Brazil Approves Tax Incentives to Begin iPad Production as Apple Targets its Next Major Market

MacRumors

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Brazilian newspaper Folha reports [Google translation] that the Brazilian government has officially approved tax incentives that will allow Foxconn to begin producing iPads in the country. Interministerial Ordinance #34, signed on Monday and published in Brazil's official register today, specifically provides for a reduction in or exemption from certain taxes associated with the production of touchscreen tablet devices lacking a keyboard and weighing less than 750 grams.
According to ministerial decree 34 published Wednesday in the "Official Gazette", the company will be entitled to the benefits provided for in Decree 5906 of September 2006.

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.
The iPad 2 of course fits within those specifications, weighing in at just over 600 grams with only slight variation among the various models. The ordinance also permits the production of accessories, cables, power supplies and manuals associated with the allowed tablet devices. While the ordinance applies generically to tablet devices, it has clearly been written to support Foxconn's plans for the iPad.

Last April, Foxconn announced a major push to bring iPad production to Brazil, but the company's efforts were slowed as it negotiated with government officials over tax breaks and other issues. As recently as October the company had signaled its intention to begin production by December, and while the company has missed that target it now appears ready to move forward.


Foxconn's Brazilian iPhone and iPad factory (Source: Cult of Mac)

The launch of iPad production in Brazil comes at a key time for Apple, as CEO Tim Cook noted just yesterday during the company's earnings conference call that Brazil is its next area of emphasis after China among the "BRIC" countries with newly advanced economies. Russia and India are the other two countries in that grouping and Cook acknowledged that Apple has begun to "go deeper into Brazil" as its next target, although he cautioned against any expectations of Apple retail stores arriving in the country over the near term.

High import taxes on foreign-made goods have prevented Apple from making significant inroads in Brazil, with iPad pricing currently starting at the equivalent of US$925 for the 16 GB Wi-Fi iPad 2. With Foxconn moving iPad production to Brazil under the new tax incentives, Apple should be able to offer more competitive pricing on the device as production ramps up. Photos of a Brazilian-made 8 GB iPhone 4 showed up in late November, suggesting that Foxconn is also ramping up domestic production of new iPhone devices for Brazilian customers.

Article Link: Brazil Approves Tax Incentives to Begin iPad Production as Apple Targets its Next Major Market
 

macduke

macrumors G4
Jun 27, 2007
10,617
14,191
Central U.S.
If Apple is making the iPhone 4 in Brazil now, and it's the cheaper alternative to the iPhone 4S, then this rumor could lead credibility to the idea of an iPad 2 alongside the iPad 3 at a reduced price point. Probably iPad 2 16GB for $399 and iPad 3 32/64/128GB for $499/599/699.
 

Teste

macrumors 6502
Jan 8, 2011
353
5
If Apple is making the iPhone 4 in Brazil now, and it's the cheaper alternative to the iPhone 4S, then this rumor could lead credibility to the idea of an iPad 2 alongside the iPad 3 at a reduced price point. Probably iPad 2 16GB for $399 and iPad 3 32/64/128GB for $499/599/699.
Or maybe Apple will simply take so long to introduce the iPad 3 here that they would rather sell only the iPad 2 here for now (and only the iPad 3 everywhere else). Or maybe Apple thinks we don't have enough money for an iPad 3, only for a cheap iPad 2, so they wouldn't even think about officially selling the iPad 3 here.

I doubt both of the above, but the fact that the iPad 2 will be produced here in Brazil isn't indicative of Apple keeping both models around in the rest of the world, IMO.

(I plan to buy an iPad 3 myself. But I hope the iPad 2 produced here will be of good quality and have at least a slightly smaller price; I wouldn't be surprised if retailers keep the current prices just to increase their profits.)
 

andrewlgm

macrumors 6502
Feb 16, 2011
255
10
NYC
This is great news!
I don't see why this is great news - economically speaking. It's great for Brazilians, sure, but still pretty bad for us back in America. The reason why Brazil has such high import taxes is precisely for this - to bring companies into the country. As its employment and education numbers rise, and the number of people living in misery fall - almost 30 million in the past decade have joined the middle class - the purchasing power increases. Therefore if companies want to profit from the country joining the developed world - they will have to go and manufacture there. Three years ago the price of a macbook pro in Brazil was going for $13,000 reals - an estimated $7,000 dollars.

Perhaps we ought to do this here, place heavy import taxes on products manufactured in China, India, Brazil, etc, raising the price of the simplest macbook pro and other similar computers to $2,000 or more and we'll see apple moving back to manufacture in the US. That's what the government should have done 10 years ago when manufacturing jobs started disappearing as a result of free trade signed in the 90s, and not ask Jobs "what can be done to bring Apple back to the US?"
 

entropys

macrumors 6502a
Jan 5, 2007
543
636
Brisbane, Australia
Macduke, the price of an iPad in Brazil would have as its base point the basic world price of an iPad. Like every other country, this will vary according to local selling cost factors. So, whatever the price in Brazil, it will have nothing to do with how much Yanks pay for an iPad.

