Economy

Foxconn is Altering the Terms of the Deal. Again.

JM Ashby
Written by JM Ashby

Taiwanese technology manufacturer Foxconn stirred up a bit of a scandal two months ago when they quietly announced that they would build a smaller factory in rural Wisconsin than they had originally agreed to build in a deal with the state worth over $4 billion in subsidies.

At the time, Foxconn said it was still committed to building a larger factory at some point, but they would build a smaller factory at the same location first.

Now it looks like they're no longer even vaguely committed to eventually building the full-size factory.

From the Milwaukee Journal Sentinel:

In a shift from its stance of two months ago, the company on Wednesday did not offer assurances that it still plans to build the type of liquid crystal display panel plant the contracts cite.

Known as “Generation 10.5” fabrication facilities, or fabs, such plants are the largest and most expensive in the display industry. They produce very large panels, such as 65-inch or 75-inch television screens, that are cut from ultra-thin pieces of “mother glass” measuring about 9.5 feet by 11 feet.

Foxconn’s original plans last year called for building a Generation 10.5 plant, and both the state and local agreements reached with the company define the project that way. [...]

Asked subsequently whether Foxconn still plans to build a Gen 10.5 plant, the company said it “is still planning for an advanced fab facility in the near future after the completion of the first phase. Whether it is Gen 10.5 or something else depends on the market and economic situations at the time.

You know, this is actually in line with what we've been saying here for many months.

Even under ideal conditions, with Foxconn building a plant that employs at least 13,000 people at competitive wages, a majority of whom live in Wisconsin, the state's investment isn't expected to pay off until sometime in the year 2045.

The problem is that no one is going to be using LCD displays in 2045 or even 2035. LCDs, while still extremely common, are more or less obsolete today in 2018. If you have a smartphone that was built in the last few years, it probably has an organic light-emitting diode (OLED) or some other advanced display. Likewise, if you have a relatively new television, it probably has a more advanced display.

Foxconn isn't committed to building a large factory for large LCDs because the "market and economic situation" won't support it. It was never going to.

It seems extremely unlikely that Foxconn will ever employ 13,000 people at a larger factory that probably won't even be built.

I don't know the exact terms of their contract or what loopholes exist within it, but my gut says the Walker administration did not leave the state much room to claw back their subsidizes without going to court over it. Including robust enforcement measures just wouldn't be in Scott Walker's nature.

  • katanahamon

    Hmm, I wouldn’t mind a 9.5 by 11 foot tv…given that the jump in price from a 65inch to 75inch is about 2.5X, at least OLED, it would cost about 120,000 bucks…slightly extremely out pride my price range. Guess I’ll make do with my new and fabulous Sony 65in OLED. After my 20 year old 34in Sony WEGA flat screen, it’s certainly a deserved upgrade!

  • Aynwrong

    This is the type of scandal that should end a politicians career but Walker is a Republican in today’s Republican party. A party that in Michigan reelected a governor AFTER it was discovered his policy of “fiscal austerity” led directly to the poisoning of an entire city’s water supply.

    What is the local and state wide media like in Wisconsin? Was this boondoggle called out for what it is? My only familiarity with Wisconsin media is Charlie Pierce describing the race baiting shit show that conservative talk radio is there, which once included Charlie Sykes (just one of the reasons I don’t trust the Never Trumpers).

  • Badgerite

    I myself won’t buy any screen that doesn’t have LED in the title. The technology is simply far superior to LCD.
    Leave it to Scott Walker and the gop controlled legislature to offer whopping subsidies to a company that proposes to produce an already obsolete product.

    • katanahamon

      Just upgraded my 20 year old Sony WEGA flat CRT to a 65 in OLED Sony..it’s..amazing..!

      • Badgerite

        Exactly.

  • muselet

    Scott Walker clearly graduated from Trump University, with a degree in Screwing Up Negotiations.

    Walker richly deserves to be tarred and feathered for this fiasco.

    –alopecia

    • Draxiar

      Perhaps his voters as well.

  • gescove

    Your analysis of this debacle was spot on from the beginning. That whooshing sound you hear is more WI taxpayer dollars being flushed away by the Walker administration. I hope this helps get him roundly kicked to the curb in November.