Mike Buetow

 

 

 

 

 

 

 

Or Broome County, NY. Or Harrisburg, PA.

Despite repeated media reports of an impending Foxconn migration, the company will remain what is has been since its founding in 1974: Chinese.

Sure, there will be satellites in key spots elsewhere: Juarez. San Jose. São Paolo.

If Foxconn were to come to the US, it would buck not just every single manufacturing trend, but outright common sense. Here are three quick reasons:

  1. Incentives. Foxconn routinely holds out for hefty discounts on taxes, favorable access to land and other concessions. (See India, Malaysia, Indonesia, Vietnam, etc.) Given the higher cost of land acquisition, building codes, labor costs and taxes, among other things, Foxconn would certainly insist on favorable treatment. Even if it were to get it – an unlikely proposition – how would that play with Americans if a Chinese company were to be given such breaks? Such a backlash has already begun in India, by the way.
  2. Access to capital. Foxconn founder and chairman Terry Gou is the single largest shareholder. He has been leveraging his own capital, including company stock, to fund recent acquisitions, including the mega-deal for Sharp. Despite (or perhaps because of) being publicly held in Taiwan, getting a clear picture on Foxconn’s assets and true financial worth is exceedingly difficult.  Would the company be willing to trade its famously secretive culture in exchange for access to American bankers and financial markets? Or would that be the blow that levels a house of cards?
  3. Access to labor. Foxconn is prone to promoting – or at least failing to dismiss – wildly optimistic forecasts of capital investment in local projects. In the past few weeks alone, it has been tied to a nearly $9 billion display manufacturing investment in China and another possible $7 billion version in the US. Citing founder Terry Gou as the source, reports say the latter would create 30,000 to 50,000 jobs. Putting aside the fact that few of these massive new job figures ever are completely realized, even 1/10th of that amount would be three times the size of the battery factory Tesla built in 2014, for which Nevada ponied up nearly $1.3 billion in tax credits and rebates.

Simply put, there aren’t that many qualified engineers and technicians available in and around the American countryside to fill a campus that large. Even China, which supposedly graduates two to three times the number of students in engineering and related fields each year, doesn’t appear to have sufficient manpower to handle those employment estimates.

The US Census Bureau, which tracks such things, notes there are nearly one million job openings at US manufacturers today. Is a single company going to add 5% more to that figure? Not likely.

According to my sources, Foxconn is outsourcing, or seeking to outsource, work to other EMS companies in Southeast Asia. That doesn’t sound like a company that intends to take on manufacturing consumer products in North America.

More than that, as Gou himself told Reuters of news Foxconn would expand in the US: “There is such a plan, but it is not a promise. It is a wish.”

The reaction of some who have been teased by Foxconn in the past only to be left with vaporware is telling:

One location Foxconn already is familiar with in Pennsylvania is Harrisburg, where the company has a small operation and, in 2013, announced intentions to spend $30 million on a new plant that would employ up to 500. For that project, DCED officials met with Foxconn representatives on various occasions and showed them potential locations for the planned site, but the project did not come to fruition.

As part of the same announcement in 2013, Foxconn said it would invest $10 million for research and development at Carnegie Mellon University in Pittsburgh. When asked whether Foxconn ever delivered on its pledge, CMU spokesman Ken Walters said the university had no comment.

So with apologies to Utica, Harrisburg and other fine American cities, we say if you are waiting on Foxconn, don’t hold your breath.

P.S. For a great breakdown of Foxconn's capital expenditures, see the analysis by Bloomberg’s Tim Culpan published Jan. 24, titled “US Faces Risk of Foxconn Panel Plans that Don’t Add Up.”

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