Tech

How China Built 'iPhone City' In Zhengzhou For Apple Partner Foxconn

By Victor Thomson , Dec 30, 2016 03:59 AM EST
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Apple's partner Foxconn has built an iPhone production facility in Zhengzhou, China. (Photo : Jack Taylor/Getty Images)

Around half of all Apple's iPhones are made in Foxconn's Zhengzhou factory that exists in large part thanks to billions of dollars of tax breaks and handouts from the Chinese government.

iPhone City's Perks

Foxconn's major iPhone manufacturing production facility in Zhengzhou, China, is locally referred as "iPhone City." According to The New York Times, around $1.5 billion was provided by local government to Foxconn to help the company build large portions of the factory and worker housing.

A report published by Apple Insider points out that the local government keeps paying bonuses for meeting export targets, continues to offer money against energy and transportation costs and is even helping Foxconn with hiring subsidies to recruit and train new staff.

As subsidies haven't been publicly disclosed by either party, it is uncertain what the full extent of Foxconn's government backing is. Officially, Apple declared that it was aware of Foxconn getting infrastructure aid, but the high-tech giant hasn't been party to the manufacturer's talks with the Chinese government and isn't aware of any specific tax breaks, subsidies, and grants.

Reports claim that the city of Zhengzhou allows Foxconn skip both VAT and corporate taxes for five years. For the following five years, the city promises to halve the rates. The amount of money took in social insurance and other payments were also lowered by up to $100 million per year.

The city of Zhengzhou has even built pipelines, power generators, paved roads and offered a five percent discount on energy bills. An airport just several miles away from the Foxconn factory was expanded with a $10 billion investment.

In order to keep its profits high, Apple has also taken advantage of low Chinese manufacturing costs, while deflecting concerns about environmental issues, safety, and labor. The high-tech American company has not completely rectified these problems even if it worked to address them.

These hidden subsidies, tax breaks and perks uncovered behind the scenes of Foxconn's operations are having a significant role in helping the production facility in Zhenghzou to became one of Apple's major global manufacturing plants, according to MacRumors.

History Of Foxconn's Zhenghzou Factory

The iPhone plant kept growing and in 2014 an estimated 230 million smartphones having been exported from Zhengzhou in the years since it had been open. The manufacturing facility includes 94 production lines for the iPhone 6 and iPhone 5s. The Chinese government considers the Zhenghou "iPhone City" as one of the important export centers in the country. Its work force produces 500,000 iPhones a day at peak and has "the size of a national army."

Up to this day, Foxconn remains a loyal partner in Apple's manufacturing processes, gearing up to be a major supplier of the 2017 iPhone and most recently considering expansion into the United States. After the introduction of the iPod in 2001, when Apple's sales took off, Foxconn had the expertise to meet the demand that accompanied the American tech giant's each hit product.

Foxconn's factories could quickly launch new products, build prototypes, increase production and hire hundreds of thousands of workers during peak periods. Joe O'Sullivan, a former Apple executive who worked in Asia, said that the Chinese company has brilliant tooling engineers and it is willing to invest in order to keep pace with Apple's growth.

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