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Brazil's answer to iPad mini brings internet to hundreds of thousands Brazil's answer to iPad mini brings internet to hundreds of thousands
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Apple's launch of a smaller, cheaper iPad this week generated a global hullabaloo, but for one Chinese businessman in Brazil, it cannot have seemed quite so extraordinary.Apple's launch of a smaller, cheaper iPad this week generated a global hullabaloo, but for one Chinese businessman in Brazil, it cannot have seemed quite so extraordinary.
Paulo Xu had been there and done that – a year earlier and for half the price – with a 300-reais (£100) tablet computer that has brought the internet into hundreds of thousands of low-income homes for the first time.Paulo Xu had been there and done that – a year earlier and for half the price – with a 300-reais (£100) tablet computer that has brought the internet into hundreds of thousands of low-income homes for the first time.
The technology may have been less advanced, but the simple device showed how new combinations of manufacturing nous and marketing opportunities are changing the face of the electronics industry in emerging economies.The technology may have been less advanced, but the simple device showed how new combinations of manufacturing nous and marketing opportunities are changing the face of the electronics industry in emerging economies.
With the European market in crisis and production costs rising in China, Latin America is an increasingly attractive proposition for many major firms seeking new areas of growth. In recent weeks, BMW, Foxconn and Hyundai have announced major new investments in Brazil.With the European market in crisis and production costs rising in China, Latin America is an increasingly attractive proposition for many major firms seeking new areas of growth. In recent weeks, BMW, Foxconn and Hyundai have announced major new investments in Brazil.
Xu arrived many years earlier and has since built one of Brazil's fastest growing computer companies.Xu arrived many years earlier and has since built one of Brazil's fastest growing computer companies.
Born Xu Xuwei to a middle-class family in Nantong, Jiangsu province, he came to Brazil in 1994, adopted the name Paulo, and started out in the kitchen of a Japanese restaurant, where he says he worked 17 hours a day and earned 450 reais a month.Born Xu Xuwei to a middle-class family in Nantong, Jiangsu province, he came to Brazil in 1994, adopted the name Paulo, and started out in the kitchen of a Japanese restaurant, where he says he worked 17 hours a day and earned 450 reais a month.
But like his idol, Li Ka Shing – Asia's richest man – he had ambitions to become an entrepreneur. Xu opened a restaurant, then a gift shop, then moved into consumer electronics by forming a new company, Digital Life, in 2004.But like his idol, Li Ka Shing – Asia's richest man – he had ambitions to become an entrepreneur. Xu opened a restaurant, then a gift shop, then moved into consumer electronics by forming a new company, Digital Life, in 2004.
He started out with car audio equipment and moved into the tablet business a few years ago, getting technical advice from manufacturers in China. Many components are made in his homeland, but all the assembly work is done in Brazil, which enables him to qualify for generous tax breaks.He started out with car audio equipment and moved into the tablet business a few years ago, getting technical advice from manufacturers in China. Many components are made in his homeland, but all the assembly work is done in Brazil, which enables him to qualify for generous tax breaks.
To avoid competition with higher-end devices made by multinational brands, Digital Life aims at the growing niche of low-income consumers.To avoid competition with higher-end devices made by multinational brands, Digital Life aims at the growing niche of low-income consumers.
Thanks to strong economic growth, government wealth redistribution polices and – sometimes alarmingly – extended credit lines, this group are starting to buy smartphones, motorbikes and other products that were unavailable to them before.Thanks to strong economic growth, government wealth redistribution polices and – sometimes alarmingly – extended credit lines, this group are starting to buy smartphones, motorbikes and other products that were unavailable to them before.
Digital Life's cheapest tablet computer, which retails for 300 reais (£93), has an 800 MHz processor, four gigabytes of memory, an 18cm (7in) screen and a wireless modem. Unusually for a tablet, it also has a port for a cable connection because many purchasers do not want to pay extra for routers.Digital Life's cheapest tablet computer, which retails for 300 reais (£93), has an 800 MHz processor, four gigabytes of memory, an 18cm (7in) screen and a wireless modem. Unusually for a tablet, it also has a port for a cable connection because many purchasers do not want to pay extra for routers.
