Foxconn, most famous as Apple’s China-based manufacturer, has set out a stringent list of demands for Brazil to meet before it builds a $12 billion plant there.
Rumors swirled for long while that Foxconn, also known as Hon Hai, was considering expanding its existing local business and opening a multi-billion dollar manufacturing facility in Brazil, with firmer data emerging only earlier this year. Now Foxconn has revealed its list of requirements before it commits over $12 billion in equivalent currency to build all the infrastructure needed to start churning out iPads, iPhones, and more equipment for Dell and Sony (which it already serves through a smaller plant in São Paulo). Some of them are perfectly understandable, some of them tough. In return Brazil is demanding co-operation from Foxconn, including respect for what the international community may deem as archaic and obstructive labor laws. The thing is if both sides can agree then the situation for gadget manufacturing and delivery over the world could change–particularly for Apple gear.
Foxconn’s demands have been communicated to the government, and include:
- A large facility, housing more than one Foxconn division
- High-speed Wi-Fi
- Expedited shipping at airports, including São Paulo
- Funding support from the Brazilian National Development Bank
- Assistance in finding local, smaller investors
- Infrastructure improvements to permit fast delivery in and out of the site
- Fiber optic Net connections
The government’s response, through president Dilma Rousseff, has been to demand Foxconn employ mainly local labor (no doubt to counter concerns it could ship in experts or even low-grade workers on the cheap from China), share technology and afford “basic respect” of Brazil’s labor laws.
These laws are tricky, and are famous for their antiquated stance and labyrinthine layers, which are tricky enough that it’s habitual for up to a third of Brazil’s workforce to be made redundant every year and that legal challenges can draw out over decades. The demand Foxconn respect them is a direct response to public criticism from Foxconn’s CEO Terry Gou in 2010 that questioned high wages in Brazil as well as the Brazilian work ethic–two things that Foxconn will find challengingly different than back home in China.
But if the plans went ahead, it could set an interesting precedent, particularly where Apple is concerned. Foxconn in China has been embroiled in a scandal over working conditions, which some allege have pushed the company’s employee suicide rate to impossibly high levels. The company is expanding its operations in China, but the demand from its Western clients is still enormous. Though limited supply of component electronics from sub-contracters has played its part, Foxconn will also bear some of the responsibility for supply chain delays that have limited availability of new products like the iPad 2–and notably the slow international roll-out of the iPhone 4.
A South American plant wouldn’t necessarily improve this aspect of the business, but it would allow a whole new–and much speedier–distribution pattern to arise. Foxconn Brazil products could be shared around the U.S. much more quickly than from China, leaving the Asian facilities to service the huge European market, and the swiftly growing markets at home in China and other Asian locations. This could change how Apple typically stages its new product roll-outs, leading to a more efficient and thus income-earning launch for new devices. And if Foxconn Brazil works well, there would be a precedent for other firms currently favoring Asian locations to consider secondary facilities in the South American nation too. Which may be favorable, in the aftermath of Japan’s earthquake and tsunami disasters.
Apple’s (and other Western firms) only concern with the idea may be to ensure that Foxconn’s plant and infrastructure changes doesn’t damage or pollute a nation that’s already in green activists headlights as under environmental risk.