Massive government incentives are likely to keep iPhone production in China
Zhengzhou's Foxconn factory has received billions of dollars worth of government benefitsBy Rob Thubron 27 comments
Reports emerged last month claiming Apple had asked its two iPhone manufacturing partners to investigate what it would take to move the handsets' assembly from China to the US. But despite the transfer being one of Donald Trump's pre-election promises, production seems certain to stay in Asia, thanks to the numerous incentives offered by the Chinese government.
Last month, the Nikkei Asian Review claimed Foxconn "has been studying the possibility" of opening US-based iPhone-manufacturing facilities. But a new, in-depth investigation by the The New York Times highlights why such a move is highly unlikely.
The report looks at the giant Foxconn factory in the city of Zhengzhou, which locals call "iPhone city." When running at full capacity, the facility, which already produces half the world's iPhones, can churn out 500,000 Apple handsets a day.
The Times reveals that the Chinese government gave $600 million toward the construction of the factory, along with another $1 billion to build housing for its hundreds of thousands of employees. Other benefits include discounts on energy and power generator construction costs, corporate and value tax breaks for five years, help with worker recruitment and training programs, and a $10 billion upgrade for a local airport to make exporting products quicker and easier.
While Donald Trump said he would "create incentives" to tempt Apple into moving its facilities to the States, they are unlikely to come anywhere near the kind of aid and tax breaks the Chinese government has given the Foxconn facility. There's also the issues of lower labor and component costs in China.
But Apple's Chinese setup could still be threatened by Trump. The country has promised to "take a tit-for-tat" approach if the President-elect follows through with his campaign promise and imposes a 45 percent tariff on imports from China.