Despite a slowdown of the Brazilian economy in 2012 to about 2%, Xu expects sales of his low-price tablet to increase tenfold this year to 1m units, and to rise to 2.5m by 2014.Despite a slowdown of the Brazilian economy in 2012 to about 2%, Xu expects sales of his low-price tablet to increase tenfold this year to 1m units, and to rise to 2.5m by 2014.
"When it comes to the Chinese and Brazilian markets, my advice is to bet on the economy and work honestly. That always gives a return," he says."When it comes to the Chinese and Brazilian markets, my advice is to bet on the economy and work honestly. That always gives a return," he says.
His business owes much to the model that made China the workshop of the world: importing hi-tech components from overseas and assembling them cheaply.His business owes much to the model that made China the workshop of the world: importing hi-tech components from overseas and assembling them cheaply.
In his case, this is being done on a medium scale at a factory in Minas Gerais. But multinationals are starting to follow suit.In his case, this is being done on a medium scale at a factory in Minas Gerais. But multinationals are starting to follow suit.
With costs rising in China and the Latin American market growing, several big manufacturers are expanding their operations in Brazil.With costs rising in China and the Latin American market growing, several big manufacturers are expanding their operations in Brazil.
Taiwan's Foxconn, which assembles products for Apple and others, is moving more of its operations from China. Since opening its first factory in Brazil last year, it has ramped up production. Last month, it announced a 1bn reais plan to build its seventh plant in Brazil. The megafacility in São Paulo will assemble smartphones and tablet computers and provide 10,000 jobs.Taiwan's Foxconn, which assembles products for Apple and others, is moving more of its operations from China. Since opening its first factory in Brazil last year, it has ramped up production. Last month, it announced a 1bn reais plan to build its seventh plant in Brazil. The megafacility in São Paulo will assemble smartphones and tablet computers and provide 10,000 jobs.
China's Chery Automobile recently unveiled a $400m investment in a new factory in São Paulo that will have the capacity to produce 150,000 vehicles per year once it is finished towards the end of 2013.China's Chery Automobile recently unveiled a $400m investment in a new factory in São Paulo that will have the capacity to produce 150,000 vehicles per year once it is finished towards the end of 2013.
This week, BMW announced plans to build its first car plant in Latin America. Construction will begin next April on the $264 factory in Araquari. South Korea's Hyundai and Samsung are also working on new factories in Brazil.This week, BMW announced plans to build its first car plant in Latin America. Construction will begin next April on the $264 factory in Araquari. South Korea's Hyundai and Samsung are also working on new factories in Brazil.
Brazil is in dire need of more manufacturing to rebalance an economy that is over-reliant on exports of commodities such as soy, iron ore and oil. China is its main customer for raw materials and greatest competitor for manufactured goods. For most of the past decade, cheap Chinese goods have dominated.Brazil is in dire need of more manufacturing to rebalance an economy that is over-reliant on exports of commodities such as soy, iron ore and oil. China is its main customer for raw materials and greatest competitor for manufactured goods. For most of the past decade, cheap Chinese goods have dominated.
This has been a similar story in much of Latin America, but there are signs that this may be changing as the costs of doing business in China start to rise because of improved labour regulations and a stronger currency. According to a recent study by JP Morgan, labour costs in Mexico and China are now almost equal – a dramatic change since 2003, when the latter was three times cheaper.This has been a similar story in much of Latin America, but there are signs that this may be changing as the costs of doing business in China start to rise because of improved labour regulations and a stronger currency. According to a recent study by JP Morgan, labour costs in Mexico and China are now almost equal – a dramatic change since 2003, when the latter was three times cheaper.
But Brazil still has to catch up. Compared with China, Xu says, Brazil has more bureaucracy, less developed supply chains and weaker industrial promotion policies.But Brazil still has to catch up. Compared with China, Xu says, Brazil has more bureaucracy, less developed supply chains and weaker industrial promotion policies.
