Tag Archives: Foxconn

Add Wisconsin to the List of Failed Foxconn Bettors

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The ink was barely dry on the lawsuit filed by Lordstown Motors against would-be savior Foxconn when the next round of news hit: the world’s largest ODM/EMS company is pulling out of Wisconsin.

If we go back to 2019, we will recall Lordstown opened the doors of its plant, formerly owned by GM and seen as critical to its hometown’s economic future, to Foxconn, which came bearing (the promise of) much-needed cash. In return, the ODM was to obtain access to Lordstown’s electric vehicle technology, which Foxconn sought as it reportedly focuses on building electronics and other products for what is seen as the future platform for individual and fleet transportation.

That dream ended in a crash, unfortunately but unsurprisingly. The investment never really materialized, Lordstown went bankrupt, and the winners will be the lawyers.

Some 30 miles south of Milwaukee, Foxconn’s much-ballyhooed splash into the Wisconsin cornfields is resolving with the sale of its 315-acre campus to Microsoft.

That’s a far cry from the $10 billion in investment and 13,000 jobs the company forecast — and lots of politicians touted — as longtime homeowners were hit with eminent domain mandates to make way for the 200,000 sq. ft. plant. Some $500 million of taxpayer money later, the prairie landscape is left with a mostly vacant shell. Likewise, company plans to build innovation centers in Madison, Milwaukee, Green Bay, Eau Claire and Racine have mostly been shelved, and the properties are going on the block. 

What both deals had in common was that they took place in states that of late are highly contested in federal elections. That’s no surprise: Foreign companies have often (always?) tried to influence the outcome of US elections to suit their strategic interests. (The constraints foreign entities should have on such maneuvers, if any, are for others to decide.)

Experienced bettors know when to fold their cards, however, and Foxconn is well-known for exiting the table when it doesn’t like the stakes. When the trade winds blew cold, the company headed for warmer climes.

So a shout out to Georgia, Arizona and Nevada, among others: If Foxconn comes calling, look hard at the cards before asking for a hit.

If You Thought Foxconn Is Just a Manufacturer …

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… Think again.

Foxconn, the world’s largest EMS/ODM, with annual revenues now topping $200 billion (!), said this week it now has more than 54,000 invention patents worldwide.

Some 63% of them have been issued in the US (17,600 patents) and Japan (16,200).

Among the most common technology areas:

  • Computer accessories 17%
  • Semiconductors 14%
  • Processing and detection technologies 13%
  • Robots and optoelectronics equipment 12%
  • Display equipment 11%

If you wonder what the end-game is, think worldwide monopoly.

Would-Be Foxconn Beneficiaries: Always A Bridesmaid

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The University of Wisconsin this week became the latest would-be benefactor of Foxconn’s pretend largesse to acknowledge that it has been, in fact, jilted.

A UW-Madison response to a public records request by the Wisconsin State Journal on Monday shows the Taiwanese electronics company gave $700,000 in the first year of a five-year agreement and no money in the second or third year. The amount to date represents less than 1% of the original commitment.

“I am not at this point expecting to receive that gift,” Blank said in an interview with the State Journal editorial board last week. “It’d be nice. I think it’s unlikely.”

— UW Chancellor Rebecca Blank

UW should feel no embarrassment at falling for the Taiwanese ODM’s promises of riches — in this case, $100 million in grants. The list of brides left standing at the altar by Foxconn is long and global.

Perhaps one day, when Foxconn comes knocking, the prospective bride will demand the ring — and the cash — upfront.

Somehow, however, I tend to doubt it.

The Labor Honeypot

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Plexus, annually among the highest-ranking performers in the CIRCUITS ASSEMBLY Top 50 EMS Companies list, yesterday announced a new plant to be built in Thailand.

In its press release, the company touted the facility as an example of “Plexus’ commitment to Environment, Social & Governance (ESG) best practices.” And on the surface, much of this sounds great: green building initiatives, an exterior green zone for employees, and other features.

But the Plexus Code of Conduct goes further than just green initiatives. There’s talk — lots of talk — about corporate and individual ethics, core values and leadership behaviors. And ESG criteria are more than green initiatives: the “social” component is tied to standards for managing relationships with employees, suppliers, customers, and the communities where a company operates.

