Foxconn is apparently considering smartphone manufacturing in the U.S., raising questions about what deals the Trump Administration is offering.
Buried in Foxconn’s press release yesterday about a $10 billion Wisconsin LCD fab was an eye-opening statement.
Chairman Terry Gou said the Wisconsin plant was “the first in a series of facilities we will build in several U.S. states, this is part of a bigger plan to create a robust 8K+5G ecosystem in the United States,” implying smartphone manufacturing. In remarks at the event President Trump alluded to other plants “in negotiations.”
Earlier this week, President Trump told the Wall Street Journal that Apple chief executive Tim Cook promised him he will build three manufacturing plants in the U.S. Foxconn’s Wisconsin plan has no apparent connection to Apple, but is focused on LCDs for large-screen TVs , something that Apple was rumored years ago to be considering.
Back in the day, former President Obama once asked Apple founder Steve Jobs what it would take to bring iPhone manufacturing to the U.S. Jobs famously responded that those factory jobs are not coming back.
What happened between the Trump Administration and Gou, potentially changing the calculus is not clear but bears exploring. Several observers noted the $3 billion in tax breaks for the $10 billion LCD plant was a high price to pay for a guarantee of a minimum of 3,000 jobs—a cool million dollars for each average $53,000/year job.
Part of the calculus is clearly political. The LCD plant is going to Wisconsin, a state that voted for Trump and is represented by a Republican governor and House Speaker who presided over the Foxconn event.
At this rate, the potential for an additional 10,000 U.S. jobs could cost another $10 billion in tax breaks. It would be reasonable to expect they would involve plants in other rust-belt states such as Michigan and Ohio that voted for Trump and are represented by Republicans.
Foxconn's Terry Gou at the White House event was flanked by Republicans (from left) Wisconsin Governor Scott Walker, Vice President Pence and Wisconsin Representative Paul Ryan and Senator Ron Johnson. (Image: WhiteHouse.gov)
The White House event yesterday was full of congratulations all around. They included self-congratulations from Trump who said Foxconn would never have spent the $10 billion if he had not been elected. Trump’s son-in-law Jared Kushner also got mention for his role in a U.S. innovation council that was key to the deal.
The event was short on transparency on the exact terms of whatever larger deal is still being negotiated. Can any business now get a tax break of a million dollars per new job created? Or is this something available only by special arrangement with the Trump family?
It feels like the U.S. under Trump has shifted from government by policy to “The Art of the Deal.” Under this business-like approach, the public does not get to see what the rules are, it is simply informed of deals after they happen and it is expected to be appreciative.
On the business side, the same is apparently true for Foxconn’s tech partners such as Corning, Applied Materials and others. They face costs helping Foxconn build a new supply chain for LCDs in Wisconsin and maybe one for smartphones in Michigan and Ohio. Their shareholders may also have questions about this new reality in American business policy.
The top-down Trump plan to encourage manufacturing in the U.S. is an ambitious approach radically different from the bottom’s up approach of his predecessor. During his tenure, President Obama focused on creating centers of excellence for next generation technologies such as flexible, printed electronics and photonics and encouraging global entrepreneurs.
So far, the Trump approach has put some large figures on the scoreboard. However, who wins in this game is not yet clear.
— Rick Merritt, Silicon Valley Bureau Chief, EE Times