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Foxconn May Scale Back $10 Billion US Plant

Jan. 30, 2019
Foxconn now intends to turn the Wisconsin site into a base for mostly engineers and researchers, Reuters reports.

Foxconn Technology Group is considering scaling back or even abandoning plans to make cutting-edge displays from a $10 billion plant it’s building in the U.S., Reuters reported.

Such a move could undermine promises to create 13,000 jobs at a project hailed by U.S. President Donald Trump for reviving American manufacturing. Apple Inc.’s main manufacturing partner is re-thinking its approach because of the high cost of making advanced TV screens from the U.S., Reuters cited spokesman Louis Woo as saying.

Foxconn unveiled the Wisconsin project with much fanfare in 2017 as the Taiwanese company extracted a raft of incentives from the state, although some were forfeited last year after falling short of hiring goals. Billionaire Chairman Terry Gou’s Taiwanese company is in a particularly precarious position as the U.S. and China wage an escalating battle over trade. It does most of its manufacturing in the mainland, sells products to Americans and faces pressure from both sides to maintain or create new jobs.

Foxconn now intends to turn the Wisconsin site into a base for mostly engineers and researchers, Reuters cited Woo as saying. It would also produce specialized products for industrial, health care, and professional applications, he said.

“In terms of TV, we have no place in the U.S.,” Woo is cited as saying. “We can’t compete.”

Doubt is growing about Foxconn’s ability to meet its hiring commitments. Gordon Hintz, minority leader in the Wisconsin State Assembly, expressed concerns that Foxconn would fall far short, under a deal regarded as the richest tax credit, exemption, and subsidy package in state history. The concern came into focus in a letter to the Wisconsin Economic Development Corporation, in which Foxconn confirmed it missed job-creation targets for 2018.

Representatives for the Taiwanese company didn’t immediately respond to phone and emailed requests for comment.

Foxconn’s potential retreat from its signature American project comes as demand for Apple’s iPhone -- and smartphones in general -- is flagging. Hon Hai gets about half its revenue from its U.S. client, which is struggling to staunch declines in revenue particularly in the pivotal Chinese market. In November, Bloomberg News reported Foxconn is planning a steep reduction in its expenses in 2019.

Taipei-based Foxconn assembles everything from iPhones and laptop computers to Sony Corp. PlayStations at factories in China and around the world. Beyond the slowing smartphone market, it’s grappling with an uncertain economic climate as U.S.-Chinese trade tensions escalate. Hon Hai in November posted earnings about 12% below expectations.

By Debby Wu

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Licensed content from Bloomberg, copyright 2016.

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