With Foxconn and Wisconsin at odds over subsidies, the possibility of Foxconn moving any manufacturing to the U.S. ..
Foxconn’s plan to build an LCD fab in Wisconsin looks “dead,” according to one of the analysts hired by the state as a consultant on the project.
The $10 billion investment project would have created as many as 13,000 jobs and helped bring high-tech manufacturing back to the US. It had the endorsements of President Donald Trump and Scott Walker, the former governor of Wisconsin who 2017 signed an agreement with Foxconn.
The Taiwan-based company that’s the world’s largest electronics contract manufacturer has failed to meet targets that would have qualified it to receive up to $19.1 million in job-creation tax credits and another $192.9 million in capital-investment tax credits for jobs and investments in 2019, a substantial portion of the $2.85 billion in total tax credits described in the deal.
Foxconn founder Terry Gou said earlier this week that the company’s commitment to the project depends on government aid for the project, according to a report in the Wall Street Journal.
Meanwhile, a global supply glut has soured the outlook for building more production capacity.
“Right now it looks dead,” Display Supply Chain Consultants (DSCC) CEO Ross Young told EE Times. “They only built a storage facility and are not getting the subsidies they need. We don’t anticipate any more G10.5 LCD fabs being built. The industry has sufficient capacity. In fact, the Korean suppliers Samsung and LGD are shutting down a significant amount of capacity and looking to exit the LCD TV panel market as Chinese government subsidized capacity drove prices down.”
DSCC has provided consulting services to the Wisconsin government on the Foxconn project.
“The only economic argument from my perspective for a G10.5 LCD fab is the high cost of shipping large TVs from Asia,” Young said. “However, assembly in North America can often reduce the costs.”
Electronics brands like Apple and Dell don’t appear to be demanding reshoring of display production, according to Young.
“In fact, we have never had much display production in the USA. The military is a small consumer of displays, and displays are not a differentiator today in terms of defense capability. Perhaps AR/VR goggles could be in the future, but those are more likely to be made here anyways due to lower capital intensity.”
In order to qualify for the maximum tax credits, Foxconn would have needed to employ 2,080 workers in Wisconsin and invest $1.3 billion in the state. These lofty numbers have long been ruled out, though, as Foxconn’s project has diminished from a Gen 10.5 fab complex, to a Gen 6 fab, to an uncertain manufacturing site, DSCC said in a report provided to EE Times.
While the Wisconsin government has denied Foxconn’s request for tax credits, it has offered to to renegotiate the contract once the company is able to provide more accurate details of the proposed project, such as its size, scope, anticipated capital investment and job creation, the report added. Such offers have been made repeatedly by the Wisconsin government since the current governor, Tony Evers, took office in January 2019.
Foxconn seems unclear in its plans for the Wisconsin site, according to DSCC. “The Foxconn representatives meeting with state officials often change from one meeting to the next, and the company has never described a coherent plan to do business at the Mount Pleasant site. Although Foxconn built a 1 million square foot (93,000 square meter) building at the Wisconn Valley site that was intended for a Gen 6 fab, the company got permission in June to use the Gen 6 building for storage,” Display Supply Chain said.
In 2018, the Walker administration shifted up to $90 million in local road funding to road work related to the Foxconn factory. The Wisconsin state legislature granted Foxconn special legal privileges within the Wisconsin judicial system. In June 2018, President Trump praised the plant, describing it as “the Eighth Wonder of the World” at the groundbreaking.
At this stage, there’s no compelling reason to build an LCD fab in the US, according to Young.
“We really don’t see the demand for US display production at this time. There is sufficient capacity still in China, Taiwan and Korea, and there is growing interest in India, which may see large subsidies and has much lower wages along with increased assembly demand.”
Government subsidies will very likely be needed to clinch the US deal, if both sides decide to proceed.
“Federal or state (subsidies) would help since the Chinese fabs have benefited from them plus the advantage of lower wage costs and more skilled production personnel. A fully automated fab could help offset the wage differential,” Young said.
The outcome of the project is likely to affect deliberations on potential US industrial policy regarding the reshoring of the semiconductor industry, much of which has migrated to Asia.
The Creating Helpful Incentives for Producing Semiconductors in America Act (CHIPS Act) is wending its way through the congressional budget process. Politicians, bureaucrats and semiconductor companies increasingly back efforts to beef up chip production on US soil.