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 Paulo. But not the American countryside, and not in big fashion, as is being widely reported by international media.
If Foxconn were to bring one of its Death Star-like campuses to the US, it would buck not just every single manufacturing trend, but outright common sense. Here’s three quick reasons why to expect that won’t happen.
- 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 and labor costs, and taxes, among other things, Foxconn would certainly insist on favorable treatment. Even if it were to get it – and 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.
- Access to capital. Founder and chairman Terry Gou is Foxconn’s 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?
- 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. The latter, the reports say, citing Gou as the source, 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 workforce of the 6 million sq. ft. 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. And a single company is going to add 5% more to that figure? Not likely.
There certainly aren’t that many available workers in Utica (population 61,000) or Harrisburg (population 50,000). The latter, famous as home to the Hershey chocolate company, should know to resist Foxconn’s temptations. On second thought, maybe it does:
“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, Havens said, 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 Wednesday the university had no comment.”
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. Pointedly, 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.”
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 see this piece: http://www.livemint.com/Opinion/uzqTrvW0hMxgkSKCnh41dP/US-faces-risk-of-Foxconn-panel-plans-that-dont-add-up.html