Nonetheless, with the Chinese market more saturated and competitive, he sees the greatest future opportunities in Brazil.Nonetheless, with the Chinese market more saturated and competitive, he sees the greatest future opportunities in Brazil.
"The Brazilian market is very big and diverse because Brazilians like new things, especially technology. Chinese consumers are more conservative," he says. "All the expansions that we are planning will be made right here in Brazil.""The Brazilian market is very big and diverse because Brazilians like new things, especially technology. Chinese consumers are more conservative," he says. "All the expansions that we are planning will be made right here in Brazil."
Additional reporting by Carolina MassoteAdditional reporting by Carolina Massote
CommentsComments
16 comments, displaying first 17 comments, displaying first
25 October 2012 1:48PM25 October 2012 1:48PM
What exactly does this have to do with the iPad mini? Apple didn't invent the mini tablet, it didn't invent the tablet, it is not the only tech company in the universe and the sooner you realise that then the technology section will regain some dignity instead of continuing to slide into the apple-loving circus that it has become.What exactly does this have to do with the iPad mini? Apple didn't invent the mini tablet, it didn't invent the tablet, it is not the only tech company in the universe and the sooner you realise that then the technology section will regain some dignity instead of continuing to slide into the apple-loving circus that it has become.
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25 October 2012 1:53PM25 October 2012 1:53PM
Bottom line, there are more low-income consumers than any other, by targeting that group he is going to succeed. Sadly Apple missed a chance with the mini to go after the same market with an over priced product that clearly not as good as its competition.Bottom line, there are more low-income consumers than any other, by targeting that group he is going to succeed. Sadly Apple missed a chance with the mini to go after the same market with an over priced product that clearly not as good as its competition.
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25 October 2012 1:56PM25 October 2012 1:56PM
Half price...of a Nexus 7 maybe? More like 1/3rd the price of an iPad mini. And considering that you can buy tablets on Amazon for £70 or less with equivalent or better specs, it's not exactly bringing (tablet) computing to the masses.Half price...of a Nexus 7 maybe? More like 1/3rd the price of an iPad mini. And considering that you can buy tablets on Amazon for £70 or less with equivalent or better specs, it's not exactly bringing (tablet) computing to the masses.
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25 October 2012 1:56PM25 October 2012 1:56PM
No breakfast this morning?No breakfast this morning?
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25 October 2012 2:15PM25 October 2012 2:15PM
The point is that in Brazil you can´t buy tablets on Amazon without paying very high import charges. Prices there on the same electronics you find in the US or Britain are at least 50% higher for final consumers.The point is that in Brazil you can´t buy tablets on Amazon without paying very high import charges. Prices there on the same electronics you find in the US or Britain are at least 50% higher for final consumers.
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25 October 2012 2:24PM25 October 2012 2:24PM
This article has to be a joke. This chinese "grand entrepreneur" buy the tablets in China, disassembles them over there to import them in parts to avoid the tax authorities (props for finding the overused loophole!), re-assembles and then sell them to the favelados. I checked his website. "His" tablets are the same generic ones made in China by the hundreds of thousands distributors all over the world sell and distribute mainly in third world countries. He even uses the same old and lame pics vendors use in Taobao, ebay.co.uk, amazon, etc.This article has to be a joke. This chinese "grand entrepreneur" buy the tablets in China, disassembles them over there to import them in parts to avoid the tax authorities (props for finding the overused loophole!), re-assembles and then sell them to the favelados. I checked his website. "His" tablets are the same generic ones made in China by the hundreds of thousands distributors all over the world sell and distribute mainly in third world countries. He even uses the same old and lame pics vendors use in Taobao, ebay.co.uk, amazon, etc.
But maybe I'm wrong, perhaps the whole purpose of this article was just an excuse to mention "Apple".But maybe I'm wrong, perhaps the whole purpose of this article was just an excuse to mention "Apple".
