Foxconn's iPhone plant in Zhengzhou built on billions in Chinese government aid - report
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.
Image Credit: Gilles Sabri? | New York Times
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.
Image Credit: Gilles Sabri? | New York Times
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 $10 billion was spent on expanding an airport just miles away from the Foxconn factory.
Apple has taken advantage of low Chinese manufacturing costs to keep profits high, while deflecting concerns about labor, safety, and environmental issues. The company has worked to address those problems, but hasn't completely rectified them.
Comments
Carrier cost wat? 70$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.
Typically govt incentives come only when the manufacturer makes some enforceable long-term commitment.
I suspect that Foxconn is rotten to the core. Competition for that mob in Korea perhaps.
The rise of the iPhone mirrored the collapse of their businesses. Far fetched?
All it takes is one or a few Syhsters to think this is a good idea and bingo, you have a lawsuit (or twenty)
It's rather silly and naive to think otherwise.
These incentive and stimulus programs have always been a pervasive part of the US economy at all levels of government. The federal government has entire agencies like the Economic Development Administration (EDA) purposely tasked with enhancing economic growth and innovation for the benefit of US based industries and businesses. State and local governments are just as actively involved in programs to bring jobs and taxes to their jurisdictions.
I can't believe that a major US news agency would try to spin this FoxConn deal into a China-vs-US controversy. The same exact thing has been taking place surrounding the siting of just about every major professional sports franchise (NFL, NHL, MLB, NBA, etc.) in every US city that has a team. Cities and local municipalities bend over backwards financially, install all kinds of infrastructure, and levy taxes on all their residents (whether they are sports fans or not) just for the privilege of getting a professional sports company to locate to their city and take on their city's name.
Business runs on money and you have to spend money to make money.
the article documented how Intel had developed an "Ideal incentive matrix" which was a shopping list of tax breaks and other incentives they were demanding of local communities that were bidding to recruit Intel - it is an amazing stroy and amazing list - and a blueprint for what Apple and Foxconn have done in China - and a key insight of how global corporations now dominate the global economy
There are no jurisdictions that I'm aware of that prohibit a corporation accepting state aid directrly or indirectly from a foreign government when on foreign soil. That would be a very odd law, since countries generally only make laws that apply on their own soil.
The only thing I can assume you are referring to is the Ireland situation, but that is the EU law, and the EU sets supranational law across its members states, which include Ireland. China isn't a member of the EU or any other economic blocs that have state aid laws.