Report Goes In-Depth Into Foxconn’s Zhengzhou iPhone Factory

Most of the iPhone models Apple develops, markets and sells are being assembled by Foxconn, the world’s leading contract manufacturer. In a new investigative piece, The New York Times newspaper delves into the inner workings of Foxconn’s iPhone manufacturing plant in Zhengzhou, a city of six million people in an impoverished region of China.

 The article itself covers a variety of different topics, outlining how a plethora of “hidden bounty of perks, tax breaks, and subsidies,” in Foxconn’s operations. Apple, for its part, has said that it is “not a party to.”
“The well-choreographed customs routine is part of a hidden bounty of perks, tax breaks and subsidies in China that supports the world’s biggest iPhone factory, according to confidential government records reviewed by The New York Times, as well as more than 100 interviews with factory workers, logistics handlers, truck drivers, tax specialists and current and former Apple executives. The package of sweeteners and incentives, worth billions of dollars, is central to the production of the iPhone, Apple’s best-selling and most profitable product.”
The report notes that the facility, which is massive, resides in an impoverished region and hosts upwards of six million people. When the manufacturing plant is running at full power, it can put together 500,000 iPhones every single day, which also helped the factory earn its nickname.

Foxconn had to search for the right area to build its massive plant, and many different cities within China offered their own incentives, which included reduced transportation costs and reduced energy costs. Zhengzhou was eventually chosen, and it didn’t take long before it launched assembly lines back in 2010. The city zoned the plant, and then included a $250 million loan to Foxconn. The government also pledged to spend over $10 million to expand the nearby airport as well.

All of which is to make sure that the Foxconn factory can run at full speed as often as possible, and dole out as many iPhones as it can on any given day. Foxconn earns bonuses for meeting export quotas as well. All to say that it comes down to the workers on those factory lines, which, in 2014, there were 94 production lines.
“A crushing work force begins arriving for the early shift at 6:30 a.m. They travel by foot, by bus, by motor scooter and even by pedicab.
They file steadily into dozens of factory sites, spread out across 2.2 square miles. At the peak, some 350,000 workers assemble, test and package iPhones — up to 350 a minute.
Apple’s labor force, the size of a national army, relies heavily on the generosity of the Zhengzhou government.
As part of its deal with Foxconn, the state recruits, trains and houses employees. Provincial officials call townships and villages to ask for help finding potential workers.”

Some of the perks supplied to Foxconn by the Zhengzhou government include:
  • Built and partly financed the construction of a huge manufacturing complex at a cost of $600 million.
  • Spent around $1 billion to build housing that could accommodate hundreds of thousands of workers.
  • Provides a discount that reduces the cost of power by 5 percent annually.
  • Built infrastructure, including power generators and a 24-kilometer pipeline.
  • Eliminated corporate taxes and value added taxes for five years, then halved the usual rate for the next five years.
  • Granted a $250 million loan from the municipal treasury.
  • Helps recruit and train workers, as well as paying subsidies for new hires.
  • Lowered the amount of social insurance and other payments by up to $100 million a year.
  • Offers bonuses tied to the growth of exports.
  • Pays out a subsidy to help defray the cost of shipping goods.
Foxconn on its part said in a separate statement to the paper that the government support it has received over the years was “no different than similar tax breaks all companies get in locations around the world for major investments.”

 


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