Foxconn denies it’s changing plans for Wisconsin project

Nikkei Asian Review report suggested strategy shift amid supply chain concerns

Last updated on July 2nd, 2019 at 09:12 pm

Foxconn Technology Group is denying that it’s changing its plans for its Mount Pleasant LCD manufacturing campus after the Nikkei Asian Review reported that the company had decided to focus on making smaller screens for phones and tablets there instead of making larger display panels.

“That report is inaccurate and is not based on any facts,” the company said in a statement. “Foxconn can categorically state that our commitment to create 13,000 jobs and to invest $10 billion to build our state-of-the-art Wisconn Valley Science and Technology Park in Wisconsin remains unchanged.”

Louis Woo, special assistant to Foxconn chairman Terry Gou, speaks at the announcement of the Mount Pleasant site.

Foxconn said it would announce more details in the coming months. The company has a groundbreaking set for June 28.

The company said its product development and production plans for the campus are unchanged and its investment strategy “has always been guided by the overall business growth and development goals of our company as well as the needs of our customers.”

“Against this backdrop, we are adopting a phased approach with the construction of facilities that will be part of our Wisconsin campus, to ensure that we continue to meet current and projected demand for advanced LCD panels,” the company statement said.

The first phase of the project “will be harnessing the latest generation advanced TFT-LCD manufacturing technology” for a wide range of applications, including self-driving cars, notebooks and monitors, the statement said, leaving open the possibility of a product mix that includes both large and small screen items.

Nikkei reported the company determined it would be more feasible and efficient to build a generation six or 8.5 factory instead of the Gen 10.5 plant that Foxconn announced last year. The earlier generation plants typically focus on screens for phones, tablets, computer monitors and televisions while the Gen 10.5 plant would be aimed at large screens.

A Gen 6 plant would produce roughly 5 foot by 6 foot panels while a Gen 10.5 plant would produce 10 foot by 11 foot panels, according to Bob O’Brien, a partner at Display Supply Chain Consultants.

“Obviously those are two very different deals,” O’Brien said, noting the Gen 10.5 is optimized for making 60 or 70 inch panels. While a Gen 10.5 could produce 20 inch panels, it likely wouldn’t go much smaller and a Gen 6 is better for producing smaller screens.

The big difference comes in cost. O’Brien said a $10 billion investment makes sense for a Gen 10.5 plant while a Gen 6 would be closer to $2 billion or $3 billion.

Supply chain sources told Nikkei “the incomplete local supply chain was a big obstacle to Foxconn’s previous plan.” Other efforts by Asian technologies companies to build up operations in the United States have run into similar problems.

Foxconn’s statement did not address potential supply chain concerns. The company has said it will spend $4.26 billion annually, including $1.4 billion in Wisconsin. The Wisconsin Economic Development Corp. has created a position to work directly with the company on meeting its supply chain needs in the state.

Jela Trask, WEDC key business liaison, said at a Wisconsin Manufacturers and Commerce event last week that she’s working with the company to figure out what it needs, when and in what quantities.

“They may not know what exactly they’re going to need two years from now,” she said. “They’re still working through exactly what products they’re going to be shipping out of the assembly facility in a couple years.”

The agency has adapted an online tool for companies to register as a potential Foxconn supplier and about 900 businesses have indicated their interest. Foxconn has also said it could bring up to 150 suppliers to the U.S. from Asia.

“The number is kind of a little loose right now, but they are tier one suppliers,” Trask said at the WMC event, adding there would likely be tier two and tier three opportunities for Wisconsin companies.

The most high-profile of the potential suppliers is a $1 billion Corning glass plant on the same campus as the Foxconn plant. No details have been announced on that project, but Corning’s chief executive said last month his company would require two of every three dollars to development the facility to come from someone else. That prompted many to wonder if the state would have to award additional incentives, but WEDC chief executive Mark Hogan has said the state would not do that, leaving Foxconn to cover costs to attract suppliers.

O’Brien said a Gen 10.5 plant would require Corning to co-locate a glass plant because the size of the substrates makes shipping too costly. That’s not the case for a Gen 6 plant, he said, noting Corning has already has a facility producing glass in Kentucky.

“You could put it on a truck in Kentucky and get it to Wisconsin in six hours,” he said.

Foxconn also said today it is “fully committed “to meeting its contractual obligations with “relevant government agencies.”

The state has approved $3 billion in tax incentives for the project and Mount Pleasant, along with Racine County, created a $784 million tax incremental financing district. To get the full $3 billion state incentive, Foxconn would need to invest $10 billion and create 13,000 jobs by 2022.

Gov. Scott Walker’s office pointed to Foxconn’s statement when asked about the reports. Kelly Lietz, Wisconsin Economic Development Corp. vice president of marketing and brand strategy, also pointed to the statement and said the agency is in regular contact with Foxconn.

After the Nikkei report surfaced, the Democratic Party of Wisconsin was quick to point out Foxconn has previously made promises for significant investment but had not followed through. The party’s Twitter account highlighted projects in Brazil, Pennsylvania, Indonesia and India in particular.

“Will Foxconn have broken its promise to Wisconsinites before they’ve even broken ground here?” The @WisDems account tweeted.

Walker communications director Tom Evenson tweeted, “State Dems couldn’t wait to attack using a false report. They proved this morning they care more about political attacks than family-supporting jobs. Sad.”

Later Evenson tweeted, “Foxconn knocks down false report & remains committed to $10bn investment & 13K jobs. Will Dems retract their false attack?”

The Democratic Party of Wisconsin tweeted, “Foxconn claiming it isn’t breaking promises when it has a clear history of doing so (and is making changes to its promises to Wisconsin) is no reassurance to WI taxpayers who prefer investing $4.5 billion in our state businesses and our roads & schools.”

State, local and Foxconn officials in recent weeks have highlighted the amount of progress made since the first meetings were held in late April 2017. Foxconn has already received permits for air emissions, storm water plans and Great Lakes water.

Work has already begun on $100 million in site preparation, which is expected to take until August 2019. Foxconn has also released a bid package for an 88,000-square-foot multi-purpose building at the Mount Pleasant site. A groundbreaking has been set for June 28.

Despite the progress, there have been signs the project is running up against some challenges. Local officials said last year the company wanted to begin building an at least 1.5 million-square-foot assembly facility in Mount Pleasant early this year with operations beginning in 2019. No plans for that facility have emerged to date.

When asked in late April when building construction would begin, Adam Jelen, senior vice president at Gilbane Building Co., said Foxconn was still designing its manufacturing process, which would inform the building program.

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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