Brazil Approves Tax Incentives to Begin iPad Production as Apple Targets its Next Major Market
Brazilian newspaper Folha reports [Google translation] that the Brazilian government has officially approved tax incentives that will allow Foxconn to begin producing iPads in the country. Interministerial Ordinance #34, signed on Monday and published in Brazil's official register today, specifically provides for a reduction in or exemption from certain taxes associated with the production of touchscreen tablet devices lacking a keyboard and weighing less than 750 grams.
According to ministerial decree 34 published Wednesday in the "Official Gazette", the company will be entitled to the benefits provided for in Decree 5906 of September 2006.
The determination provides for exemption or reduction of the IPI (Excise Tax), PIS and Cofins for companies investing in research and development of technology products.
The iPad 2 of course fits within those specifications, weighing in at just over 600 grams with only slight variation among the various models. The ordinance also permits the production of accessories, cables, power supplies and manuals associated with the allowed tablet devices. While the ordinance applies generically to tablet devices, it has clearly been written to support Foxconn's plans for the iPad.
Last April, Foxconn announced a major push to bring iPad production to Brazil, but the company's efforts were slowed as it negotiated with government officials over tax breaks and other issues. As recently as October the company had signaled its intention to begin production by December, and while the company has missed that target it now appears ready to move forward.
Foxconn's Brazilian iPhone and iPad factory (Source: Cult of Mac)The launch of iPad production in Brazil comes at a key time for Apple, as CEO Tim Cook noted just yesterday during the company's
earnings conference call that Brazil is its next area of emphasis after China among the "BRIC" countries with newly advanced economies. Russia and India are the other two countries in that grouping and Cook acknowledged that Apple has begun to "go deeper into Brazil" as its next target, although he cautioned against any expectations of Apple retail stores arriving in the country over the near term.
High import taxes on foreign-made goods have prevented Apple from making significant inroads in Brazil, with iPad pricing currently starting at the equivalent of US$925 for the 16 GB Wi-Fi iPad 2. With Foxconn moving iPad production to Brazil under the new tax incentives, Apple should be able to offer more competitive pricing on the device as production ramps up. Photos of a Brazilian-made 8 GB iPhone 4 showed up in late November, suggesting that Foxconn is also ramping up domestic production of new iPhone devices for Brazilian customers.
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