Roger Fingas
Foxconn's Zhengzhou factory — where about half of all Apple's iPhones are made — exists in large part because of billions of dollars in handouts and tax breaks from the Chinese government, a report pointed out on Thursday.
Some $1.5 billion alone was provided by local government to help Foxconn build worker housing and large portions of the factory, the New York Times said. It continues to offer money against energy and transportation costs, while paying bonuses for meeting export targets, and even helping the company recruit and train new staff — with hiring subsidies to boot.
The full extent of Foxconn's government backing is uncertain, as subsidies haven't been publicly disclosed by either party. The Times' information is said to come from secret government records, as well as interviews with over 100 people, ranging from truck drivers through to tax specialists and both current and former Apple executives.
Officially, Apple told the Times that while it was aware of Foxconn getting infrastructure aid, it hasn't been party to the manufacturer's talks with government, and isn't aware of any specific grants, subsidies, or tax breaks.
The city of Zhengzhou allegedly let Foxconn skip both corporate and VAT taxes for five years, with a promise of halving rates for the following five. Similarly, it lowered the amount of money it took in social insurance and other payments by up to $100 million per year, and granted a $250 million loan.
It has even paved roads and built power generators and pipelines, and offered a 5 percent discount on energy bills. Over $10 billion was spent on expanding an airport just miles away from the Foxconn factory.
Apple has taken advantage of low Chinese manufacturing costs to keep profits high, while deflecting concerns about labor, safety, and environmental issues. The company has worked to address those problems, but hasn't completely rectified them.
Charles Martin
Malcolm Owen
William Gallagher
Christine McKee
Wesley Hilliard
14 Comments
The United States has to do this type of thing to get manufacturing back to the US...if it wants it. I am not sure how else you combat this properly. What is unclear for me is it really worth it or is there a better solution?
China and what has happened in Ireland demonstrates that a global company such as Apple can set up its manufacturing and corporate structures in places that offer the best deals. Is this unfair to other counties in breach of international trade agreements or is it forward thinking job creating and long term investment by regional or national governments? It will be interesting to see in Trump will be prepared to offer incentives to persuade Apple to return some of its manufacturing to the USA, and if he does, how other counties will then react during his attempt to encourage more free trade with the USA.
Yeah guess what? Other countries pay big bucks and charge their taxpayers big bucks, to promote industry.
Carrier cost wat? 70$M to save 700 jobs?
If you want the CLUSTER of capable high tech factories needed to produce iPhones? Pres Elect Trump, you are gonna pay a LOT more than $70 Million.
It has to be creating the right conditions for LOTS of companies to repatriate manufacturing. With a FORTUNE in govt subsidies/corporate welfare.
You can't just slap tariffs on Chinese goods and spark a trade war. That will simply undermine the US economy.
The solution is Uncle Sam taking out the checkbook.
I wonder if China's deal with Foxconn has any exit penalty... e.g., "If Foxconn moves manufacturing out of China within the first 15 years, Foxconn must pay a fee of $X to the government."
Typically govt incentives come only when the manufacturer makes some enforceable long-term commitment.
I smell a bunch of lawsuits heading Apple's way. In many places state aid like this is very illegal.
I suspect that Foxconn is rotten to the core. Competition for that mob in Korea perhaps.