Bruce Murphy
Murphy’s Law

Foxconn’s Story Changes. Yet Again.

Nearly all the manufacturing will be done by robots, company says.

By - Aug 23rd, 2018 11:06 am
Design for Foxconn's campus. Photo from the WEDC.

Design for Foxconn’s campus. Photo from the WEDC.

Another day, another story from Foxconn. 

On Tuesday, Foxconn executive Louis Woo told the Racine Journal Times that the company really isn’t interested in manufacturing televisions and most of its assembly jobs will actually be done by robots. It’s an entirely different picture of what might happen at the Foxconn plant, which could have huge ramifications for the state’s taxpayers, who are on the hook to pay $1,774 per household to subsidize the operation.

The original story was that Foxconn would be building flat-panel liquid crystal display (LCD) screens with huge dimensions in a plant that would cost $10 billion and employ 13,000 workers, in return for a $3 billion state subsidy. 

But the $3 billion has grown to $4.1 billion when all state and local subsidies are included, even as the state legislation dropped the required investment to $9 billion. Yet Foxconn and the the media continue to refer to a $10 billion plant though that’s not required by state law.

Next we learned that Foxconn would not be building a Gen 10.5 plant that produces 10-foot-by-11-foot LCD panels, but a much smaller Gen 6 plant that makes smaller (5 feet by 6 feet) panels. But a Gen 6 plant would be much smaller and require only a $2 billion to $3 billion investment. After emphatically denying reports of this change, Foxconn’s leaders eventually admitted it was true, but then offered a new story: that the Racine plant would be built in “phases” and would eventually add a facility to manufacture the larger screens.

Except that glassware needed for the larger screens is too large to transport and must be made on site, and the Corning glass company declared it wouldn’t co-locate on the Foxconn campus without a subsidy from the state for at least two-thirds the cost of the facility, which the administration of Gov. Scott Walker has refused to provide. 

Now we learn from Woo that the plant, if it does do large screen LCD televisions, won’t do it for long. “We are not really interested in television,” he told the Racine Journal Times.”We are interested in vertical solutions”  in medical, manufacturing, office automation or other areas, so the company could be building 8K or ultra-high-resolution displays and 5G technology for the next generation of cellphones, Woo says. 

And this in turn will mean a huge change in the kind of workers Foxconn will need. “If, six months ago, you asked me: What would be the mix of labor? I would pull out the experience that we have in China and say, ‘Well, 75 percent assembly line workers, 25 percent engineers and managers,’ ” Woo said. But “now it looks like about 10 percent assembly line workers, 90 percent knowledge workers.”

That’s a massive change. 

For those imagining that unemployed central city workers from Milwaukee or Racine might get hired in manufacturing, forget it. Woo predicts nearly all that work will be done by robots and a lot of automation. Which also means the much discussed issue of creating a transit line from Milwaukee to Foxconn is quite irrelevant. 

Instead the plant will be all about knowledge workers “who will devise new ways to use the 8K, 5G and artificial-intelligence technologies that Foxconn will build,” as the story noted. So say goodbye to the Gen 10.5 plant and the need for a company like Corning and say hello to TFT. 

Foxconn, you see, wants to build America’s first thin-film transistor fabrication, or “TFT fab” operation. “We’d like to work with academics, or R&D entities, around the country to see what they want to do with it,” Woo said.  

This, too, is a different story. Recall that Foxconn previously said it was creating satellite “innovation centers” in cities like La Crosse and Green Bay, in order to connect to universities and students in those cities. Other than as a ploy to help reelect its patron, Gov. Walker, by proving Foxconn would help the entire state, this made no sense. If the goal was to connect to innovation in Wisconsin why not do a satellite near UW-Madison, one of the top American research universities, with the fastest growth in high tech workers of any city in the state? And if the idea was to hire top college grads, why not target the state’s flagship university, rather than UW-Green Bay or the Chippewa Valley Technical College in Eau Claire? Probably because that wouldn’t get Walker any votes, since heavily Democratic Madison would never support him. 

But now Woo is admitting the obvious, that if you want to connect to academics and R&D entities, you don’t need to move your company next door to them, but can connect remotely or simply hire smart people to work at the Racine plant. 

So now that Foxconn has completely changed the plan it so easily sold to Walker, how many jobs will it create? Woo predicted the Racine County plant would start with just 2,000 jobs but still expects to get to 13,000 jobs by 2023. 

That kind of rapid scaling up made sense for the kind of manufacturing plants Foxconn has done in China, which relied on low-paid workers grinding out products invented by high-tech companies like Apple. But for Foxconn to transform its approach to create new technology by top-flight “knowledge” workers and somehow scale that up to 13,000 workers in a few years? That sounds like a fantasy.  

