Foxconn receives tax breaks in Brazil; iPad production slated to commence soon

Thu, Feb 2, 2012


Foxconn, Apple’s largest manufacturing partner, recently received a few sought after tax breaks that will result in the Asian-based company opening up a plant in Brazil and manufacturing iPads.

The Brazil-based Folha website reports:

The determination provides for exemption or reduction of the IPI (Excise Tax), PIS and Cofins for companies investing in research and development of technology products.

According to the ordinance today, the rule will apply to tablets with touch screens, no keyboard and weighing less than 750 grams.

Also included as accessories, cables, power supplies and manuals that are related to the tablets.

With the iPad 2 weighing in at a tad over 600 grams, Apple’s market leading tablet clearly falls under the exception.

Notably, Apple is taking a keen interest in Brazil and looks at it as an extremely important market, second of course to China. During Apple’s earnings conference call last week, Apple CEO Tim Cook stressed that Brazil was squarely on Apple’s radar.

We’re selling in Brazil through carrier partners and online. We’re selling in Russia through carrier partners and reseller partners. We’re selling in India through carrier partners and reseller partners. I’ve tried to be clear in the past that we have our time and energy in China at the moment. We’re not ignoring others, but we’re spending less time in the others. Brazil is the next country, we’ve begun to go deeper in that country.

During the recent holiday quarter, sales in Brazil climbed 118% year over year.

That said, the presence of an iPad manufacturing plant in Brazil should do wonders for Apple’s interest in making inroads there. As it stands now, high taxes on imported foreign made goods result in products like the iPad costing nearly twice as much as they do in the US. For example, a base model iPad 2 – which sells for $499 here in the US – might cost in the $900 range in Brazil.

Foxconn already has two plants in Sao Paulo and has already invested $300 million into a third that will likely be tailored for iPad production and will accommodate 1,400 employees.

Originally, Foxconn was hoping to begin iPad production in July 2011 before they became entangled in a dispute with the Brazilian government.  With all of the aforementioned roadblocks now out of the way, iPad production should begin relatively shortly.

Lastly, it’s worth pointing out that Apple in January reportedly hired former Sony executive Anderson Teixeira – who was born in Brazil by the way – to head up the company’s Latin American division.



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