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25 October 2012 2:28PM25 October 2012 2:28PM
50% higher on some of the tablets on Amazon, mostly shipped from China or Hong Kong would still make it around the same price. And alot of those come with more memory, better screen, better processor. i.e. better all round.50% higher on some of the tablets on Amazon, mostly shipped from China or Hong Kong would still make it around the same price. And alot of those come with more memory, better screen, better processor. i.e. better all round.
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25 October 2012 2:49PM25 October 2012 2:49PM
Well if you can open a factory for $264 no wonder companies want to move to Brazil.Well if you can open a factory for $264 no wonder companies want to move to Brazil.
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25 October 2012 3:44PM25 October 2012 3:44PM
Surely it can't be long now before The Guardian guidelines are updated so that every article must finish with the obligatory "Sent from my iPhone" or "Sent from my iPad".Surely it can't be long now before The Guardian guidelines are updated so that every article must finish with the obligatory "Sent from my iPhone" or "Sent from my iPad".
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25 October 2012 5:08PM25 October 2012 5:08PM
Mentioning iPad in an article that has nothing to do with iPads shocker.Mentioning iPad in an article that has nothing to do with iPads shocker.
Also, doesn't an 'answer' usually follow the thing that it is an answer to, rather than precede it by a year?Also, doesn't an 'answer' usually follow the thing that it is an answer to, rather than precede it by a year?
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25 October 2012 5:56PM25 October 2012 5:56PM
I've said it before, but I got one of these tablets for £60 - it looks like it'll be shocking, but it's actually blooming good. I don't need the extra power of the ipad. Although I am finding myself wanting a slightly bigger screen at times I guess. Someone said I should get the Nexus 7, but I don't know why I'd need it.I've said it before, but I got one of these tablets for £60 - it looks like it'll be shocking, but it's actually blooming good. I don't need the extra power of the ipad. Although I am finding myself wanting a slightly bigger screen at times I guess. Someone said I should get the Nexus 7, but I don't know why I'd need it.
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25 October 2012 6:06PM25 October 2012 6:06PM
Yes,apples arent the only fruit.Yes,apples arent the only fruit.
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25 October 2012 8:07PM25 October 2012 8:07PM
the knowledge economy being led by communicative capacity rather than design!the knowledge economy being led by communicative capacity rather than design!
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25 October 2012 10:51PM25 October 2012 10:51PM
Nexus 7 has HD and the power for games etc.
Obviously 7" is travel device size so its GPS is a main selling point.		Nexus 7 has HD and the power for games etc.
Obviously 7" is travel device size so its GPS is a main selling point.
3G compatible 8" Mini clones with the latest RK3066 chipsets(Rockchip) hit the speed and quality mark(IPS 1024X768) at £100. Whilst you sacrifice some future support for cheapness
The RK3066 CPUs are clocked faster than the iPad mini.		3G compatible 8" Mini clones with the latest RK3066 chipsets(Rockchip) hit the speed and quality mark(IPS 1024X768) at £100. Whilst you sacrifice some future support for cheapness
The RK3066 CPUs are clocked faster than the iPad mini.
Amazon has/had also sold decent(like Simon's at the time) 8" aluminium ODYS german branded tablets in the UK at £100 for 12 months now. So the iPad mini is sort of 12 months lateAmazon has/had also sold decent(like Simon's at the time) 8" aluminium ODYS german branded tablets in the UK at £100 for 12 months now. So the iPad mini is sort of 12 months late
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26 October 2012 7:55AM26 October 2012 7:55AM
government wealth redistribution polices and ... extended credit lines,government wealth redistribution polices and ... extended credit lines,
So, a customer base financed by public subsidy and inflated credit? Seems Brazil are only about 5-10 years behind the UK then.So, a customer base financed by public subsidy and inflated credit? Seems Brazil are only about 5-10 years behind the UK then.
I'd been wondering what Gordon Brown was up to these days...I'd been wondering what Gordon Brown was up to these days...
