Foxconn's Wisconsin plant faces headwinds after US elections
Incoming governor wants to renegotiate deals around $10bn factory
TAIPEI --Concerns are emerging over the future of Foxconn Technology Group's $10 billion investment in the U.S. state of Wisconsin after the politician who helped to harness nearly $4bn in tax breaks and other incentives for the project was ousted in Tuesday's election by a fierce critic of the package.
Foxconn, a key supplier for Apple, HP, Dell, Amazon and many others, is building a liquid crystal display panel plant in Wisconsin, and Chairman Terry Gou has credited Gov. Scott Walker's support as key to attracting the company also known as Hon Hai Precision Industry to the state. Both Walker and U.S. President Donald Trump attended the groundbreaking in June.
The $10 billion project represents one of the largest foreign investments in the U.S, and Foxconn had claimed it would create 13,000 jobs. The nearly $4 billion state and local incentive package for Foxconn also marks the largest subsidy program for a foreign company in American history.
Walker's defeat in his bid for a third term by Democrat Tony Evers in this week's mid-term elections has sparked questions over the future of the plant. In August Evers suggested in an interview that the deal should be redrawn.
"What we can do is renegotiate some of the side deals that Walker made with [Foxconn] that frankly don't make any sense," Evers said in an interview with Wisconsin's News 3 in August. The governor-elect has also said he will revisit the air permits granted to Foxconn for its manufacturing complex in the state.
Eric Chiou, a veteran display analyst at research firm WitsView, expects that Foxconn will need to renegotiate terms with Wisconsin, "and such talks could likely lead to some delay of the project."
"We need to monitor closely whether the successor would still somehow endorse the program," Chiou said. Display projects require massive capital investment, he added. "Any change in tax breaks, incentives and subsidies could make the Foxconn project even more challenging to generate returns sooner," Chiou said.
Evers has not responded to Nikkei’s request for comment as of press time.
As of Wednesday night, Gou had yet to convene an internal meeting to discuss the U.S. election result, two sources with the knowledge told Nikkei. But the company held meetings ahead of the election to discuss all possible outcomes, one of the individuals said.
"Gou will talk to Foxconn executives who are familiar with the U.S. and monitor the upcoming [Group of 20] summit before reaching any conclusions," one of the sources said.
Responding to Nikkei’s queries about whether the election result would affect its investment there, Foxconn congratulated Evers. “We look forward to working with Governor-elect Evers and his team,” Foxconn said.
“We have already made significant progress and continue to actively move forward on our commitment to create high-value jobs in Wisconsin as part of our major investment in the state,” the company said.
Foxconn did not disclose how much it has spent on the project in the manufacturing complex in Wisconsin or how much subsidy it has received from the state. But it has started to build the facility and initiated hiring programs there.
Foxconn and Trump announced the company's plan to invest $10 billion into Wisconsin during a White House event in July 2017. Wisconsin's state government soon agreed to offer $3 billion in tax breaks. Racine County and Mount Pleasant, the village where the plant is being built, later agreed to give around $764 million in incentives to the Taiwanese manufacturer.
The groundbreaking ceremony on June 28 in Mount Pleasant highlighted Trump's effort to restore manufacturing jobs in the country. But Foxconn's changes to the plan have raised growing doubts.
Instead of building a 10.5th-generation LCD facility as announced, Foxconn now will construct a factory that harnesses sixth-generation LCD technology in order to adapt to the fast-changing industry, Louis Woo, Gou's special assistant, confirmed to local media a few days before the groundbreaking.
Woo insists, however, that Foxconn's promise of a $10 billion investment remains unchanged. The Nikkei Asian Review first reported Foxconn's revised plan in May.
Foxconn also changed the workforce profile for the project. The company originally said it would require 75% of the 13,000 jobs to be production operators, according to a report by Foxconn's consultant agency Ernst & Young in July 2017.
But Woo told the Milwaukee Business Journal this August that at least 80% of the workforce will consist of engineers or research and development scientists.
Walker's loss need not affect Foxconn's project given the generally bipartisan support for jobs and investment, said Willy Shih, a professor of management at Harvard Business School.
Yet if the Taiwanese company's changes to the investment plans prompt Governor-elect Evers to have second thoughts about the deal, "any renegotiation or attempt at renegotiation [would] give Foxconn the perfect excuse to back out of the project," Shih told the Nikkei Asian Review.
Foxconn denied a Wall Street Journal report that it is considering bringing engineers from China to help fill the gap in Wisconsin. But market watchers say the news signals Foxconn's challenges in finding sufficient trained engineers in the U.S. and coping with the incomplete supply chains for building an LCD fab.
Though the election result and the Journal report suggest Foxconn's LCD plant will face growing skepticism in the U.S., the company has continued to try to raise its profile in the country.
Foxconn has started R&D programs and other collaborations with local universities to nurture the types of talent that it needs in the U.S. The company also established an artificial intelligence company in Silicon Valley to accelerate its efforts in industrial AI technology.
On Monday, Foxconn and Wisconsin Economic Development Corp. led 14 businesses in the state to join the first China International Import Expo in Shanghai, an effort to show that the company delivers on its commitment to support the growth of the state's economy.