Doubts over Foxconn’s intent

With Taiwanese electronics giant Foxconn deep in talks with the Brazilian government, doubts have been raised about the firm’s readiness to follow through on its Vietnam investment plans.

Foreign media outlets last week quoted the Brazilian Minister of Science and Technology Aloizio Mercadante as saying that negotiations on Foxconn’s $12 billion investment in Brazil were progressing well.

By doing so, the minister put paid to a rumour that the firm’s South American plans had stalled because of demands from the Taiwanese firm for both hefty loans and tax incentives from the Brazilian government.

Mercadante even affirmed the world’s largest contract electronics maker would start producing iPads and iPhones at its new Brazilian plant by the end of this year as planned.

Foxconn announced its Brazil investment plans in April, saying it planned to pour $12 billion into Brazil over the next five years. The first phase of the project will see a roll-out of iPad and iPhones, and the second phase is about building “intelligent city” to make touch panels.

Four years ago, Foxconn announced a massive investment plan in Vietnam, saying it would spend $5 billion in the country by 2012. But the latest statement from the Brazilian science and technology minister raises questions about Foxconn’s investment priorities.

Foxconn representatives in Vietnam were not available to answer this question. However, the fact remains that Foxconn’s investment in Vietnam has been modest in comparison with its announced $5 billion plan. To date, Foxconn has only two manufacturing facilities in northern Bac Ninh province and two other facilities in Bac Giang province.

The firm was granted investment certificates for a $200 million cell phone manufacturing plant in Vinh Phuc province and a 400 hectare industrial park in Bac Giang, but construction of those projects has been sluggish at best.

Meanwhile, investment plans for Binh Dinh province, Haiphong city, Ho Chi Minh City and Hanoi, where the company said it would set up a chain of hi-tech zones to accommodate factories to produce computers, LCDs, communication devices and electronic appliances, have yet to be implemented after four years.

“Foxconn said it had to delay investment here because it was facing market expansion and finance difficulties. I guess this is not the main reason. Everyone knows that Foxconn is seeking investment opportunities not only in Brazil but also in low-cost areas in China,” said Do Quoc Tuan, deputy director at Bac Giang Department of Planning and Investment.

Man Ngoc Ly, director at Management Authority of Nhon Hoi Economic Zone in Binh Dinh – where Foxconn in 2007 signed a memorandum of understanding on building a $1 billion hi-tech park, thought Vietnam was no longer a top priority for Foxconn.

“If Foxconn really considered Vietnam a potential base for serving strategic customers, it would have implemented its promised project over the past four years,” he said.

And even though Foxconn chairman Terry Gou announced the company would relocate factories from China to countries further south after the firm was forced to raise its wages for Chinese workers by nearly 100 per cent following labour unrest last year, the firm’s investment plans for Vietnam were not pushed forward.

Nguyen Mai, chairman of Vietnam Association of Foreign Invested Enterprises, said Foxconn might delay investment plans in Vietnam while seeking other destinations where it could enjoy better tax incentives than Vietnam.

In a statement released by Foxconn in April, the manufacturer explained it would like to invest in Brazil because this country had “tremendous economic development potential” and was “strategically positioned to meet the needs of growing markets throughout Latin America”.

But Brazilian Minister Mercadante cast a different light on this, saying the South American country had offered tax incentives for the electronic industry that could help Foxconn cut tablet computer prices by 40 per cent or more. – VIR

Tags: Foxconn Brazil, Foxconn Vietnam