12 Billion dollar Foxconn factory in Brazil is in doubt

By Mike Dunn September 29, 2011

Foxconn is famous mostly due to the fact that it makes several Apple products, and because there is a history of suicides at its factories. Well Foxconn is making news again thanks in part to its attempt to build a 12 billion dollar iPad factory in Brazil.

According to a Reuters report the Taiwanese manufacturer is having a hard time at the bargaining table with Brazilian officials. The source says that the 12 billion dollar deal is now “in doubt” due to failed negotiations. The major sticking point seems to be tax breaks that Foxconn was hoping to receive but Brazil isn’t eager to give out. The source says, “(Foxconn) is making crazy demands” for tax breaks and other special treatment.”

Brazil not only has high taxes for products produced in the country they also have high taxes and tariffs on imported products. For example a 16 gigabyte Apple iPad which retails for $500 in the U.S. sells for about $900 in Brazil.

Another hurdle facing the huge project is the labor pool. Brazil is hosting the 2014 World Cup, and the 2016 Olympics and needs to execute several big building projects to make those events a reality. There is doubt that the country can produce enough of a work force for all those projects, let alone an additional 12 billion dollar iPad plant.

The conclusion is that Foxconn might have to scale down the project and reduce what exactly will be produced in Brazil. Originally Foxconn wanted to build screens and other components locally, but now they might be looking to just assembling parts made elsewhere around the world.

We are curious if the news that Pegatron has won the iPad 3 production contract with Apple might also be throwing a monkey wrench into Foxconn’s plans to build a plant that was meant to focus on building iPads.

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