23 January 2017

The New York Times: “How China built ‘iPhone City’ with Billions in Perks for Apple’s Partner”

It all centers on Zhengzhou, a city of six million people in an impoverished region of China. Running at full tilt, the factory here, owned and operated by Apple’s manufacturing partner Foxconn, can produce 500,000 iPhones a day. Locals now refer to Zhengzhou as “iPhone City.”

The local government has proved instrumental, doling out more than $1.5 billion to Foxconn to build large sections of the factory and nearby employee housing. It paved roads and built power plants.

It helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets.

All of it in support of iPhone production.

We needed something that could really develop this part of the country, said Li Ziqiang, a Zhengzhou official. There’s an old saying in China: If you build the nest, the birds will come. And now, they’re coming.

David Barboza

So Apple doesn’t pay the full taxes in the US because the tax rate is too high; it doesn’t pay taxes in the EU because of their selective arrangements with the Irish government; now it turns out their largest manufacturer in China is enjoying a range of subsidies and tax cuts from the regional government. Apple, of course, denies any knowledge of the specifics – while at the same time investing heavily in Chinese companies; anybody think that’s a coincidence?

Is the entire market advantage of Apple built on preferential deals like these ones?

Dormitories for Foxconn factory workers
Behind an open-air mall, dormitories for Foxconn factory workers. The local government built large sections of employee housing as part of its deal with Foxconn. Credit: Gilles Sabrié for The New York Times

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