By Tom Still
Two recent news stories, seemingly unrelated to the media fire drill over the Foxconn Technology Group project, help to explain why the company may still evolve its Wisconsin operations over time.
The first was a New York Times story on how American-born Apple struggled to assemble its Mac Pro computer in Texas, despite its best “Made in America” intentions, mainly because of gaps in the supply chain and lack of available talent. As Apple chief executive officer Tim Cook was quoted as saying in late 2017: “In the U.S., you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China, you could fill multiple football fields.”
The second story from the Associated Press also involved Apple, which is grappling with sluggish iPhone sales – especially in China, its No. 2 customer behind the United States – and how that has affected revenues and stock prices of late. The company is now counting on more growth in a division that collects commissions from paid apps, processes payments, sells hardware warranty plans and music streaming subscriptions.
How does this affect Foxconn and its plans for Wisconsin? Directly and indirectly, even after President Trump’s intervention.
Foxconn is a leading Apple contractor, although assembly of iPhones and Macs was never on the drawing boards for the company’s facility in the Racine County Town of Mount Pleasant. Foxconn is one of the top five tech companies in the world, yet it is subject to trends that range from global device sales to talent pipelines to trade wars.
Those trends are playing out now. On Jan. 30, a Reuters news report said Foxconn was reconsidering whether to produce LCD video screens in Racine County, touching off finger-pointing among people and politicians on all sides of the Foxconn deal.
The next day, there were conflicting reports. The first quoted a leading Foxconn official as saying the Reuters story was out of context and nothing had changed in terms of the company goal to create 13,000 jobs and invest $10 billion in Wisconsin. The second, from Nikkei Asian Review, said Foxconn will suspend work on its Racine campus and postpone work on a $9-billion display panel project in Guangzhou, China, for at least six months.
Then came a “personal conversation” between Trump and Foxconn founder Terry Gou and news the LCD plant was back on track. That was a confusing 48-hour turn-around, but some facts are known:
- Foxconn has invested about $200 million in Wisconsin so far, acquired several thousand acres of land, acquired property for innovation centers in Eau Claire, Green Bay and Milwaukee, and forged relationships with many, if not most, academic institutions in the state.
- Private and public economic development officials in Wisconsin have been told by Foxconn’s No. 2 executive that work will proceed over the next 18 months in Racine County on a liquid crystal module packaging plant; a high-precision molding factory; a system integration assembly facility; a rapid prototyping center; a research-and-development center; a high-performance data center; and a town center to support employees in Mount Pleasant.
- A contract negotiated by the state of Wisconsin and Foxconn remains in place, setting out tiered goals for job creation, salary levels and capital investment in exchange for state tax credits. The contract is structured in an “all or nothing” way that means tax credits are not paid each year unless annual goals are met. For example, Foxconn didn’t get any tax credits for the 2018 year because it fell short of hiring enough people.
Foxconn’s footprint in Wisconsin may eventually be that of a diversified company with interests in research and development, engineering, advanced screens for industries such as aviation and autonomous vehicles, medical imaging, high-throughput computing, robotics, sustainable systems and other technologies consistent with what Wisconsin does well.
Will that result in 13,000 jobs and investments of $10 billion? No one knows, perhaps not even those inside Foxconn. The only thing that seems certain is that state taxpayers are largely protected under ever-changing global and market scenarios that have little or nothing to do with events in Wisconsin.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal.