Bruce Murphy
Murphy’s Law

More Doubts About Foxconn Project

Compressed gravel base can’t support LCD fabrication plant. So what’s being built?

By - Apr 2nd, 2019 10:24 am
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Design for Foxconn's campus. Photo from the WEDC.

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

Will there ever be a final, definitive story on what if anything Foxconn will be manufacturing at its proposed plant in Racine County? 

Back in late January there was a flurry of news stories saying Foxconn had suspended its plan to build a Liquid Crystal Display (LCD) fabrication plant in the state, and had recalled top staff from its planned project. Those reports were reinforced by Foxconn executive and frequent spokesperson Louis Woo explicitly ruling out the manufacture of advanced TV screens: “In terms of TV, we have no place in the U.S.,” he told Reuters. “We can’t compete.”

All of which merely reinforced what had been reported off and on since last June, often based on comments from Woo, that it no longer made sense to build such a plant. But just two days after Woo’s statement to Reuters, the company reversed field once again. 

“After productive discussions between the White House and the company, and after a personal conversation between President Donald Trump and Chairman Terry Gou, Foxconn is moving forward with our planned construction of a Gen 6 fab facility,” Woo announced.

This sudden flip flop from what the company had told the media just two days earlier left some doubting the newest promise. “Going back and forth seemingly at random gives employees, investors and the community in which you operate cause for concern,” said Joe Holt, a business professor at the University of Notre Dame, in a story by the Washington Post. “Their inconsistency is dizzying.”

So last week the company held a big press conference in Mt. Pleasant to buttress the promise made to Trump, announcing it had awarded $34 million in contracts to five Wisconsin-based companies to work on the project. “Foxconn is proud to announce these successful Wisconsin-based subcontractors who will help make the Gen6 facility a reality,” said Woo. 

Which certainly sounds like that plant is being built after all. 

Except that these contractors aren’t building a plant, but are working on utilities, roadways and drainage systems — which could be built for any kind of plant. 

Except that it won’t be till May that the company even releases the initial bid packages for the construction of the Gen6 fabrication facility, it says, and with no date specified for when these bids will be awarded. 

Except that the when the LCD plant is built, according to Adam Jelen, senior vice president with Gilbane Building Co., Foxconn’s construction manager, it will be built on the many acres of flat, compressed gravel at the Mt. Pleasant site, as he told the media. And you can’t build an LCD plant on such a base, as Willy Shih, Professor of Management Practice, Harvard Business School and an expert on the LCD industry, tells Urban Milwaukee.   

“A compressed gravel foundation might be fine for a normal industrial building, but it’s probably not an LCD Fab, which has to have a massive steel infrastructure to support a vibration-free environment for equipment that has to do ultra-precision (manufacturing),” Shih says. 

That steel support substructure is no small undertaking and could be two floors deep — just one part of what makes these LCD plants so massively expensive. 

But the compressed gravel base would work fine for what Woo told TMJ4 it would be building. Woo’s comments to the station were just before the Trump announcement and were meant to head off the furor that erupted after his statement saying Foxconn wouldn’t be manufacturing TV screens. 

It will “not” be a factory, he told TMJ’s Charles Benson, but “an advanced manufacturing campus which will at least include a crystal display backend packaging plant, a high precision molding factory, a system integration assembly facility and a rapid prototyping center to help startups to test out their ideas and concepts to develop new vertical solution using 8K+5G platform/ecosystem.”

Which means what? That “suggests they are building an assembly plant that will take LCDs manufactured in Asia and put them into plastic housings (high precision molding) for things like TVs, monitors for computers and other things that use electronics displays,” Shih says. “For that, a compressed gravel foundation will be fine.” 

Of course, that sounds very much like the small experimental assembling plant Foxconn tried in Racine County, and which Bloomberg reported on, and which was a complete failure.

I contacted Foxconn’s representatives for a response to Shih’s observation that the Gen6 plant couldn’t be built on a compressed gravel base and received a reply dismissing this as an “inaccurate assertion” and reiterating that contractors would be asked to bid on the Gen6 facility, which would be built in time to start production in the fourth quarter of 2020. 

That may sound like plenty of time to build the plant, but as a research paper co-written by Shih noted, these factories are “enormous in scale and scope, and required as much as a year or more to build and equip, even at the breakneck pace of construction that was the norm in Taiwan.” 

“With all the zoning approvals and meetings, it will probably take closer to two years in the U.S. to build something like that,” Shih tells Urban Milwaukee. Which would push the date for a finished facility to the summer of 2021.

And in East Asia, the only place on earth where such plants have been built, they depended on a whole eco-structure of support. As Jeffrey Dorfman, an economics professor at the University of Georgia, told the Post: “It takes years to set up supply chains and logistics. You don’t just turn around on a dime.”

These plants are are also tremendously expensive. The typical construction and equipment cost for the latest-generation LCD fabrication plant in Asia was $4 billion in U.S. dollars, the research paper noted. Shih estimates the proposed Racine plant, if it was built, would have a price tag of around $5 billion.

That’s a massive amount of capital to invest on a plant that according to experts, including Woo, would not be able to manufacture LCD products at a competitive price, and at a time when there is a glut in the market for them. 

Which merely adds more reasons — to the many I’ve previously spelled out  — to doubt this LCD plant will be built. More likely the company is spending $34 million for roads and utilities to an assembly plant.

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More about the Foxconn Facility

Categories: Business

4 thoughts on “Murphy’s Law: More Doubts About Foxconn Project”

  1. Jake formerly of the LP says:

    Nice work connecting the dots, Bruce. Stay on these snakes.

    The scary part is if Foxconn builds an expensive plant, taxpayers are on the hook for 15% of those costs if even a small amount of people are working at Foxconn.

    Cut them a check and have them leave.

  2. Barb- West Bend says:

    I wonder how many assembly workers Foxconn will hire, and what wages they will be paid?

  3. frank a schneiger says:

    During a hearing in the aftermath of the financial collapse and the Great Recession, Senator Carl Levin pointed to a note that a Wall Street banker had sent to an analyst at one of the ratings agencies after the analyst had refused to rate a transaction that he said was “a piece of crap.” The Wall Street banker wrote back something to the effect of, look just sign it, “IBG/YBG.” Senator Leven asked the analyst, “what does IBG/YBG mean? The response was, it means, who cares, I’ll Be Gone/You’ll Be Gone when the crap hits the fan.

    Foxconn and the tap dancing that is now going on about its plans are just a “let’s buy some time” version of IBG/YBG, which is standard operating procedure in our country today. Let’s just hope that someone is keeping lists because the roster of things that culpable people are gong to want to lie their way out of in the future gets longer by the day.

  4. Jake formerly of the LP says:

    Frank- Good catch. And notice how Foxconn claims the date this thing will open,is right after the 2020 elections? Just enough time to make empty promises for Trump and WISGOP that “we’re doing something”, only to have the truth come out right after the election.

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