A report originating in Asia adds questions as to the ultimate production strategy related to Taiwan based contract manufacturer Foxconn’s plans for its planned production facility in the United States.

Our Supply Chain Matters initial view is that a production strategy shift may have something to do with the ongoing trade tensions involving China and the United States, which is particularly focused on intellectual property protections and China’s stated objective to lead in new advanced technologies over the next five years.

Readers might recall that in July of last year, global contract manufacturer Foxconn announced a first-ever, major high-tech electronics manufacturing presence in the United States. The new $10 billion factory, to be located and built in Southwest Wisconsin represented an investment planned by Foxconn designed to rebuild a high-tech electronics supply chain within the United States. The State of Wisconsin provided $3 billion in incentives to ensure that this facility would be located in that state.

Plans called for this production facility to deploy the latest LCD technology for applications across many industries including automobile displays, medical devices, televisions, and smartphones. The Wisconsin plant was expected to employ upwards of 3000 people initially and as many as 13,000 people at peak capacity.

This week, a published report from Nikkei Asian Review (Metered free subscription) indicates that Foxconn management has now elected to produce smaller LCD electronic displays at the U.S. facility. The report, from our lens, adds confusion as to what this change implies.  According to the report, the new strategy represented a change from a previous plan to produce larger LCD panels mainly for use in television production. 

Production of the larger panels would have required the presence of a more robust U.S. supply chain including local glass substrate manufacturing. Instead, Foxconn has elected to deploy sixth-generation display plant or an 8.5th-generation technology with production equipment that could be moved from Asia. A prior plan called for the use of 10.5th -generation LCD display technology which is more applicable to today’s larger sized displays. Nikkei indicates that sixth-generation panel production facilities produce mainly smaller displays for use in mobile phones, tablets, notebooks, and wearable devices.

Foxconn indicated: “it is fully committed to this significant investment” including its commitment for a $10 billion investment.

This move now calls into question whether the Foxconn U.S. site can be an LCD supplier for Apple’s needs, given that Apple’s iPhone product line-up has moved to the later iterations of screen technology use. The report does indicate:

A facility focusing on small to midsized panels would also provide a foundation once Foxconn is ready to produce its organic light-emitting diode or OLED, displays, and wants to bring that into mass production in the U.S., sources said.”

The above statement, from our lens, leaves open the question of timing, or whether advanced generation technologies such as OLED displays will reside in the U.S. in the next decade.

Takeaways

Readers and consumer electronics supply chain teams can interpret the latest Nikkei report for various meanings.

The report indicates that the change in manufacturing strategy does not imply that Foxconn will back away from Sharp branded TV manufacturing in the U.S., rather, larger semi-finished LCD display cells would be sourced elsewhere, more than likely, by our lens, in China.

For its part Foxconn provided a detailed statement to Nikkei reporters indicating that the panels will be used in a wide-range of applications that impact consumers’ daily lives including latest generation TV’s to self-driving cars.

The fact remains that Foxconn has a mixed track-record in following thru with its original plant commitments. Foxconn is likely walking the fine line of geo-political trade forces as a global manufacturer, including the distinct needs of its major customers such as Apple and other consumer-electronics firms. As a brand owner, under the umbrella of Sharp, the manufacturer walks the line of global trade tensions among the U.S. and China in terms of tariffs and domestic sourcing.

Where all of these forces end-up is again subject to the current environment of uncertainty in trade policies.

 

Bob Ferrari

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