The Supply Chain Matters blog updates readers on global high-tech electronics contract manufacturer Foxconn’s proposed large investment in its U.S. based manufacturing complex in southern Wisconsin and a report of a new lifeline.
In our last Foxconn Wisconsin update published in mid-October, we cited published reports indicating that the State of Wisconsin has denied a request from global contract manufacturing services provider, and prime Apple contract services provider for the initial tax subsidies due, reportedly until company officials draw up a new contract regarding the now revised scope and purpose of this manufacturing facility.
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. Wisconsin state officials have now indicated that tax subsidies that were agreed to in the initial contract were tied to jobs and capital investment for specific projects, which Foxconn is failing to deliver, specifically that the contract manufacturer was expected to have created slightly over 2000 jobs at the proposed production facility by the end of 2019, as well as invested upwards of $3.3 billion.
The new twist to the Wisconsin facility is this week’s published report by Bloomberg and picked-up by other outlets such as Verge, indicating that this U.S. facility will assemble components for Google and its Cloud infrastructure server needs.
According to Bloomberg, citing informed but sensitive sources, Foxconn has decided to locate production for a newly acquired Google supply contract in Wisconsin rather than in China. Indicated was that volume production should begin in the first quarter, timed with release of Intel’s Ice Lake server micro-processors. Reportedly the facility will utilize surface-mount technology assembly lines to place semiconductors onto circuit boards.
A Foxconn spokesperson reportedly confirmed to Bloomberg that the manufacturer is developing data center infrastructure and high-performance production capability at the Wisconsin facility but declined to name any customers.
What This Development Implies
If indeed Foxconn is now motivated to make a meaningful presence in Wisconsin, the news of this supply contract is certainly a start. Providing a supply base for now booming new Cloud based server demands indeed provides a lifeline to the facility. However, from our lens, Foxconn has to re-double its efforts in order to meet some of the baseline assumptions regarding the proposed manufacturing complex. That includes working with the state of Wisconsin to re-negotiate the purpose of the facility and any adjustments to original tax subsidies, which were substantial.
There are certainly other ironies.
In the recently completed U.S. Presidential election, President-elect Biden carried the State of Wisconsin. In the state’s recent state gubernatorial election, a Democrat was elected over the incumbent Republican governor. We have always viewed the Foxconn Wisconsin presence as politically charged given its original announcement stemming from the Trump White House.
The incoming Biden Administration along with the State of Wisconsin may possibly have the opportunity to make something of this U.S. manufacturing presence for high tech manufacturing and consequent manufacturing employment. Other high-tech providers in either Cloud computing, medical devices, automotive, robotics or high-end consumer electronics should be nudged once again to consider the possibilities of an added U.S. supply network presence.
Candidly, a disappointment that needs to be stated is that of Apple which continues to have an opportunity to demonstrate such an added commitment. Instead, current indications point to the consumer electronics provider favoring other parts of Asia as an alternative to China in responding and supplying U.S. product demand. While the argument that a vibrant and cost-effective high-tech supply network does not currently exist in the U.S. remains, we would have expected the technology and manufacturing ingenuities of both Apple and Foxconn to have at least made a viable effort.
With the building prospects for increased de-coupling of strategic high-tech supply networks in China, high tech manufacturers should consider being more open-minded.
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