Yesterday, we reported that Foxconn had effectively canceled its plans to build a major factory in Mt. Pleasant, Wisconsin, despite the promise of $4.5B in total tax credits, utility costs, incentives, sales tax exemptions, worker training, road improvements, and local government grants. Now, that plan is supposedly back on following a conversation between President Trump and Terry Gou, founder and chairman of Foxconn (formally known as Hon Hai Precision Industry Co).
Foxconn has released a statement claiming that the company will now build a Gen 6 plant at the Wisconsin site, saying: “After productive discussions between the White House and the company, and after a personal conversation between President Donald J. Trump and Chairman Terry Gou, Foxconn is moving forward with our planned construction of a Gen 6 fab facility.”
A Gen 6 facility is much smaller than the Gen 10.5 facility that Foxconn had initially pledged to build and requires a much smaller investment footprint. Still, this would seem to be a better outcome for the state of Wisconsin than before, if the plan actually comes to fruition. That’s still a very big ‘if,’ regardless of how many personal conversations President Trump has with Foxconn’s chairman.
A Trail of Broken Promises
As Marketwatch details, Foxconn has a long history of impressive promises and minimal follow-through. A $30M investment in a Pennsylvania factory announced back in 2013 never happened. Neither did the $1B investment Foxconn promised to make in Indonesia in 2014 or the $5B it pledged to invest in Vietnam back in 2007.
In 2011, Foxconn promised to invest up to $12B in Brazil with a facility it claimed would employ up to 100,000 people. Instead, the company reportedly shut down operations back in 2017. (It’s been surprisingly hard to confirm if Foxconn has formally left Brazil or not, but either way, the $12B investment never happened).
In 2015, Foxconn signed a memorandum of understanding with India, promising to invest $5B in that nation over the next five years. Despite grand promises, this never came to fruition. When Apple began assembling smartphones in India, Foxconn partnered with Chinese phone manufacturer Xiaomi to do it.
When it comes to making plans for grandiose capacity and plant expansions, Foxconn is a fundamentally untrustworthy partner.
This Is Not How You Build a Manufacturing Facility
The other major reason not to trust a word coming out of Foxconn’s mouth is that literally no other company I’ve ever heard of builds manufacturing plants in this fashion.
Building a manufacturing plant is a major undertaking. A Generation 10.5 plant for building large TV screens will have a different floor plan, power requirements, staffing levels, and water needs than a Gen 6 plant making much smaller panels. A series of facilities devoted to knowledge workers — basically an office complex with some RD labs and maybe a bit of assembly work — is distinct from either.
The cost and difficulty of retrofitting large-scale manufacturing facilities for other purposes are very high. Companies don’t typically break ground until they’ve laid exact plans for every aspect of the facility, from the type of product that will be built there to the layout, design, and utility needs of the building. Every change delays the amount of time until the facility comes online. In a hypercompetitive environment, nobody can afford to spend an extra few years waiting for a factory to finish getting built. Every inch of floor space being renovated or under construction is floor space that isn’t making money.
When foundries and IDMs like TSMC, Samsung, Intel, or GlobalFoundries make plant announcements, they build what they said they would. If those plans change mid-cycle, it’s treated as major news. Yet since signing off on the Wisconsin deal, Foxconn has made multiple dramatic alterations to its plans for the facility. First, it was a Gen 10.5 plant. Then it was a Gen 6 factory. Then it became a buzzword ecosystem to promote and research “AI 8K+5G” (that’s the actual term used), with most of the manufacturing done by robots. Yesterday, Foxconn told Reuters it would create a “technology hub” in Wisconsin, with research facilities, packaging, and assembly operations, with a focus on producing specialized tech for industrial, healthcare, and professional applications. That’s four distinct visions for the purpose of a facility that’s supposedly been under construction for over six months.
“In Wisconsin we’re not building a factory. You can’t use a factory to view our Wisconsin investment,” Louis Woo, special assistant to Foxconn Chief Executive Terry Gou, told Reuters yesterday.
Except now, we supposedly can? It’s not as if President Trump hasn’t met Terry Gou before. The President attended the groundbreaking ceremony at the Mt. Pleasant site earlier this year. He publicly welcomed the Foxconn-Wisconsin deal when it was initially announced. Bringing manufacturing jobs back to the United States was central to his campaign. It’s been a consistent theme since his election. Terry Gou knows this. He knew it in 2017.
I have no idea what kind of facility Foxconn will build in Wisconsin. But the company’s history gives absolutely no reason to believe it’ll build the factory it promised, no matter how many personal conversations the president has. This isn’t how serious firms do business or make decisions about where to invest billions of dollars. It’s just par for the course at Foxconn.
Feature image from Wikimedia Commons.
- Foxconn Admits It Won’t Build TV Plant in Wisconsin Despite $4B Investment
- Foxconn Claims It’ll Build a Factory in Wisconsin, but Don’t Hold Your Breath
- Foxconn is attempting to replace its human workers with thousands of robots