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Foxconn Rethinking Plans for Wisconsin LCD Display Factory

Debby Wu and Austin Carr

(Bloomberg) -- Foxconn Technology Group is rethinking its plan to build a cutting-edge factory in Wisconsin that was part of a promise to create 13,000 jobs, raising new questions about a high-profile project President Donald Trump once called central to his efforts to return manufacturing to the U.S.

The world’s largest contract-electronics manufacturer is reconsidering whether it is economically feasible to develop liquid-crystal displays at its Wisconsin plant, Louis Woo, special assistant to Chairman Terry Gou, said on Wednesday. Reuters reported earlier that the company could scale back its LCD production plans or abandon them.

The signaled shift marks yet another surprising evolution to the scope of Foxconn’s slated $10 billion expansion into the state, which has gone through a series of changes since Gou and Trump unveiled the project to much fanfare in 2017. The Taiwanese company had secured billions of dollars in potential incentives from the state in exchange for meeting capital investment and hiring targets, but the deal has grown increasingly controversial, with critics, including Wisconsin’s new governor, Tony Evers, describing it as a corporate giveaway.

Gou’s 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.

Though Woo suggested Wednesday there are no plans to give up on the planned facility entirely, the company is assessing what LCD technology is best suited for the project, in part due to ongoing supply chain challenges.

“Given global economic conditions and the trade tensions between China and the U.S., we have to be responsible to our employees and customers, and it’s impossible that we can always stay committed to our original plan without any change,” Woo said. “There is no scrapping of our plans. We are upholding our commitment to Wisconsin.”

Doubt has been 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 its job-creation targets for 2018.

Initially, Trump, who personally helped shepherd the project forward, said Foxconn’s move into Wisconsin foreshadowed a major shift toward bringing back manufacturing jobs to the U.S. from places like China. At a groundbreaking ceremony for the Wisconsin factory last June, Trump and Gou posed for cameras holding golden shovels, and the president said the state’s investment would help America reclaim its “proud manufacturing legacy.”

But Foxconn soon acknowledged that its plans were under transition. Rather than hiring 13,000 factory workers, the company said months ago that the vast majority of roles would likely be comprised of “knowledge” workers, high-skilled engineering positions, since much of its plant’s manufacturing operations would be automated. The company also revealed it would instead be building a smaller-scale LCD factory in southeastern Wisconsin than it committed to in the contract with the state, in order to remain cost competitive with China.

Tension over the deal’s future became a heated issue during Wisconsin’s gubernatorial election race last year. Republican Governor Scott Walker, who struck the partnership with Foxconn on behalf of Trump, said it would prove transformational for the state, while Evers, his Democratic opponent, called it a “lousy” deal.

Since Evers won the election, he has said he will hold the company accountable for its contract commitments, but has not suggested he’d attempt to make any other substantial changes to the project. Reuters reported Wednesday that Gou planned to meet with Evers later this year to discuss changes to Foxconn’s agreement with the state.

Local officials in Wisconsin issued a statement after the initial report that Foxconn may abandon plans for LCD manufacturing.

“Contrary to what was reported by Reuters, Foxconn reiterated to us, today, its commitment to building an advanced manufacturing operation in Wisconsin, in addition to its commitment to create 13,000 jobs and invest $10 billion in Racine County,” the officials said in an emailed statement. “As Foxconn has previously shared, they are evaluating exactly which type of TFT technology will be manufactured in Wisconsin but are proceeding with construction on related manufacturing, assembly and research facilities on the site in 2019.”

Foxconn, Apple Inc.’s main manufacturing partner, is also dealing with a slowdown in demand for iPhones. Its main listed business, Hon Hai Precision Industry Co., gets about half its revenue from Apple, 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 percent below expectations.

(Updates with Wisconsin officials statement in the 12th paragraph.)

--With assistance from Gao Yuan.

To contact the reporters on this story: Debby Wu in Taipei at dwu278@bloomberg.net;Austin Carr in New York at acarr54@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, ;Jillian Ward at jward56@bloomberg.net, Edwin Chan, Peter Elstrom

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