We wanted to provide our readers an update from a recent Supply Chain Matters posting citing a report indicating that a Sharp Foxconn U.S. plant announcement was imminent.
This week, The Wall Street Journal reported that while Foxconn was still interested in building a large-scale flat-panel U.S. manufacturing facility, its iconic Chairmen is challenging U.S. business and sense-of-urgency norms.
This latest WSJ update (Paid subscription required or metered view) indicates that Foxconn Chairman Terry Gau is drawing contrasts among China’s Guangdong Province officials who eagerly supported efforts to move ahead with the siting and building of an $8.8 billion flat-panel factory while U.S. talks have stretched on for years. Cited are officials noting that it took literally just 50 days for Guangdong officials to negotiate a deal with Foxconn.
Supply Chain Matters would quickly add, however, that business norms among these countries are quite different, for very important reasons.
In this week’s report, Mr. Gau indicated to the WSJ that he had just visited Washington D.C. but declined to elaborate further. He further indicated that to compete with China government officials, the U.S. must offer tax breaks and develop worker-training programs, along with studying how things are done in China. Gau indicated to the WSJ that he has urged U.S. state representatives to visit China: “To see how in such a short span of time, we can get so many things done here.”
We strongly suspect that Mr. Gau may be trying to cater to the current pro-business agenda of the new Trump Administration, especially in the notions of reduced regulations and in the reported thwarting of government agencies such as the U.S. Environmental Protection Agency (EPA). Perhaps Mr. Gau may not be sensitive to the current political backdrop of a U.S. state granting fairly large incentives to a China based manufacturer as contrasted to a U.S. resident manufacturer.
Beyond the political optics, there is, from our lens, a far broader consideration.
In the acquisition of Sharp, Foxconn is embarking on a mission to foster a globally branded company. Brands represent certain perception and values for consumers which not only include features, pricing, and technology of products, but other values as well. They include commitment to sustainability and the environment along with social responsibilities in the treatment of workers and suppliers. Do not misconstrue, any company has the right to be a tough bargainer and foster its business goals, but a set of values must be recognized as well.
An important reinforcement to the above is the WSJ reporting of Foxconn’s confirmation that it is bidding to also acquire the flash-memory business of Toshiba Corp.
With the current U.S., political debate leaning toward corporate tax reform and a potential import tax, Foxconn may find itself needing a U.S. presence, not only in support of its own brands, but in supporting its own contract manufacturing customers. The other card that Foxconn has in its favor is its current investments in manufacturing assembly automation utilizing robots, along with access to other U.S. manufacturing centers of excellence.
Foxconn could well re-discover that negotiating is a give and take exercise, with the latter having equal value.
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