Summary of How China Built ‘iPhone City’ with Billions in Perks for Apple’s Partner

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Subsidizing companies that manufacture goods for Western multinationals has been a crucial component of China’s economic policy. A major beneficiary of this policy has been Apple and its manufacturer Foxconn, which operates a large iPhone production facility in Zhengzhou, China. The New York Times correspondent David Barboza has obtained confidential government records and conducted more than 100 interviews to conclude that billions of dollars’ worth of subsidies are behind “iPhone City,” Foxconn’s highly profitable manufacturing site in Zhengzhou. getAbstract recommends Barboza’s investigative report to business leaders with a stake in the Chinese market.

In this summary, you will learn

  • How the city of Zhengzhou is subsidizing the production of Apple iPhones,
  • In what way China has become less welcoming to manufacturing companies serving foreign multinationals, and 
  • How Beijing’s economic priorities have started to diverge from those of Chinese local governments.
 

About the Author

The New York Times correspondent David Barboza has written extensively about US firms doing business in China. 

 

Summary

China has been offering generous incentive packages to manufacturing partners of Western multinationals. Local governments compete for these companies to set up production facilities in their cities. Zhengzhou, for example, convinced Taiwanese manufacturing giant Foxconn to set up a state-of-the-art production facility to produce iPhones. To bring jobs to the region, Zhengzhou’s government offered generous tax breaks and production bonuses. In addition, it spent more than $1.5 billion to build parts of the factory, employee housing and power plants. It also pledged $10 billion to expand the airport near the manufacturing site. The Zhengzhou government continues to subsidize the plant’s energy and transportation costs and “recruits, trains and houses employees.” The facility has the capacity to produce 500,000 iPhones per day while keeping production costs low. This allows Apple to “earn 90% of the profits in the smartphone industry worldwide” despite having only a 12% share of the global smartphone market.


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