Brazil's $12 billion iPad manufacturing deal in trouble

By Lee Kaelin on September 30, 2011, 10:30 AM

The reported $12 billion deal between Brazil and Foxconn to produce iPads in the South American country is in doubt, according to government officials. Apparently the two can't come to terms over tax breaks and other special treatment, while the lack of qualified workers in Brazil is also cited as one of the main causes.

"The talks have been very difficult, and the project for a Brazilian iPad is in doubt," one official said, speaking to Reuters on the condition of anonymity. "(Foxconn) is making crazy demands" for tax breaks and other special treatment, the official further added.

The original proposal to build the iPad in Brazil was announced in April by President Dilma Rousseff during an official visit to China. Many saw the deal as a sign of the growing economic ties with Asia, and evidence that the South American country's manufacturing economy was growing. Production was meant to start in July, but then was delayed until November. Now it looks more unlikely as each day passes that it will ever start on the scale once envisioned

The Folha de S.Paulo newspaper reported yesterday that funding for the entire project from the BNDES state development bank was in danger of being withdrawn. Without this funding, the deal is almost certainly expected to collapse.

Another big obstacle appears to be Foxconn's wishes to have a new industrial complex built outside of Sao Paulo, a so-called "intelligent city" with the option of possibly having its own energy facilities, roads and other infrastructure. Brazil is already struggling with the $1 trillion investment required in order to host the World Cup in 2014, and the Olympics in 2016, with current estimates envisaging only half of the planned infrastructure to be in place by then.

One option under consideration is the possibility to "bolt together" the iPad using pre-manufactured parts, as opposed locally manufacturing all the parts that make the iPad.

User Comments: 13

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SammyJames said:

Dear Foxconn and Apple:


Thank you.



SammyJames said:

Oh -- and duh -- I meant NORTH American labor. And I really meant UNITED STATES labor.

I'm getting REALLY sick and tired of hearing about all of these so-called "American" companies USING OTHER COUNTRIES FOR THEIR MANUFACTURING. MANUFACTURE HERE.

Questions...? DON'T ASK. JUST DO IT.

mailpup mailpup said:

Ease up on the shouting, SammyJames.

gwailo247, TechSpot Chancellor, said:

Actually Sammy, the problem is not Apple or Foxconn, the problem is the American consumer. People would not pay $1000 for an iPad.

mosu said:

Brazil, listen to me: Drop the iPad idea and collaboration with Apple, only one party wins here and it's not Brazil.

Win7Dev said:

Well, the problem with an $1000 ipad is that the $500 price tag is already to high for the lack of innovative features it has. If anyone can tell me more than two things that are a new technology on the ipad 2, I'll will be amazed.

tonylukac said:

People buy those overpriced other apple products. Let's say it. Manufacture all apple products in the us. They certainly have the cash.

SammyJames said:

mailpup said:

Ease up on the shouting, SammyJames.

You're right. I'm sorry. I should have been much calmer. Seriously.

I guess that maybe the problem IS the American consumer. But I guess also that if Americans were more engaged in producing our own technology, I believe that in the mid- to long-term, we might see a more stable price/performance ratio that would be attaianble. One possible scenario is that, if we hire more people at home to help manufacture products, then we could export the technology and get more money that way. Too, we could raise the price -- but each of us would have more cash in-hand with which to purchase said technology.

We've been on this slippery slope for the last forty years. Sure -- China has made it much cheaper for us to buy things. They have also made it more difficult for us to buy stuff, because so many of us aren't able to pay our medical bills -- let alone buy iPads and MacBook Pros.

I can be reasonable. I'm still upset, because I've been out of a job for over 12 years.

Guest said:

As a brazilian, living in São Paulo and knowing a thing or two about IT, I am sure we do NOT have enough manpower with the skills and knowledge necessary to assemble iPads, in a massive scale, from scratch. Assembling them from imported parts is feasible and I truly believe things will end up like that.

The explanation is that we have an education system that has been in shambles for *decades*, so all the cheap labour we have can barely do simple math, or read single-sentence instructions - we can train them to solder chips on boards, but anything more than that is simply unfeasible.

BrazilMan said:

This for guest 32.;

Are you really from Brazil?

We do not need apple overpriced products.

We already have Our IN HOUSE COMPANY manufacturing GOOGLE TABLETS.ática

SNGX1275 SNGX1275, TS Forces Special, said:

American (US) consumers are the only people that buy Apple products..

Guest said:

@BrazilMan, I'm from São Paulo, generally I'm at USP. I have seen many professors and students with iPads, I have never seen anyone using a touchpad which wasn't Apple.

Do you work for Positivo? Can you tell us wiht more accuracy about the pros and cons of manufacturing electronics in Brazil?

caravel said:

Actually Sammy, the problem is not Apple or Foxconn, the problem is the American consumer. People would not pay $1000 for an iPad.


North American workers effectively compete in a world market for their jobs - the same market as someone in China who gets a few $$$'s per day assembling flashy consumer electronics.

It's a vicious circle and a lot of it comes down to the huge gaps in pay brought on by rampantly excessive profiteering. At one end of the spectrum, you have people earning ridiculous amounts of money for doing nothing, at the other you have those earning hardly enough to live on working seven days a week. Those at the bottom end provide the market for cheap imports and their wages are set by the global market - i.e. to make end product competitive globally, labour costs have to be cut to the bone...

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