Foxconn Technology Group on Wednesday announced plans to build an LCD panel plant in Wisconsin, with chairman Terry Gou (郭台銘) and US government officials lauding the move at a press conference at the White House.
While the move is likely to benefit interests in both Taiwan and the US, it might not be for the reasons some might think.
US President Donald Trump had promised to bring more manufacturing jobs to the US, and when Apollo Global Management and Metropoulos & Co rescued snack cakes manufacturer Hostess Brands from bankruptcy last year, many thought that Trump’s promise might come true. However, the private equity firms later streamlined operations and cut the company’s workforce, even closing one of the reopened factories at Schiller Park in Illinois.
Foxconn has also demonstrated interest in reducing labor costs by moving factories to India and replacing workers with automation. While labor costs in China are rising, electronics would still cost up to 30 percent more if they were assembled, and their internal components manufactured, in the US.
Also, manufacturing components in the US would still require the import of rare-earth minerals, the mining of which is costly and environmentally destructive. Even factoring in tariffs and shipping, it is still cheaper to manufacture in China. So why would Foxconn want to manufacture in the US?
Vice Minister of Economic Affairs Yang Wei-fu (楊偉甫) said that the investment would result in technology-sharing and other forms of cooperation between Taiwan and the US.
Taiwanese companies are already actively involved in research and development in the US.
USTaiwanConnect, a Web site run by the Ministry of Economic Affairs, lists 600 Taiwanese companies operating in the US, which it says “invest in the US to draw on established US management expertise, capable US engineers and cutting-edge US innovation.”
Local companies collectively account for 17 percent of the world’s major LCD manufacturers and now Foxconn can be added to that list, following its acquisition of Japan’s Sharp Corp last year.
Foxconn is the world’s largest electronics manufacturer and is the primary contract manufacturer for Apple’s mobile devices, as well as for Microsoft’s Xbox One video game console.
Traditionally, iPhone screens have come from Samsung, while LG and Japan Display (a joint venture by Sony, Toshiba and Hitachi) have made the screens for Apple’s MacBook line of PCs. However, Foxconn might be able to take over production of all of these screens — a move that could streamline supply.
Having all of the iPhone’s components, including the screen, made by Foxconn would mean that Apple could better protect technological innovations from appropriation by its major competitors, especially if those components were manufactured in the US.
At Wednesday’s press conference, Foxconn said the Wisconsin plant “signifies the start of a series of investments by Foxconn in American manufacturing in the coming years.”
This could mean that the company plans to make not only displays, but also chips and circuit boards in the US, which would mean not only greater profits for Foxconn, but also better protection of intellectual property for Microsoft and any other US companies it might decide to work with.
President Tsai Ing-wen’s (蔡英文) administration has expressed interest in creating an “Asian Silicon Valley” in Taoyuan, but plans have been stagnant largely due to inadequate infrastructure and problems with legislation. Perhaps the way forward is for Taiwanese tech companies to follow in the footsteps of Foxconn, to form closer relationships with their US and Japanese partners and reduce dependence on cheap Chinese manufacturing and subcontracting.
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