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26 October 2012 10:21PM26 October 2012 10:21PM
I was with you to the point you mentioned "favelados". I'm from Brazil, and I don't think this people can afford to buy a tablet - even those low priced ones, such as the produced by the Chinese entrepreneur. Most “favelados” are humble people who cannot afford to pay a monthly home rental - of course in “favelas” there are thieves as well. The primary consumers of these type of technologies here are classes B and C, I would say.
Now, the author is right when he says that the Brazilian economy is growing and that organizations are investing in plants and offices down here. However, what he forgets to mention is that due to the fact that our economy was not affected by the global crises, some multinational companies that operates here are sustaining all their other operations in the rest of the world with the profits they are making here.
So to your point, I would say that those "favelados" you mentioned are working for paying salaries of many people in the so called "developed countries".		I was with you to the point you mentioned "favelados". I'm from Brazil, and I don't think this people can afford to buy a tablet - even those low priced ones, such as the produced by the Chinese entrepreneur. Most “favelados” are humble people who cannot afford to pay a monthly home rental - of course in “favelas” there are thieves as well. The primary consumers of these type of technologies here are classes B and C, I would say.
Now, the author is right when he says that the Brazilian economy is growing and that organizations are investing in plants and offices down here. However, what he forgets to mention is that due to the fact that our economy was not affected by the global crises, some multinational companies that operates here are sustaining all their other operations in the rest of the world with the profits they are making here.
So to your point, I would say that those "favelados" you mentioned are working for paying salaries of many people in the so called "developed countries".
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27 October 2012 3:43AM
So Apple is copying Brazilian 'prior art'?
Of course Amazon and Google played follow the leader, too.
Link to this comment:Link to this comment:
New iPad buyers face online delays as Apple struggles with demandNew iPad buyers face online delays as Apple struggles with demand
12 Mar 201212 Mar 2012
People ordering Apple's new iPad online face a three-day delay due to overwhelming demand for the device. By Charles Arthur and agenciesPeople ordering Apple's new iPad online face a three-day delay due to overwhelming demand for the device. By Charles Arthur and agencies
25 Oct 201225 Oct 2012
iWant: how Apple and the gadget-makers train consumers' covetousnessiWant: how Apple and the gadget-makers train consumers' covetousness
25 Oct 201225 Oct 2012
Apple product launches – are they becoming more frequent?Apple product launches – are they becoming more frequent?
24 Oct 201224 Oct 2012
iPad mini unveiled by Apple - videoiPad mini unveiled by Apple - video
23 Apr 201223 Apr 2012
Apple: why doesn't it employ more US workers?Apple: why doesn't it employ more US workers?
(12 pictures) New iPad: Apple faithful line up to pay tribute - in pictures(12 pictures) New iPad: Apple faithful line up to pay tribute - in pictures
16 Mar 201216 Mar 2012
Like a pilgrimage to Mecca, thousands of gadget fans queued up at Apple stores around the world on Thursday night to be the first to get their hands on the shiny new iPad, with its slightly faster processor and slightly better screen – but still no USB portLike a pilgrimage to Mecca, thousands of gadget fans queued up at Apple stores around the world on Thursday night to be the first to get their hands on the shiny new iPad, with its slightly faster processor and slightly better screen – but still no USB port
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Economic growth, wealth redistribution and credit are increasing demand for gadgets among Brazilians on low incomesEconomic growth, wealth redistribution and credit are increasing demand for gadgets among Brazilians on low incomes
Apple's launch of a smaller, cheaper iPad this week generated a global hullabaloo, but for one Chinese businessman in Brazil, it cannot have seemed quite so extraordinary.Apple's launch of a smaller, cheaper iPad this week generated a global hullabaloo, but for one Chinese businessman in Brazil, it cannot have seemed quite so extraordinary.
Paulo Xu had been there and done that – a year earlier and for half the price – with a 300-reais (£100) tablet computer that has brought the internet into hundreds of thousands of low-income homes for the first time.Paulo Xu had been there and done that – a year earlier and for half the price – with a 300-reais (£100) tablet computer that has brought the internet into hundreds of thousands of low-income homes for the first time.
