Politics and technology intersect more often than you might think. And no better example of this can be found than the announcement in 2018 by Terry Gou of Hon Hai Precision (Foxconn) that he would build a state-of-the-art, Gen 10 LCD panel manufacturing plant in Wisconsin, presumably to crank out large panels for Ultra HDTVs. The plant would be the center of a $10 billion high-tech campus near Racine and would have earned over $3 billion in state and local tax credits, and Gou predicted over 13,000 jobs would have been created.
Foxconn’s initial announcement received White House ‘hoopla’
To say that many of us analysts and members of the press greeted this announcement with surprise is an understatement. There’s a pretty good reason why no one manufactures LCD panels in the United States, and that would be the high finished cost of each panel. Given the collapsing retail price trends for 4K televisions, no one could ever hope to recover such an investment. Was Gou trying to pass off a bill of goods? What would those 13,000 people actually do at this facility?
Now, it appears he’s wavering in his commitment. After the village of Mount Pleasant issued bonds and borrowed $300 million dollars to acquire and clear land for the project, Gou was quoted in January of this year as saying that the television factory was a dead idea.
“In terms of TV, we have no place in the U.S.,” he told Reuters. “We can’t compete.”
Apparently that comment set off a series of phone calls between Foxconn and the White House, because two days later, Gou reversed course.
“After productive discussions between the White House and the company…Foxconn is moving forward with our planned construction of a Gen 6 fab facility,” the company said in a statement. “This campus will serve both as an advanced manufacturing facility, as well as a hub of high technology innovation for the region.”
This Gen 6 fab (motherglass of 1850mm x 1500mm) will take up over a million square feet and is scheduled to hire 1,500 positions. That seems a bit high to me for a facility that is largely automated – less than 100 people run one entire LCD line for LG Display in Paju, Korea. But Gou’s original deal with the state also promised that 5,000 people would be employed at the Gen 6 fab.
From an NBC News report this past Sunday, it appears quite a bit of land has been cleared for the project, some roads have been laid down, and some buildings have been put up. But little if any activity is taking place at the site, and residents are getting a bit irritated about the whole thing. Several sold their homes as part of eminent domain acquisitions by the town and now feel they were misled. A former gubernatorial candidate, Matt Flynn, exclaimed
“This state got snookered. We really got taken to the cleaners on this!” in an interview with WMAQ-TV in Chicago.
The Gen 6 facility was described as one that would make smaller glass cuts or things like smartphones, tablets, computer screens, and small TVs. But the smartphone market is shifting to OLEDs, tablet sales are in steady decline, and small televisions are an extremely low-profit business. So why make that kind of investment?
Gou may also be changing his manufacturing plans again, according to a story in the Nikkei Asian Review from June 11. According to that story,
“The products to be manufactured in the Wisconsin factory would be extended beyond the planned display panels to servers, networking products and automotive central controls. The factory is expected to be operational from the end of next year…while Foxconn had originally intended the plant to manufacture new generation liquid crystal displays, the company has scaled back its ambitions several times, citing the overcrowded display market.”
Gou could also be playing a long game, figuring any investments in Wisconsin will spare him the tariff fights currently going on between Washington and Beijing. Perhaps his thinking is that bringing any jobs at all to this part of Wisconsin will certainly curry favor. Indeed, Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, was quoted in the NBC story as saying,
“Even if the project stopped where it is now, 1,500 jobs are nothing to sneeze at, and no one is out any money. This will still be the largest foreign investment that we’ve ever had in this region.”
In any case, the current governor of Wisconsin, Tony Evers (D), is all over Gou to get this project completed. What it will actually look like when completed is anyone’s guess, but from my perspective, it appears to be a classic “pay for play” deal. And regardless of your political leanings, it still doesn’t make any sense economically to build an LCD panel fab in the United States, unless you’re happy to pay an arm and a leg for a new TV…