Brazil is doing what a lot of countries have tried over the years, placing massive tariffs on imported manufactured goods in an attempt to create a local industry. All that happens is that the international producer might set up a local assembly shop of (mostly) imported parts to avoid the taxes, and pockets higher margins in economic rent as even without the tariff higher than world prices can still be charged (there is no competition from imports to keep them honest). They can even get away with a lesser product because the tariff wall protects them from the higher cost to make latest tech (note Brazil currently makes iPhone 4, not 4S).

This strategy never works of course. If the prop of the tariff wall is ever reduced, the local arm of the businesses' first strategy is to squeal a lot, seeking a reinstatement of the tariff or government subsidies instead. And of course, the second strategy is to wind up local operations as the local business structure is uncompetitive with imports, molly coddled as it was behind the tariff walls. In the end all that happens is that the local consumer has over the years paid billions of dollars extra for products that are always just one step behind in a technological sense.

I know this because my own country pursued this exact same strategy sixty years ago, promising a glorious future in manufacturing, but really only leading to a brake on living standards that reached its lowest point in the seventies which only began to be reversed when tariffs started to be cut back. The biggest beneficicairy of our tariff wall was the car industry, which to this day constantly attempts to blackmail government for special treatment. Constantly bleats like a calf being weaned.
 

wickerman1893

macrumors 6502
Dec 16, 2008
468
0
This is good. I'd rather see production in Brazil than China. But full production in the U.S.A would be great! However that would result is some major loss of profit...:(
 

entropys

macrumors 6502a
Jan 5, 2007
543
636
Brisbane, Australia
Andrew, High tariffs reduce the standard of living in the tariff imposing country, as it means that goods cost more. So if a person has to use more of their money on a phone or a computer or a car, they have less of it to spend on education etc. This is true if it is an imported product or a product sheltered behind a tariff wall. The price of the product will be higher than the world price regardless.

Brazil's economy will grow if it concentrates on what it does best, resources and primary production. Let these industries maximize their potential and be outward focussed on export earnings, which actually provides the cash to raise standards of living for the community. Not squabble over a small pond surrounded by a tariff wall.
 

daxomni

macrumors 6502
Jun 24, 2009
453
0
Andrew, High tariffs reduce the standard of living in the tariff imposing country, as it means that goods cost more.
Yeah! Brazil should be following America's lead and watching their middle class shrink back into poverty. Nothing like a brand new manufacturing plant to teach those silly Brazilians how bad their policies are working.
 

firewood

macrumors 604
Jul 29, 2003
7,660
889
Silicon Valley
High tariffs reduce the standard of living in the tariff imposing country, as it means that goods cost more. So if a person has to use more of their money on a phone or a computer or a car, they have less of it to spend on education etc. This is true if it is an imported product or a product sheltered behind a tariff wall. The price of the product will be higher than the world price regardless.
This assumes that the tariff money is totally thrown away (or eaten by graft and corruption). If however some portion makes into into government spending on such things as educational system and road repairs, then as the price of certain tariff'd products gets higher, the cost of others (tuition and road taxes) might get a delay in increased prices to the consumer.

The free enterprise argument is that each person should choose what benefits them the most (e.g. maybe they want a computer and a car, but don't have kids in public schools and prefer driving on pot-holed dirt roads).
 

katewes

macrumors 6502
Jun 7, 2007
420
91
If Tim Cook is such a genius at creative manufacturing, he ought to find a way - when others say it is impossible - to bring back manufacturing to the United States. Experiment. Use automation. Find ways to make things more efficient. Right now, even as a non-American, it sickens me to see Apple's growing pile of cash, and their insistence that Apple cannot manufacture in the U.S.A.

As I see it, if Apple has $99 billion in the bank from manufacturing outside the U.S.A. - wouldn't they still be happy if it had been, say, $50 billion with manufacturing in America. There comes a point there having less profit, but still pretty good profit, is actually better if it brings back not just retail jobs but the whole manufacturing process to America. It's not just jobs, but the technology, know-how.

Germany has maintained its manufacturing base, and it's only corporate greed in America that has prevented it from doing what Germany has done.

American people, think. Imagine this going on for another 30 years, the continual transferring of manufacturing overseas, simply because of corporate greed. America will become another basket-case economy like Russia with its corruption.

I love Apple products, and have for decades - but I loathe Apple's corporate greed.

For me, Apple's grovelling and dry-swimming in its pile of cash is the epitome of everything that is sick in corporate America - the pursuit of cash over any other principle in life.
 

Ryth

macrumors 68000
Apr 21, 2011
1,565
119
Liberal whining about how Apple isn't creating jobs here but instead is using slave labor in Brazil to commence on all major news sites in...3...2...1...

