The confidential government records obtained by The Times detail multiple meetings over several years in which Zhengzhou city officials discussed their “support” for iPhone production, calling the benefits a “preferential policy.” The records offer a snapshot of those benefits, including the specific aid for Foxconn in multiple areas, like infrastructure, labor, taxes and exports.Īs China’s largest private employer, Foxconn, a Taiwanese company, has enormous leverage in the negotiations for those incentives. And Apple says it was not a party to Foxconn’s negotiations. The subsidies aren’t disclosed by the Chinese government or Foxconn. It is difficult to tally the total value of government benefits for the Zhengzhou operation, or to determine the exact effect on the profits of Foxconn or Apple. As such, the Zhengzhou operation provides an especially illustrative look at China’s importance to American technology companies - and specifically iPhone production and more recently, Apple’s consumer sales. While Apple came later than many technology companies, it now generates nearly a quarter of its revenues from sales in China and has some of the fattest profit margins in the business. And many rely on local manufacturing partners like Foxconn. Dell, Hewlett-Packard and Samsung have all flocked to China to lower their production costs, bolster their bottom lines and tap into the world’s largest consumer market. In China, the competition for companies is secretive and rarely exposed to public scrutiny or debate - and it is often focused on manufacturing partners, rather than multinationals themselves.Ĭhina’s lure is strong. To compete in the era of globalization, multinationals, which face pressures from shareholders and customers, must seek the best opportunities, increasingly by relying on a highly interconnected supply chain spread across the world.īut the reasons behind their choices are not always transparent. In this way, China is not unlike other countries, including the United States, where states and cities vie for companies. Beijing, for decades, has encouraged such efforts at the national level, by developing special economic zones that offer tax breaks to multinationals and exempt them from costly and cumbersome rules. Local and provincial officials, in an effort to create jobs and drive growth, have courted manufacturers with incentive packages that make it easier and cheaper to do business. But the Zhengzhou operation shows the extent of China’s effort to entice overseas multinationals to set up production facilities in the country. 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.Īmerican officials have long decried China’s support of its state-owned companies, calling the subsidies and other aid an unfair competitive advantage in a global marketplace. 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 state-of-the-art facility was built several years ago to serve a single global exporter: Apple, now the world’s most valuable company and one of China’s largest retailers. Unmarked trucks stretch for more than a mile awaiting the next load headed for Beijing, New York, London and dozens of other destinations. Government officers, in sharply pressed uniforms, race around a maze of wooden pallets piled high with boxes - counting, weighing, scanning and approving shipments. ZHENGZHOU, China - A vast, boxy customs center acts as a busy island of commerce deep in central China.
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