will be producing products ready for delivery. One of the questions they didn't answer is what will happen with their plant in China? Is this going to be shut down, or are they just increasing their overall capacity?

  5. mfbertozzi
    April 14, 2011

    Maybe it is not easy to answer on what will happen, but don't forget China and Brasil are teaming also on REEs market taking the leadership and some optimizations in terms of production and capacity is going to come also from those actions.

  6. tioluwa
    April 14, 2011

    Brazil, as a member of the BRICS Nations certainly holds great potential in the near future.

    I don't think Foxconn is changing base from China to Brazil, but rather expanding, maybe just trying to get their own piece of the economic growth in the region.

  7. Anand
    April 14, 2011

    “Brazilian manufacturing plant could bring the electronics supply chain closer to the US”

    Nicole,

      Manufacturing plant which is nearer to the US will definitely have many advantages over manufacturing plant in China, especially when the transportation costs are significant. Do you think this will eventually eat away the business from Foxconn China ?

  8. The Source
    April 14, 2011

    Anandvy, TIOLUWA and   Jay_Bond,

    I’ve heard that Foxconn will continue to operate its Chinese-based plants, and has no intention of leaving China. I do think that once Foxconn produces Apple's products in Brazil there will naturally be a realignment of Apple’s supply chain.  How this will affect Apple’s competitors is unknown. 

    It will be very interesting to see how Apple’s competitors – their products and supply chains – are impacted by this new development.     

    Again, thanks for reading the article and for taking the time to comment.

  9. mario8a
    April 14, 2011

    Hi

    I think is great Foxconn is lloking for options for expansion in Brazil, however for what I saw with other big companines stablished in South America their biggest cocern is the safety of their goods and making a safe trip from the manufacturing house to their customer hands, that will be a good challenge as the new guys in the neighborhood.

    Foxconn in SenZehn China increased the base salary to the whole operation force about 25% and this created a domino effect in the companies stablished in the DonGuan and GuanDong area and now the south of China is not that promising as it used to be, this might be a reason for looking expansion out of their confort zone.

    Best Regards

     

  10. The Source
    April 14, 2011

    mario8a

    You make some very interesting points regarding the safety of good at manufacturing plants in Brazil as well as Foxconn’s recent hike in wages for its Chinese workers.  We will know soon enough how much Foxconn is prepared to pay its  Brazilian workers. 

    Thanks for your insightful comment.

  11. proent
    April 15, 2011

    Taiwanese as I known of is smart and calculative group, they are trained by Japanese culture many many years ago, work on something Japanese do not engage. This is how they are today. Brazil is a fat land many years later when most of their oil well completely established like Saudi and Iran. It is God's gift to Brazil, It won't be wrong for Foxconn to foot in Brazil, land of the future rich.

     

  12. mario8a
    April 18, 2011

    Thank You very much for your comments.

    I'll be looking foward for a job openning in Foxconn Brazil (JK)

    Regards

     

  13. Mr. Roques
    April 28, 2011

    Do you think China's cheap labour, etc is reaching a turning point? Could they be possible running out of people?… I seriously doubt that the manufacturing company in Brazil will be only for the internal market… it will be enough to satisfy the entire LATAM region. 

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