Bunnie Huang recently toured the Arduino production facilities and wrote a great post about what he saw (with lots of photos!):

Arduinos are made in Scarmagno, Italy, a small town near the Olivetti factories on the outskirts of Torino. All of the circuit board fabrication, board stuffing and distribution is handled out of that small town. I was really excited to see the factories, and I’d like to share some photos of them with you.