The technology may have been less advanced, but the simple device showed how new combinations of manufacturing nous and marketing opportunities are changing the face of the electronics industry in emerging economies.The technology may have been less advanced, but the simple device showed how new combinations of manufacturing nous and marketing opportunities are changing the face of the electronics industry in emerging economies.
With the European market in crisis and production costs rising in China, Latin America is an increasingly attractive proposition for many major firms seeking new areas of growth. In recent weeks, BMW, Foxconn and Hyundai have announced major new investments in Brazil.With the European market in crisis and production costs rising in China, Latin America is an increasingly attractive proposition for many major firms seeking new areas of growth. In recent weeks, BMW, Foxconn and Hyundai have announced major new investments in Brazil.
Xu arrived many years earlier and has since built one of Brazil's fastest growing computer companies.Xu arrived many years earlier and has since built one of Brazil's fastest growing computer companies.
Born Xu Xuwei to a middle-class family in Nantong, Jiangsu province, he came to Brazil in 1994, adopted the name Paulo, and started out in the kitchen of a Japanese restaurant, where he says he worked 17 hours a day and earned 450 reais a month.Born Xu Xuwei to a middle-class family in Nantong, Jiangsu province, he came to Brazil in 1994, adopted the name Paulo, and started out in the kitchen of a Japanese restaurant, where he says he worked 17 hours a day and earned 450 reais a month.
But like his idol, Li Ka Shing – Asia's richest man – he had ambitions to become an entrepreneur. Xu opened a restaurant, then a gift shop, then moved into consumer electronics by forming a new company, Digital Life, in 2004.But like his idol, Li Ka Shing – Asia's richest man – he had ambitions to become an entrepreneur. Xu opened a restaurant, then a gift shop, then moved into consumer electronics by forming a new company, Digital Life, in 2004.
He started out with car audio equipment and moved into the tablet business a few years ago, getting technical advice from manufacturers in China. Many components are made in his homeland, but all the assembly work is done in Brazil, which enables him to qualify for generous tax breaks.He started out with car audio equipment and moved into the tablet business a few years ago, getting technical advice from manufacturers in China. Many components are made in his homeland, but all the assembly work is done in Brazil, which enables him to qualify for generous tax breaks.
To avoid competition with higher-end devices made by multinational brands, Digital Life aims at the growing niche of low-income consumers.To avoid competition with higher-end devices made by multinational brands, Digital Life aims at the growing niche of low-income consumers.
Thanks to strong economic growth, government wealth redistribution polices and – sometimes alarmingly – extended credit lines, this group are starting to buy smartphones, motorbikes and other products that were unavailable to them before.Thanks to strong economic growth, government wealth redistribution polices and – sometimes alarmingly – extended credit lines, this group are starting to buy smartphones, motorbikes and other products that were unavailable to them before.
Digital Life's cheapest tablet computer, which retails for 300 reais (£93), has an 800 MHz processor, four gigabytes of memory, an 18cm (7in) screen and a wireless modem. Unusually for a tablet, it also has a port for a cable connection because many purchasers do not want to pay extra for routers.Digital Life's cheapest tablet computer, which retails for 300 reais (£93), has an 800 MHz processor, four gigabytes of memory, an 18cm (7in) screen and a wireless modem. Unusually for a tablet, it also has a port for a cable connection because many purchasers do not want to pay extra for routers.
Despite a slowdown of the Brazilian economy in 2012 to about 2%, Xu expects sales of his low-price tablet to increase tenfold this year to 1m units, and to rise to 2.5m by 2014.Despite a slowdown of the Brazilian economy in 2012 to about 2%, Xu expects sales of his low-price tablet to increase tenfold this year to 1m units, and to rise to 2.5m by 2014.
"When it comes to the Chinese and Brazilian markets, my advice is to bet on the economy and work honestly. That always gives a return," he says."When it comes to the Chinese and Brazilian markets, my advice is to bet on the economy and work honestly. That always gives a return," he says.
