Foxconn, an electronics company in Taiwan and an Apple supplier, will invest $10 billion in Wisconsin. The plan was announced Wednesday by Terry Gou, Foxconn founder. This will be the first U.S. manufacturing plant for the electronics firm.
The White House stated that the deal was finally sealed after many discussions facilitated by the House of American Innovation led by Jared Kushner, the presidential senior adviser and son-in-law.
Foxconn belongs to the Hon Hai Precision Industry, which is one of the world’s largest manufacturers of electronics. Globally, it employs around one million personnel. In 2016 its revenue was over $100 billion.
It works with various companies, including BMW and Tesla. Foxconn on the other hand is into electronics manufacturing and supplies parts to other high-tech firms such as HP, Microsoft and Apple.
The new hub of Foxconn will be manufacturing LCD panels for television and other applications, including self-driving cars. Mr. Gou, who was at the White House when he made the announcement, remarked that the U.S. invented television but the country does not have an LCD factory.
Why Did Foxconn Choose Wisconsin?
According to Foxconn, they considered various states in which to build the plant, including Illinois, Indiana, Pennsylvania, Michigan and Ohio.
Analysts believe there was some political pressure here. Historically, Wisconsin is pro-Democrat, so it is very important for Mr. Trump to build the state. He received less than 25,000 votes from the state when he ran for president. Paul Ryan, Republican Party leader in the House of Representatives represents Wisconsin.
However, Wisconsin has shown economic resiliency. Manufacturing jobs in the area went down by almost 25% since 2000, but it remained economically strong. Its unemployment rate, which is estimated to be around 3.2%, is lower than the average in the country.
Wisconsin governor Scott Walker, a Republican, said that the investment could generate about 13,000 direct jobs (Foxconn’s estimate is 3,000) and that the starting salary would be about $53,000 plus other benefits.
There is also a potential to generate 22,000 indirect positions, according to the governor. The plant’s target completion is 2020. However, the start of the construction of the facility and its exact location are not yet announced.
Trump has hinted about this deal about a month ago when he delivered a speech in Wisconsin. The president added that his administration is still negotiating with Foxconn to build larger facilities in the future.
The state of Wisconsin is providing Foxconn with some handsome tax incentives. While it still requires legislative approval, the incentive is said to be over $3 billion. Gov. Walker said that the inclusions in the incentive package would be disclosed soon.
White House senior officials said that the President’s economic agenda that include tax reform and deregulation was what convinced Foxconn to feel confident about investing hugely in the U.S. But this is not a first for Foxconn.
In 2013 it promised to build a factory in Pennsylvania worth $30 million, which became just a promise. It does have a small operation in Pennsylvania. It also has smaller facilities in Indiana and Virginia, each of which has less than 1,000 workers.
A Harvard Business School professor, Willy Shih, said that even if Foxconn receives the subsidies from the state, it would be facing a huge challenge. First is the price. Next is the fact that many of the components used to produce the screens and the factory itself are not manufactured in the United States.
He added that the company might be able to make the venture work. It is just a question of how much money they will allow to be lost to get there. Almost everyone knows that Foxconn is able to keep prices down because labor in Taiwan is cheap.
Trump also hinted that Tim Cook, the CEO of Apple promised to build three plants in the U.S. although Apple remains silent about the president’s claim.