The Brazilian iPhone was meant to mark a new era.
When Foxconn Technology Group (富士康科技集團) agreed in April 2011 to make Apple Inc products in Itu, Brazilian President Dilma Rousseff and her advisers promised that up to US$12 billion in investments over six years would transform the Brazilian technology sector, putting it on the cutting edge of touch screen development.
A new supply chain would be created, generating high-quality jobs and bringing down prices of the coveted gadgets.
Four years later, none of that has come true.
Foxconn has created only a small fraction of the 100,000 jobs that the government projected, and most of the work is in low-skill assembly. There is little sign that it has catalyzed Brazil’s technology sector or created much of a local supply chain.
The iPhones now rolling off an assembly line near Sao Paulo, the only ones made outside China, carry a retail price tag of nearly US$1,000 for a 32-gigabyte iPhone 5S without a contract — among the highest prices in the world and about twice what they sell for in the US.
That Brazil has so little to show for the Foxconn investment underscores the shortcomings of its industrial policy, defined by costly tax incentives that have driven a widening government budget deficit without spurring growth.
The economy currently hovers close to recession and the productivity of Brazil’s workforce is stagnant.
Apple’s iPhone sales in Brazil have still been rising. Wholesale shipments increased by more than 40 percent to 2.9 million last year, according to research firm Gartner.
Apple declined to comment for this story.
Representatives for the Brazilian government and Foxconn declined to comment on why the investment fell so far short of initial projections.
With wages rising quickly in China, home to most of its 1.3 million employees, Foxconn is trying to control costs by using more robotics and expanding its global footprint to make more electronics in markets where they are sold.
However, navigating politics and managing expectations beyond China has been tricky for Foxconn, whose flagship listed unit is Hon Hai Precision Industry Co Ltd (鴻海精密).
For instance, Indonesia’s government has said for years that Foxconn would invest up to US$10 billion, but plans remain in limbo due to political snags.
In Brazil as in Indonesia, politicians and government officials were the ones making the big forecasts after conversations with Foxconn, which has been more circumspect in its own public statements and projections.
Still, as Foxconn ramped up assembly of iPhones and iPads in Brazil during 2012, reaping tax benefits, the company made a public commitment.
The company pledged an initial investment of 1 billion reais (US$325 million) to anchor an industrial park producing components locally within two years.
The location: Itu, a sleepy tourist town in Sao Paulo state nicknamed “The City of Exaggerations.”
Today the site remains an empty expanse of dirt, where bulldozers have been leveling the land since late last year.
Itu City Councilor Givanildo Soares da Silva, who helped lead the push to donate nearly 40.5 hectares of land to Foxconn, has since turned against the project.
“People are really frustrated,” Silva said. “We were expecting all these jobs by now and it’s still just empty promises.”
The Itu mayor’s office said in a statement it had given all the support necessary to bring Foxconn to the city, declining to comment on reasons for the delay.
Foxconn said in a statement the facility should be operational by the end of this year, bringing its Brazilian workforce to more than 10,000, though it did not provide a specific number of jobs or disclose how many are working on Apple products.
Apple’s official list of its top-200 suppliers, accounting for 97 percent of materials and manufacturing costs, includes just two companies in Brazil: Foxconn and fellow Taiwanese electronics company Lite-On Technology Corp (光寶科技).
Foxconn currently has five facilities in the country that make products under contract for various technology companies, including just one unit producing Apple devices in Jundiai, about 50km east of Itu.
“Foxconn continues to invest in our operations in Brazil,” the company said in a statement.
“We are committed to our goal of introducing innovative technologies that enable our employees in Brazil to focus on high value-added elements,” it added.
RESTRUCTURING: Taichung and Taoyuan profited most from local firms moving back high-end manufacturing amid the US-China decoupling of trade ties, the ministry said The government’s “Invest in Taiwan” initiative might this year see NT$627.1 billion (US$21.7 billion) of investment pledges realized, with several firms raising stakes and two dropouts due to customer losses, Minister of Economic Affairs (MOEA) Wang Mei-hua (王美花) said yesterday. Wang made the statement at the monthly meeting of the Third Wednesday Club, a local trade group featuring the top 100 firms of each business sector. Since early last year, the government has launched three programs intended to help local companies grapple with US-China trade rows and the COVID-19 pandemic, mainly through moving production lines back to Taiwan. Thus far, the ministry
JOBS AT RISK? Most Cathay Dragon routes are to be operated by Cathay Pacific or a subsidiary, but it was unclear how Taiwanese workers would be affected Cathay Pacific Airways Ltd (國泰航空) yesterday said it is planning new flight services for Taiwan as it announced a corporate restructuring that included the shutdown of its regional subsidiary, Cathay Dragon (國泰港龍), and could lead to job cuts in Taiwan. Cathay Pacific said the shutdown means that the one round-trip service between Taichung and Hong Kong per day and seven round-trip services between Kaohsiung and Hong Kong operated by Cathay Dragon prior to the COVID-19 pandemic would be terminated. “The parent company is planning a new schedule between Taiwan and Hong Kong,” Cathay Pacific assistant manager for corporate communications Moses Hou (侯恩錫)
OVERHEATED MARKET?: The gauge would be designed to provide more reliable information than private-sector data, and help improve policymaking, the council said The National Development Council (NDC) is considering creating a business climate index on Taiwan’s property market, allowing policymakers to better monitor market movements and intervene if necessary, NDC Minister Kung Ming-hsin (龔明鑫) said yesterday. Kung made the remarks at a meeting of the legislature’s Economic Committee where lawmakers from across party lines voiced concerns about housing price hikes driven by capital repatriation. Kung said that the council is assessing the possibility of creating an index designed to provide more accountable and transparent information than data provided by private-sector market analysts, and could help improve policymaking. The council would compile a report on
STOCK MARKETS TAIEX closes slightly higher The TAIEX closed slightly higher yesterday as market sentiment remained cautious over the Nov. 3 US presidential election. Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) was again the anchor stabilizing the broader market, preventing the main board from falling into negative territory at the end of the session, dealers said. The TAIEX closed up 14.88 points, or 0.12 percent, at 12,877.25, on turnover of NT$167.982 billion (US$5.81 billion). TSMC, the most heavily weighted stock on the local market, rose 0.44 percent after fluctuating between NT$451 and NT$456. The semiconductor subindex and the bellwether electronics sector