(Corrects spelling of Brazil's science and technology minister
to Aloizio Mercadante, not Mercadente in eighth paragraph)
* Move to aid tech powers like Apple
* Brazil says studying Foxconn's plan, talks ongoing
* Foxconn to start assembling iPad in Brazil by end-Nov
(Adds analyst's comment, details on Brazilian tariffs)
By Ray Colitt and Brian Winter
BEIJING/SAO PAULO, April 12 IPhone maker
Foxconn Technology Group is considering investing $12 billion
in Brazil, a move that could benefit clients such as Apple Inc
(AAPL.O) looking to break into the world's No. 8 economy.
Brazilian president Dilma Rousseff said on Tuesday her
government is studying Foxconn's investment plan, the latest
move by the manufacturer to expand its manufacturing operations
beyond the booming southern Chinese city of Shenzhen.
Rising labour costs have forced many companies to set up
operations in cheaper parts of China, but a Foxconn move into
Brazil would help tech companies sidestep hefty import tariffs
on products they sell in the South American country. Other
clients of Foxconn include Hewlett Packard (HPQ.N) and Dell
Tech companies are keen to sell to Brazilian consumers
hungry for high-end electronics, but gadgets are often priced
out of the market because of high production costs and import
tariffs. Apple's cheapest iPad, for example, retails for about
$860 in Brazil, versus $400 in the United States.
"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," Rousseff told reporters. speaking of discussions her
government was having with various technology companies.
"They're proposing a partnership. They came to us and said
we want to invest in Brazil," she said during a visit to
Beijing, where she is meeting Chinese President Hu Jintao.
Foxconn, a Taiwanese company that also controls Hon Hai
(2317.TW), manufactures most of Apple's products -- including
the latest hit gadget, the iPad -- at its Shenzhen factories.
"We've been talking to them for three months," said Aloizio
Mercadante, Brazil's science and technology minister.
TABLETS FOR THE MASSES
Rousseff herself has identified tablet computers as a
relatively cheap way to promote Internet access for Brazil's
emerging lower middle-class, which accounts for about half the
190 million population.
Brazil has one of the steepest import-tariff regimes in
South America, and is one of the world's most expensive places
to do business because of a heavy tax load, an overvalued
currency and restrictive labor laws.
But as one of the fastest-growing BRIC countries, it has
long been viewed as an attractive consumer market, one which
some -- like Apple -- have had difficulty breaking into because
of steep tariff barriers. Foxconn's move would help clients
expand into local markets while potentially also offering a
base for export to neighbouring regions.
To get around hefty tax burdens, electronics vendors have
increasingly set up local manufacturing, partly also to hitch a
ride on attractive tax benefits. Almost all locally assembled
electronic goods are produced near the Amazon city of Manaus,
where duty-free status helps make costs more viable.
The Brazilian government and Foxconn are now negotiating a
range of details, including the location of facilities,
financing, taxes, broadband infrastructure and logistics.
Mercadente also told reporters Foxconn is planning to begin
assembling Apple's iPad tablet PC at its plants in the South
American country by the end of November.
"The negotiations are far from complete but I'm confident,"
Calls to Foxconn's spokesman went unanswered. Apple
declined to comment.
Foxconn is a key supplier to top technology brands, which
typically do their own research and design work in-house and
outsource manufacturing to Foxconn and rivals such as
Chairman Terry Gou has been ramping up the company's
capabilities in the LCD sector in recent years, setting up its
own flat panel display unit and buying Sony's (6702.T) LCD TV
manufacturing plant in Slovakia. The company's LCD unit is
Chimei Innolux (3481.TW).
Besides Foxconn, other Taiwanese companies that operate
factories in Brazil include Compal (2324.TW), the world's No. 2
contract laptop PC maker.
Foxconn's last major investment outside of Shenzhen was in
October, when it announced a $2 billion plant in Chengdu, in
China's Sichuan province. The company has roughly 1 million
workers in China, and is the country's largest private sector
But over the past year, its Shenzhen base has come under
fire after a string of worker suicides, blamed on harsh living
conditions and pressure. Apple's secretive culture -- and its
stringent demands -- were blamed by media for one incident in
which a worker reportedly killed himself after losing an iPhone
prototype. CEO Steve Jobs has called the reports of worker
deaths "troubling", while Foxconn has since raised wages and
tried to improve living conditions. [ID:nTOE69005X]
(Writing by Kelvin Soh and Edwin Chan, Editing by Alex
Richardson, Don Durfee, Mark Potter and Bernard Orr)