Ground broken on Foxconn's first US factory, rumored to supply iPhone screens for Apple
Foxconn chairman Terry Gou was joined by U.S. President Donald Trump, House Speaker Paul Ryan and others on Thursday as the company broke ground at a future factory in Mount Pleasant, Wis., which could potentially be turned to helping Apple.
Trump used the occasion to promote his goal of bringing jobs to the U.S., saying the factory will provide jobs for "up to 15,000 Wisconsin Workers," although reports have indicated the number will be 13,000. Foxconn is headquartered in Taiwan but operates most of its manufacturing in mainland China, Apple being a critical client thanks to products like iPhones and Macs.
The $10 billion factory is currently slated to produce LCD panels for TVs, but has been rumored as turning to iPhone and Mac panels in an attempt to cut costs. At the same time, any panels produced in the U.S. would have to be shipped overseas for final product assembly, which might negate any cost benefits.
Apple has some U.S. suppliers, but has had little assembly done in the U.S. for many years. The most recent product to be built in the country was the 2013 edition of the Mac Pro, now largely considered outdated.
To help Apple with iPhones, the factory would also have to expand into OLED. Two OLED-based models are expected to ship later this year, sized at 5.8 and 6.5 inches. A 6.1-inch LCD product is also predicted, and may even become the most popular, but Apple will likely transition to OLED iPhones completely within the next couple of years.
Local governments have reportedly been offering substantial amounts of taxpayer money to attract the factory, including $2.85 billion in income tax credits, $150 million in sales tax exemptions, and $764 million in incentives from Mount Pleasant and Racine County. The state of Wisconsin has pledged $134 million to improve nearby roads.
Trump used the occasion to promote his goal of bringing jobs to the U.S., saying the factory will provide jobs for "up to 15,000 Wisconsin Workers," although reports have indicated the number will be 13,000. Foxconn is headquartered in Taiwan but operates most of its manufacturing in mainland China, Apple being a critical client thanks to products like iPhones and Macs.
Today, we broke ground on a plant that will provide jobs for up to 15,000 Wisconsin Workers! As Foxconn has discovered, there is no better place to build, hire and grow than right here in the United States! pic.twitter.com/tOFFodZYvK
-- Donald J. Trump (@realDonaldTrump)
The $10 billion factory is currently slated to produce LCD panels for TVs, but has been rumored as turning to iPhone and Mac panels in an attempt to cut costs. At the same time, any panels produced in the U.S. would have to be shipped overseas for final product assembly, which might negate any cost benefits.
Apple has some U.S. suppliers, but has had little assembly done in the U.S. for many years. The most recent product to be built in the country was the 2013 edition of the Mac Pro, now largely considered outdated.
To help Apple with iPhones, the factory would also have to expand into OLED. Two OLED-based models are expected to ship later this year, sized at 5.8 and 6.5 inches. A 6.1-inch LCD product is also predicted, and may even become the most popular, but Apple will likely transition to OLED iPhones completely within the next couple of years.
Local governments have reportedly been offering substantial amounts of taxpayer money to attract the factory, including $2.85 billion in income tax credits, $150 million in sales tax exemptions, and $764 million in incentives from Mount Pleasant and Racine County. The state of Wisconsin has pledged $134 million to improve nearby roads.
Comments
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40% (give or take) of the cost of investment in subsidies — is that really a good deal? Makes sports stadiums look cheap.
https://www.jsonline.com/story/money/business/2018/05/04/foxconn-need-thousands-workers-entry-level-skills/578022002/
Is this all worth $4B? Only time will tell but the community is investing in the future of their workforce so good on them. Hope it works out.
As with any corporate deal, there's always something political and I have to wonder who will be making money on this deal and who will be losing. I have a difficult time seeing LCD TV sets making a ton of money with the way they almost immediately drop in cost.
If Foxconn would produce a might quality (4K, HDR, etc.) TV monitor without any garbage Android system inside, I'd buy it, but I think that ship has sailed. If Apple wants to produce computer monitors as well as their oft-mentioned full Apple Television at this facility, great. Just make sure the Apple TV simply has HDMI ports without any speakers since that's what the HomePod can end up being (kidding) and I think there would be a market.
"... but Apple will likely transition to OLED iPhones completely within the next couple of years."
Exactly. Since it will take a few years until the new plant is completed, and up-and-running, it is a safe bat that nothing produced in this factory will be used in future iPhones. And since larger LCD panels for iPads and Macs will cost more to produce here, and are also prohibitively expensive to ship to China (where iPads and Macs are assembled), those won't be produced in the new factory either.
In other words, nothing that will be produced at this new Foxconn plant will be used for any Apple products.
As far as Apple ptoducts it is hard to tell. The original talk about this factory didnt even include Apple. My feeling here is that something else is going on to justify this plant as the industry is currently over supplied with LCDs. It will be interesting to see what develops.
A factory will provide precious jobs and income for many thousands of citizens, year 'round and for many decades to come, as well as, eventually, an annual full tax base for local, state, and federal governments. The factory also produces valuable hard products essential to other industries.
Quibbling about initial incentives is myopic.
The Wisconsin FoxConn plant may never build a single Apple product, assembly, or subassembly. So what? There are still plenty of manufacturers left in the US, even in Wisconsin and other parts of the midwest, and the option of outsourcing to FoxConn in Wisconsin may be deemed more politically acceptable than outsourcing to Mexico or Asia. The challenge for FoxConn will still be to manage its costs so it will still have to suppress wages, fend off unions, and lobby for import tariffs to remain competitive if it intends to compete against offshore manufacturing operations. Another approach would be to concentrate solely on the manufacturing of products that aren’t benefiting from offshore manufacturing. In other words, the best thing for FoxConn Wisconsin may be to avoid getting involved with Apple at all, at least around Apple products that are entrenched in offshore manufacturing. Building iPhone displays in Wisconsin and shipping them to China for assembly just seems like a load of claptrap from an operational standpoint. Building dashboard displays for automobiles and industrial HMIs may make a lot more sense.
This is a super sweet deal for FoxConn without a doubt. I personally believe these EMS based operations are better positioned for longer term employment prospects for manufacturing workers in the locations where the plants are built compared to captive manufacturing, i.e., where the manufacturing employees work directly for the product manufacturer like Apple. Contract manufacturing operations have to remain competitive on a global basis to remain viable. It will be interesting to see how competitive FoxConn can be in areas like Wisconsin that have traditionally had captive manufacturing operations backed by strong collective bargaining agreements. Again, this is still outsourcing, but rather than a US firm outsourcing to a plant in Mexico or Asia it's outsourcing to a plant that's built around the Mexican or Asian manufacturing model that's physically located in Wisconsin. It will be interesting to see how the model works when moving from a low labor cost with nearby suppliers to a model based on higher labor costs and distant suppliers. For global EMS operations like FoxConn they can redistribute workload and different parts of their operations across different countries for cost and/or supplier reasons but it still must make sense on the bottom line. Finally, from what we're seeing they can also rebalance their bottom line with additional injection of taxpayer subsidies as long as they continue to maintain political capital with those who are profiting politically from their continued presence in the US.