The Supply Chain Matters blog updates readers n the latest development relative to the on again, off again plans for the proposed Foxconn Wisconsin manufacturing complex.
The prevailing question as to the overall scope of manufacturing role for the Foxconn Technology Group’s manufacturing complex located in Southern Wisconsin will serve has moved from the category of possibly optimistic to down-right disappointing.
Last week, it was reported that Foxconn is formally scaling back plans for a liquid crystal display (LCD) manufacturing plant at this Wisconsin facility.
According to reporting by The Wall Street Journal, a revised agreement has been negotiated which calls for $672 million of investment by the year 2025 vs. an original plan that called for upwards of $10 billion at this manufacturing complex. The former contract had called for a specific type of production facility while the new agreement calls for locating and operating a technology and manufacturing ecosystem.
With the latest revised plan, Foxconn would reportedly qualify for $80 million in government incentives. The original agreement initiated several years ago had called for upwards of $2.8 billion of incentives on the basis of the potential for employing 13,000 people by the year 2032.
The previously proposed new $10 billion factory, announced in the early days of the Trump Administration, was touted as an initial investment designed to rebuild a high-tech electronics supply chain within the United States. According to reports at the time, the Wisconsin plant would employ upwards of 3000 people initially and as many as 13,000 people at peak capacity. Subsidies agreed to in the initial contract were tied to jobs and capital investment for specific projects. Specifically, the contract manufacturer was expected to have created slightly over 2000 jobs at the proposed facility by the end of 2019, as well as invested upwards of $3.3 billion. That obviously did not occur, and the new governor of the State of Wisconsin, a Democrat, has sought to hold Foxconn accountable for clarifying its investment plans for the complex. An independent state fiscal analysis at the time of the original investment determined that Wisconsin taxpayers would recoup the state’s incentive investments in the 2042-43 fiscal year- a 25-year return on investment.
According to the latest WSJ report, Foxconn indicated that the original project was slowed by: “cultural assimilation, changing business demands, a pandemic, and a presidential election year.”
In prior Supply Chain Matters published blogs, we highlighted the announcement that Foxconn has been designated to produce the second-generation model of electric vehicle start-up designer Fisker. Regarding the Wisconsin facility, Chairman Liu’s statement seemed to be far clearer: “I took over the Wisconsin task, (from prior Chairman Terry Gou) and I need to make it a viable one, so I need to find a product that fits that location. Whether it’s Wisconsin or Mexico, it’s not political, it’s business from my perspective.”
We further highlighted the growing speculation concerning Apple’s ongoing efforts to develop, produce and distribute an Apple Car. The notion here was growing speculation that Apple’s secretive attempts to negotiate an auto manufacturing partner were not yielding acceptable options and raised the usual possibilities that indeed go-to partner Foxconn would serve that purpose. Of course, the catalyst for such a presence could have been Apple, but that does not appear to be in the cards.
From our lens, this latest development provides more evidence of Foxconn’s tendencies to overpromise and under deliver when it comes to U.S. manufacturing plans in the notions of partnering with branded companies for making a U.S. manufacturing presence viable for certain industry supply network needs. The fact that certain corporate leaders such as the CEO of Fisker would specifically mention Wisconsin as an option, shows some intent to make a U.S. presence an option.
To classify this latest decision as that of strictly business related is indeed hollow when the original announcement, hype and negotiation process was high-stake political in nature, complete with politicians touting the Wisconsin facility as a renaissance for high tech manufacturing in the U.S, Midwest.
It supports the long-established thinking that Asia headquartered contract manufacturers remain anchored in Asia-centric strategy, thinking and politics. The same thinking presents itself in factory automation goals, touting aggressive investment plans in added factory automation within existing Asian based production facilities. Why not the U.S.?
We would add that Foxconn is not the only player with such thinking tendencies, Apple seems to be wedded to Asia-centric as well, despite having ever growing healthier product margins.
If both of these global providers espouse to be responsible corporate citizens committed to sustainability and social responsibility leadership, then business and geo-political considerations are a reality in today’s changing new normal of business.
Bob Ferrari
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