It’s Really Going to Happen – LCD Making to Come to the US!

With a flurry of activity in the US media, Foxconn’s Terry Gou, with support from politicians up to Donald Trump, has announced that the company will build an LCD fab in the USA.

Foxconn is planning to build a new campus that will include an LCD fab in Wisconsin in the USA, the first major LCD plant to be built outside Asia. Eventually, the investment will be up to $10 billion, with up to 13,000 workers and is said to be the largest greenfield investment made by a foreign-based company in US history. It will start with around 3,000 employees and the investment will include around $3 billion in tax credits and benefits from the state of Wisconsin.

Average Daily Long Haul Truck Traffic arrowThis forecast of average daily long haul truck traffic on the NHS in 2045 shows why Wisconsin would be a good choice from a logistics point of view. We’ve highlighted the area where the fab is planned. – Click for higher resolution

At the moment, it’s not clear where in the state the plant will be except that it will be in ‘the South Eastern’ part of the state, which would mean somewhere around Milwaukee and just North West of Chicago. Several sites are reported to be under consideration and the area is in the congressional district of US House Speaker, Paul Ryan. US President Trump is reported to have noticed vacant land in Kenosha, a site previously used by Chrysler, and he is said to have recommended the area.

Foxconn’s Terry Gou said that the facilities would be state of the art and that the plant would be designed to support 8K TVs. That implies big substrates and the fab is expected to be a G10.5 facility, optimised for 65″ and above TVs.

My View

As I have often quoted, display industry veteran, Bruce Berkoff, always used to say “Engineering beats science, and economics beats engineering, but politics beats economics”. Clearly, Terry Gou wants friends in the US and President Trump was clearly very happy to be associated with this announcement, and claimed credit for the move. However, Bruce’s axiom has been modified by some of us to add “although in the very long term, economics always wins”.

The economic case for this investment rests on the supply of bigger and bigger TVs that will benefit from reduced logistics cost if panels and TVs are made in the middle of the US, rather than in China. They will probably also depend on the issue of tariffs. The EU certainly forced the big TV vendors to build sets in the EU’s custom union to avoid having to pay the 14% duty on imported TVs. However, panel makers also found some benefit to having module assembly in Europe to be more flexible to customer needs (as the shipping is that much longer to Europe than to the US) and also to release working capital that would otherwise be tied up in the backlights, chassis, and other LCD components.

If, as seems possible, given Trump’s protectionist views, the US decides to put a bigger tariff on TVs and or displays for TVs, that could well make this investment move look like a good one.

As with the panel makers that established module assembly in Europe, Foxconn will need to make sure it has the supply chain it needs, but it probably has the economic power and business leverage, as it is already the panel maker with the largest capacity, if you combine the capabilities of its Sharp and Innolux businesses. In particular, it will need glass, but it’s hard to see Corning resisting the idea of having a plant in the US (although the company has previously said that it did not want to build plants that could only have one customer). Maybe there will be some investment from Foxconn in a joint plant, as Samsung has with Corning in Korea. Of course, Apple has also talked about investments in manufacturing, so it might be involved, somewhere, especially if a G6 fab was to follow. A G6 is more efficient for the kinds of LCDs used in handheld devices.

And What About Europe?

Could this development lead to the idea of a fab in Europe? I doubt it very much. The last such plan that I am aware of was many years ago, when there was talk of a G6 fab in Italy between Rome and Naples, but that foundered on problems with the Italian banks. The same political issues are not relevant and, furthermore, Korea has a free trade deal with the EU, which is open to trade, rather than heading in a protectionist direction. However, it’s not impossible. In the end, almost everything comes down to cost and if the numbers meant that, one day, there would be a big advantage in such a move, it could happen. It might even happen somewhere around “the edges of Europe”. – Bob Raikes