* Foxconn says sees tremendous development potential in
* Brazil investment not expected to signal move away from
(Adds analyst comment)
TAIPEI, April 13 Foxconn Technology Group, maker
of Apple Inc's iPhone and iPad, said it is looking at
investment opportunities in Brazil in line with its strategy of
"being where the market is", a plan that would boost its
presence in a fast-growing market for electronic devices.
Foxconn announced the decision in a statement on Wednesday
from Taiwan-listed unit Hon Hai Precision Industry Co Ltd
, a day after Brazilian President Dilma Rousseff said
the company was considering investing $12 billion in Brazil.
The statement did not give specific details, noting only
that Brazil had "tremendous economic development potential" and
was "strategically positioned to meet the needs of growing
markets throughout Latin America."
Technology companies are keen to sell to Brazilian consumers
hungry for high-end electronics, but devices are often priced
out of the market because of high production costs and import
tariffs. Apple's cheapest iPad, for example, retails for about
$860 in Brazil, versus $400 in the United States.
"If its client Apple is targeting Brazil, it's necessary for
Foxconn to provide services locally. It can save costs on
tariffs and can target a most promising consumer market," said
Simon Yang, vice-president at Taiwanese market research firm
Topology Research Institute.
Rousseff herself has identified tablet computers as a
relatively cheap way to promote Internet access for Brazil's
emerging lower middle-class, which accounts for about half of
the 190 million population.
Brazil has one of the steepest import-tariff regimes in
South America, and is one of the world's most expensive places
to do business because of a heavy tax load, an overvalued
currency and restrictive labour laws. [ID:nL3E7FC1RF]
Foxconn already makes mobile phone handsets in Brazil.
"The biggest benefits for Foxconn would be the huge tariff
savings and closer access to the U.S. and Latin American
markets, thanks to a free trade deal between Brazil and the
U.S.," said Maggie Chou, portfolio manager of the Brazil Fund at
PCA, a Taiwan unit of British insurer Prudential Plc .
An investment in Brazil is not likely to signal a move away
from China, where Foxconn is the largest private-sector
employer. While it has been diversifying away from its
traditional production bases in southern China, like several
rivals and clients, the company will need to stay close to its
main supply chain.
"It would be premature to say Foxconn is shifting production
from China to Brazil," said PCA's Chou. "Foxconn needs to spread
out geographically, but all of the key component suppliers are
in Asia, including Taiwan, Japan and South Korea."
Facing higher wages in the southern China manufacturing
belt, which was the scene of a series of labour disputes last
year, some Taiwanese manufacturers have opted to shift some
operations to the country's interior, where costs are lower.
Foxconn also has plants in North America and Mexico, as well
as in European countries including Slovakia and Poland.
(Reporting by Jonathan Standing, Argin Chang and Faith Hung;
Editing by Chris Lewis)