Foxconn in political storm over revised plans for Wisconsin plant

The unravelling of a promised huge factory investment in Wisconsin touted by US president Donald Trump as proof that he could revive America’s Rust Belt has set off a political storm and landed the world’s largest contract electronics manufacturer in hot water.

On Wednesday a senior Foxconn executive said in an interview that the company would not create a plant manufacturing liquid-crystal display (LCD) panels in Wisconsin, sparking a public backlash in the US. On Thursday the Taiwan-headquartered group confirmed that the “global market environment” had forced it to scale back its plans for the state.

In July 2017, Foxconn promised to invest $10bn and hire 13,000 people in a Wisconsin plant. When Foxconn founder and chief executive Terry Gou announced the project at the White House with Mr Trump, the US president boasted: “If I didn’t get elected, he definitely would not be spending $10bn.”

But the project has been languishing since Democrat Tony Evers won the Wisconsin governor election in November last year, defeating Republican Scott Walker, who had hammered out the deal for the investment with Foxconn, including generous incentives for local labour. Foxconn has since fallen behind its originally planned hiring road map, and as a result failed to receive some of the state’s subsidies.

The company revealed its rethink in an interview with Louis Woo, special assistant to Mr Gou, published by Reuters on Wednesday.

Mr Woo was quoted as saying that the company would not be hiring blue-collar workers in Wisconsin but engineers.

“In Wisconsin we’re not building a factory,” Mr Woo said. “You can’t use a factory to view our Wisconsin investment.”

The statement triggered a wave of angry comments in the US.

“President Trump, Scott Walker and Foxconn made promises to Wisconsin workers and taxpayers,” Tammy Baldwin, the Democratic senator for Wisconsin, wrote on Twitter. “Foxconn cannot be allowed to fall short of keeping their promises or break them.”

The Wisconsin governor’s office said it was “surprised to learn about this development” and would “continue to monitor the project to ensure the company delivers on its promises to the people of Wisconsin”.

The company’s retreat mirrors earlier ventures in other countries, including Brazil and several provinces in China, where Mr Gou leveraged his company’s huge workforce to extract maximum incentives from governments in exchange for promises of large-scale local employment, but failed to deliver when the conditions were not profitable for the company.

Mr Gou transformed a humble connector workshop set up in 1974 into a manufacturing powerhouse serving Apple and most other global technology brands. Foxconn racked up $172bn in revenues last year.

“Foxconn has broken its promises in Pennsylvania, Brazil, China, and now Wisconsin,” Jimmy Anderson, a Democratic state representative in Wisconsin, said in a tweet. “Everywhere they’ve gone, they have exploited taxpayers to line their pockets. Wisconsin Republicans should have known better.”

On Thursday, Foxconn said it remained committed to creating 13,000 jobs in Wisconsin.

“Foxconn will be moving forward with plans to build an advanced manufacturing facility in Wisconsin,” the company said, adding that it would construct an LCD module back-end packaging plant, a high-precision moulding factory and a system integration assembly facility over the next 18 months.”

LCD module back-end packaging, precision moulding and assembly are relatively labour-intensive operations but require much less investment than the fabrication of LCD panels themselves, which requires clean rooms and precision equipment with a price tag of several billion dollars for one fab.

LCD panel manufacturing is a highly cyclical industry, with the bulk of global capacity in China, South Korea, Taiwan and Japan.