And there is no reason for Foxconn to rush to create so many jobs or spend $9 billion on its plant. Yes, the full subsidy it is promised comes in increments, as the capital investments are made and jobs created. But all the other subsidies, worth more than $1 billion, will happen regardless of money invested or jobs created. That includes $764 million in local subsidies, $164 million in new state and local roads to serve Foxconn, a $120 million electric power line paid for by utility customers, and some $7 million on a state-paid ad campaign to attract workers for Foxconn. On a per-job basis, a smaller plant with less workers would actually cost taxpayers even more.

Which leaves Foxconn sitting pretty, and able to try whatever kind of product line it wants at much lower costs, courtesy of the biggest private company subsidy in state history.

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6 thoughts on “Murphy’s Law: Foxconn’s Story Changes. Yet Again.”

  1. Swblackwood says:

    Seems that the FOXCON deal involves a wee bit of bait-and-switch.

  2. putnampit says:

    Is anyone surprised that Foxconn’s plan to shower Southeastern Wisconsin with thousands of jobs producing TV screens has not delivered more than static? In a March Marquette University poll, just 38 percent of state voters thought it was worth the $4 billion-plus cost state taxpayers are stuck with, and that was while there was still hope the state would benefit with jobs for humans, not robots. Maybe the governor should have asked. Every Democrat who ran in the Aug. 14 primary opposed the chestnut of a Republican alchemic formula. Even Andy Gronik, the first candidate to drop out of the Democratic primary race, correctly told voters the state was already cutting checks to the company. Roads were being built and families were kicked out of their homes to make was for the godsend from Taiwan that we were getting at a time of full employment. Did the governor consider asking those nice folks who ran the plant in China where hundreds of workers threatened suicide whether they would mind providing a performance bond? Apparently, Walker was the one who duped us, or he is the last one to know he was the dupe because his reelection campaign page campaign boasts of the statewide impact. . I heard Mike McCabe say at least 25 times when he was a candidate that the plant would utilize robots. Matt Flynn’s campaign promise was that as an attorney he knew the contract was illegal and would sue as soon as elected. I urged him to not wait until the election, and I suggested he could prove he was the leader the state needed by suing or intervening now. He had a law firm and the skills necessary to end the deal to sue the company to get out of what he considered and illegal contract. Maybe the possible failure of Foxconn as an issue is more beneficial to Democrats than preventing damage in the first place, or maybe it is a great idea and Walker is right.. What we do know is that neither party has taken any steps to protect the voters they are courting and the only high-definition picture coming out of Pleasant Prairie show $100 million in contracts to going to Walker’s political supporters. It is like laundering our debt through Taipei, where part of the money is promised to some of the governor’s friends, who then give real money to Walker in campaign contributions. So far, Walker is the only one who has seen real money and the governor’s friends only win if Walker can keep the test pattern from going black. Even if he wanted to he can’t pull out now.

  3. Thomas Martinsen says:

    It looks to me like we are stuck with a Foxconn presence. My hope is that Evers will negotiate with Woo at every request for an advance. Recent history suggests that Walker will continue to write blank checks.

  4. Jake formerly of the LP says:

    Lets not also forget the $134 million in local highway upgrades at the expense of other projects throughout the state, and all of the waived environmental laws.

    This scam gets worse by the week, and given that Woo claims labor costs are too,high for low-skill manufacturing, no WAY is Foxconn adding many jobs in higher-skilled knowledge areas.

    The only people winning here are Mr. Woo, the Walker donors getting no-bid contractors to do work on the low-employee project (and the GOP politicians who get their kickback), and the land speculators who get a price break on new development.

    The rest of us are losing more by the day.

  5. Thomas Martinsen says:

    Yes to Jake, “Lets not also forget” this nick and that … ” Cons are talented at adding costs to projects before results are evident. I was conned by a contractor who claimed he could fix a structural problem on my house. I did not want to believe I was being conned. I should have sued him; rather, I paid him some more money to fix the problems he detected during the first effort … C’est la vie. I was glad my house was still standing after some dangerous episodes.

    The people of WI should lawyer up before Foxconn gets much deeper in our pockets. I would gamble on hiring Matt Flynn for this work, now that he is out of the race for governor. Flynn comes easily to mind, but Flynn or another/others,, we may need lawyers here.

  6. John says:

    Since Walker has signed the deal with Foxconn committing Wisconsin to do and pay all this money while not having legal responsibilities from Louis Woo he can do anything he wants with impunity. If there is a change in legislation this November and we try to cut the deal or force Foxconn to honor it’s “promises” Louis Woo can just pull out and sue for breach of contract. The only investment he has then is for lawyers and us taxpayers will have to foot the bill and pay him off. You deal with a crook who has a past rap sheet of doing these things in other states you get rob.

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