David Michael Miller
As Willy Shih, an economist at the Harvard Business School, writes for the online publication Wiscontext, no one has ever attempted to build liquid crystal display fabrication plants outside East Asia.
“All the other significant LCD fabs in the world are located in two time zones in East Asia — there is nothing of the kind in the U.S,” he wrote. “Additionally, all of the production tools will come from Japan, and the people who know how to install and use them are all in those same two time zones.”
And to produce them competitively, you need employees willing to work for low wages, often in hellacious conditions, so bad that Foxconn built nets around its factories to prevent suicides by workers jumping to their deaths.
How do you possibly duplicate this unique manufacturing culture in Wisconsin — or anywhere in America?
Did anyone in the Walker administration do any research on this industry or on Terry Gou, the Taiwanese founder and CEO of Foxconn? This was a man whose company also had a documented record of creating factories with massive pollution problems — and a reputation as a hardball negotiator with a history of walking out on deals after making extravagant promises.
It doesn’t appear there was much probing from Walker’s people, according to Austin Carr’s recent story for Bloomberg. “Wisconsin officials apparently didn’t consider Gou’s track record problematic,” Carr writes. “Instead, they describe the billionaire, who charmed them with stories of his early days selling TV parts in the Midwest, as almost philanthropic. ‘My impression of him was, what a nice person,’ says Scott Neitzel, who led negotiations for the Walker administration. When asked if the state looked at Foxconn’s history, WEDC Chief Executive Officer Mark Hogan says, ‘We didn’t spend a lot of time on that because, in the end, we got to know these people so well.’”
For Walker, Gou’s offer was heaven sent. Seven years into his tenure as governor, he still hadn’t delivered on his promise to create 250,000 new jobs in his first term, and needed a big win to help his bid for a third term. All the evidence suggests he simply acceded to Gou’s demands for a $3 billion subsidy (which ballooned to $4.1 billion as more state and local spending was added).
As for Gou, he was seeking a way to win favor with President Trump should a U.S.-China tariff war erupt, Carr notes, and a big manufacturing project in swing-state Wisconsin was perfect. As for the exact details of the contract, “In China, many deals or projects eventually go through, but often the details change, sometimes substantially,” Shih notes. Gou’s promise of a $10 billion investment and 13,000 jobs should be seen in that context.
As difficult as an LCD fabrication plant would be in the U.S., the challenges are multiplied if it’s a Gen 10.5 plant, which Gou promised Walker. These factories transform giant sheets of glass (9.6 feet by 11 feet) in order to produce six 75-inch TV screens at once. “The glass is fragile, so most factories in Asia have a glass factory across the street, with the glass sheets fed via an underground tunnel,” Shih writes.
Gou would have needed a glass-maker like Corning to co-locate on the Foxconn campus, but the company declined without its own huge state subsidy. Did anyone from the Walker administration research this massive obstacle to Foxconn’s plan before signing the deal?
For that matter, how serious was Gou about it? By June 2018, just nine months after signing the deal, Foxonn officials admitted they’d dropped the idea of a Gen 10.5 plant for a much smaller Gen 6 plant that experts say would only require a $2.5 billion investment. Meanwhile Gou was building another massive plant in China that was described as a duplicate of what he’d proposed for Wisconsin. As Carr writes, “state staffers informally discussed whether the switch to a Gen 6 plant constituted a breach of contract.”
Foxconn did make a half-hearted effort to manufacture something here. Soon after signing the state contract, it “brought in local staff and began testing initial manufacturing” in a leased building in Racine County. But “multiple sources say Foxconn higher-ups kept to themselves, production goals were in constant flux, and equipment seemed dated.… The company tried and failed to produce its own LCD materials at scale in Wisconsin.” Instead, “they were shipped from a Foxconn factory in Tijuana. The Wisconsin plant was only handling the last steps of assembly, and some TV displays were still labeled ‘Made in Mexico.’”
Trump now claims Gou has promised to build the promised plant in Wisconsin, but Gou offered the Chinese press a different version that was much vaguer.
The reality is the promised plant was never realistic and was simply politically expedient for both Gou and Walker, each for different reasons. All that clearing of land and use of eminent domain to buy homes in Racine County was for a massive plant that will probably never be built.
Bruce Murphy is editor of UrbanMilwaukee.