EDIT: Looks like the above poster beat the countdown.
As I see it, if Apple has $99 billion in the bank from manufacturing outside the U.S.A. - wouldn't they still be happy if it had been, say, $50 billion with manufacturing in America. There comes a point there having less profit, but still pretty good profit, is actually better if it brings back not just retail jobs but the whole manufacturing process to America. It's not just jobs, but the technology, know-how.
Apple is a global company. You need to really start realizing that Apple's base is the world...not just the USA.

Also, those retail jobs ARE here already.

And you still are forgetting the 4+ billion in payments to developers, many here in the USA, along with all the indirect jobs from accessories, cases and so on.

If Tim Cook is such a genius at creative manufacturing, he ought to find a way - when others say it is impossible - to bring back manufacturing to the United States. Experiment. Use automation. Find ways to make things more efficient. Right now, even as a non-American, it sickens me to see Apple's growing pile of cash, and their insistence that Apple cannot manufacture in the U.S.A.
So again, you want Apple to bring manufacturing back here to create jobs, BUT you want it to use automation for more efficiency. You do realize the irony of your statement right? The amount of jobs that came back would be minimal due to automation. On top of that, who is going to tool/streamline these shops...Apple has already stated America does not have the mid level engineers needed to do this in mass.
 
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kiljoy616

macrumors 68000
Apr 17, 2008
1,795
0
USA
Nice to know no Americans will be working on my next iPad 3. Would not want any Americans messing up my fantasy of a perfect device. :rolleyes:
 

Les Kern

macrumors 68040
Apr 26, 2002
3,063
76
Alabama
Great News Indeed!

Now The US Government should start tempting Apple to do more in the USA with tax incentives.
Horse Manure. Spend a few seconds on research next time. Brazil got that factory SIMPLY BECAUSE Brazil has a 49% tariff on all imported electronic goods, and it was cheaper for Foxconn to built a plant and hire local labor AT A LIVING WAGE than to ship and pay that tariff.
But here, no, we eliminated all tariffs that protected US workers, instead giving tax breaks to Apple and every other manufacturer that sent jobs overseas, thus the ongoing destruction of the middle class here. I am TIRED of subsidizing Apple's goddam business. Recently I saw that if iPads were made here they would be about 20% more expensive. I'd feel better paying that knowing Apple was doing the right thing by supporting OUR workforce and OUR country instead of being part and parcel to ****ing slave labor, plus the PR would be phenomenal for them. But no, the shareholders rule, and Apple will horde that 97BN like Uncle Scrooge.
 
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Rocketman

macrumors 603
We should expect the Brazilian plant to serve quite a bit of the "American" market so Asian plants can ship to Eurasia.

Mexico is too politically unstable to be a factor, but Brazil is a short boat ride from the entire American and African markets.

I predict Apple will build factories in Africa in the next 5 years and be a primary anchor in economic and social change there.

And make cute devices. :D

Rocketman

In response to another commenter here, globalization (exporting of our middle class and hiring entry level clerks) was perfected by Wal-Mart. Apple manufactures overseas, but provides after sale economic benefits to our citizens with devices. They are not shampoo.
 

firewood

macrumors 604
Jul 29, 2003
7,660
889
Silicon Valley
...bring back manufacturing to the United States. Experiment. Use automation. Find ways to make things more efficient.
Been there. Done that. Both Apple and Next built several state-of-the-art automated factories in California. They experimented. They used automation. Guess what? Specialized manufacturing companies in other countries could manufacture higher quality stuff faster. Why? Look at how many technicians and manufacturing engineers universities in Asia graduate every year, and compare that to the U.S.

Answer this. How many bright university students that you know in the U.S. want a career in manufacturing?

Now look at that number for Brazil. It might surprise you.

I predict Apple will build factories in Africa in the next 5 years and be a primary anchor in economic and social change there.
Not enough schools and universities in Africa graduating enough trained technicians and engineers for that to happen. And unfortunately, this change looks like it might take a lot longer than 5 years.
 
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katewes

macrumors 6502
Jun 7, 2007
420
91
Apple has already stated America does not have the mid level engineers needed to do this in mass.
Yes, I too read the NYT article. And you believe Apple?

And even if Apple is correct, sometimes it's a chicken or the egg scenario. If corporations start bringing back manufacturing jobs - and there are insufficient engineers - that is the catalyst to get more such engineers trained.

Your comment is in the category of "we cannot do it".

We're looking for the 1% in society who see an impossible situation, and can see a solution that others can't. All I'm saying is, people say Tim Cook is a genius at supply and manufacturing, so I'm urging Tim Cook to use his genius to find a way where others can't,

Ryth's comment is merely the 99% sheep-herd mentality that says it can't be done.

I'm looking for the 1% genius who finds a way where no one else can.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,892
1,466
Palookaville
It doesn't really make any sense to quote the price of products sold in Brazil in US dollars. Brazil doesn't use US dollars as their currency. The Brazilian real is one of the most overvalued currencies in the world today, and the US dollar one of the most undervalued. This is always going to make products priced this way look "cheaper" in the US compared to Brazil. I doubt manufacturing Apple products in Brazil will make a whole lot of difference to the price Brazilian consumers pay for them.