Economy

Foxconn is Altering the Terms of the Deal. Again.

Written by SK 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.