His business owes much to the model that made China the workshop of the world: importing hi-tech components from overseas and assembling them cheaply.His business owes much to the model that made China the workshop of the world: importing hi-tech components from overseas and assembling them cheaply.
In his case, this is being done on a medium scale at a factory in Minas Gerais. But multinationals are starting to follow suit.In his case, this is being done on a medium scale at a factory in Minas Gerais. But multinationals are starting to follow suit.
With costs rising in China and the Latin American market growing, several big manufacturers are expanding their operations in Brazil.With costs rising in China and the Latin American market growing, several big manufacturers are expanding their operations in Brazil.
Taiwan's Foxconn, which assembles products for Apple and others, is moving more of its operations from China. Since opening its first factory in Brazil last year, it has ramped up production. Last month, it announced a 1bn reais plan to build its seventh plant in Brazil. The megafacility in São Paulo will assemble smartphones and tablet computers and provide 10,000 jobs.Taiwan's Foxconn, which assembles products for Apple and others, is moving more of its operations from China. Since opening its first factory in Brazil last year, it has ramped up production. Last month, it announced a 1bn reais plan to build its seventh plant in Brazil. The megafacility in São Paulo will assemble smartphones and tablet computers and provide 10,000 jobs.
China's Chery Automobile recently unveiled a $400m investment in a new factory in São Paulo that will have the capacity to produce 150,000 vehicles per year once it is finished towards the end of 2013.China's Chery Automobile recently unveiled a $400m investment in a new factory in São Paulo that will have the capacity to produce 150,000 vehicles per year once it is finished towards the end of 2013.
This week, BMW announced plans to build its first car plant in Latin America. Construction will begin next April on the $264 factory in Araquari. South Korea's Hyundai and Samsung are also working on new factories in Brazil.This week, BMW announced plans to build its first car plant in Latin America. Construction will begin next April on the $264 factory in Araquari. South Korea's Hyundai and Samsung are also working on new factories in Brazil.
Brazil is in dire need of more manufacturing to rebalance an economy that is over-reliant on exports of commodities such as soy, iron ore and oil. China is its main customer for raw materials and greatest competitor for manufactured goods. For most of the past decade, cheap Chinese goods have dominated.Brazil is in dire need of more manufacturing to rebalance an economy that is over-reliant on exports of commodities such as soy, iron ore and oil. China is its main customer for raw materials and greatest competitor for manufactured goods. For most of the past decade, cheap Chinese goods have dominated.
This has been a similar story in much of Latin America, but there are signs that this may be changing as the costs of doing business in China start to rise because of improved labour regulations and a stronger currency. According to a recent study by JP Morgan, labour costs in Mexico and China are now almost equal – a dramatic change since 2003, when the latter was three times cheaper.This has been a similar story in much of Latin America, but there are signs that this may be changing as the costs of doing business in China start to rise because of improved labour regulations and a stronger currency. According to a recent study by JP Morgan, labour costs in Mexico and China are now almost equal – a dramatic change since 2003, when the latter was three times cheaper.
But Brazil still has to catch up. Compared with China, Xu says, Brazil has more bureaucracy, less developed supply chains and weaker industrial promotion policies.But Brazil still has to catch up. Compared with China, Xu says, Brazil has more bureaucracy, less developed supply chains and weaker industrial promotion policies.
Nonetheless, with the Chinese market more saturated and competitive, he sees the greatest future opportunities in Brazil.Nonetheless, with the Chinese market more saturated and competitive, he sees the greatest future opportunities in Brazil.
"The Brazilian market is very big and diverse because Brazilians like new things, especially technology. Chinese consumers are more conservative," he says. "All the expansions that we are planning will be made right here in Brazil.""The Brazilian market is very big and diverse because Brazilians like new things, especially technology. Chinese consumers are more conservative," he says. "All the expansions that we are planning will be made right here in Brazil."
Additional reporting by Carolina MassoteAdditional reporting by Carolina Massote