IPad Plant Stalls, May Affect Production

Apple’s plan for a new iPad plant in Brazil may fall through, leaving the company to rely on other ways to meet demand for the popular tablet.

IPad manufacturer Foxconn had been negotiating a deal to produce $12 billion worth of products in the country, but new concerns have put the agreement in jeopardy. Stalled negotiations with the Brazilian government as well issues about lack of skilled labour are leading Apple supplier Foxconn to rethink its plans.

Foxconn has made “crazy demands” for tax breaks and also wants priority treatment at Brazilian customs, according to a government official. The manufacturer was supposed to begin production as early as December in Brazil, but the country’s resistance to Foxconn’s demands now makes that unlikely.

The two sides are having trouble coming to an agreement, but they both have a lot to gain from a plant being built in the country, which is keeping the deal alive. A new plant in Brazil will give Foxconn more resources and allow it to take over even more of Apple’s iPad orders.

For Brazil, having Apple products made right in the country will allow citizens to bypass high import prices, cutting the cost of products like the iPad by nearly 50 per cent. The plant will also provide potentially hundreds of jobs for citizens.

Apple also has vested interest in whether this new plant opens. The company recently cut iPad orders from its Chinese suppliers by 25 per cent. Apple has not adjusted its projected shipment number of iPads for the fourth quarter to reflect the cuts, leading analysts to believe the company was planning on getting the devices from the new Brazilian plant.

In order to salvage the deal, Foxconn and the Brazilian government may consider other options. The manufacturer could scale back the size of its facility to make negotiations easier, or choose to produce parts elsewhere and just assemble the products in Brazil. Either option would likely be a better solution for all sides involved, as opposed to not having a Brazilian plant at all.

Even if Foxconn doesn’t end up establishing a factory in the country, it doesn’t mean other companies won’t attempt to. Motorola, LG, Samsung and Toshiba reportedly all have a vested interest in building new plants in Brazil. The country looks poised to become another manufacturing base for tech companies, but Foxconn’s difficulties point to possible stumbling blocks overall.

This post originally appeared at Mobiledia.

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