From the Plexus website: plexus.com/en-us/corporate-social-responsibility

Plexus specifically cites its adherence to the Universal Declaration of Human Rights, a proclamation by the United Nations General Assembly in 1948, which in its preamble notes history’s uncomfortable past with free speech:

Whereas disregard and contempt for human rights have resulted in barbarous acts which have outraged the conscience of mankind, and the advent of a world in which human beings shall enjoy freedom of speech and belief and freedom from fear and want has been proclaimed as the highest aspiration of the common people

And commits its signers to the following:

Everyone has the right to freedom of thought, conscience and religion; this right includes freedom to change his religion or belief, and freedom, either alone or in community with others and in public or private, to manifest his religion or belief in teaching, practice, worship and observance.

– Universal Declaration of human rights, Article 18

And Thailand is complex. It routinely jails citizens, including minors, for speaking out. Defaming the monarchy is punishable by up to 15 years in prison per incident. God save the king, but don’t badmouth him.

This is going to sound like I’m picking on Plexus. In fact, this is a problem facing numerous multinationals. One thing they have in common is membership in an official sounding organization called the Responsible Business Alliance (RBA). Formerly the Electronics Industry Citizenship Coalition (EICC), RBA is a group of companies that “share a commitment to ensure working conditions in the electronics supply chain are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible.”

Fancy words aside, the RBA is a crock. The companies that make up its membership include Apple, Amazon, Foxconn, Pegatron, Wistron and other OEMs and ODMs that are routinely singled out by NGOs, in social media and the mainstream media for disregarding worker health and local labor laws. In my view, the RBA is used as a shield: listen to what we say, don’t look at what we do.

I can’t argue with Plexus’ decision to locate factories where the labor is skilled and generally cheap. But I can’t rationalize how Plexus’ lofty goals of good corporate citizenship fit with Thailand’s pattern of state-sponsored oppression.

Just as we thought the bloom was off the rose in China. Will the EMS industry trade one labor honeypot for another?

Trouble in India

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The riots at a Wistron plant in Narasapura could have lingering effects long after the damage is cleaned up.

India has been touted as the “next China,” a label local trade groups and business executives have relentlessly promoted. Besides being the only countries with a population exceeding 1 billion, however, the similarities are perhaps too many for today’s climate.

Even so, despite Prime Minister Modi’s best efforts to convert the nation into an autocracy driven by a Hindu ruling class, India is fighting a current that China avoided during its rise to manufacturing power, and that flow is getting stronger.

Yes, Nokia and Apple suppliers like Foxconn continue to make plans to expand in the country. But the broader supply base still isn’t there, and, perhaps burnt out from their China experience, expats aren’t relocating by the thousands to help the locals set up and manage companies. The semiconductor industry has changed over the past 20 years. New foundry costs are still rising, and the number of players has shrunk. Putting multi-billion dollar plants in India that replicate older technologies while still finding the resources to compete on the leading-edge might be a longshot, at best.

Nor has India provided the incentives China did to relocate. Instead, it has taken a tack similar to Brazil’s: Steep import taxes that while aimed at China, might actually discourage others from migrating there. Already, India and the US have taken economic swipes at each other, with the US dumping India from its preferred buyer program that allowed zero tariffs exports to the US, and India hiking tariffs on product coming from the US. The EU Parliament is taking an equally dim view of the former British colony’s trade and humanitarian approaches.

Indeed, Modi’s approach to alienating and, some argue, encouraging violence toward India’s religious and ethnic minorities puts Western OEMs in a difficult spot. Already under the gun for their massive investments in China, which have helped prop up that country’s autocratic leadership and create an international powerhouse that is now flexing its economic and military muscle all over Southeast Asia, business leaders might be loathe to plow more assets into yet another unpredictable regime. With governments, including the United States, slapping restrictions on Chinese companies for their alleged treatment of Muslim minorities, it won’t be easy to win any PR battles over why India is somehow an exception.

And the pollution coming out of India might be on a par with China’s — or even worse — hardly an attraction for today’s green marketing campaigns.

It remains to be seen, but I think episodes like Wistron’s will delay the push to the “next China.”

Is the Supply Chain Holding On, or Holding Out?

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Foxconn, for once, was probably the first company in the electronics manufacturing sector to acknowledge the looming financial hit from the coronavirus. Apple, which relies on the Taiwanese ODM for the majority (?) of its production, was naturally forced to follow.

Speak no evil?

Jabil and Plexus have now lowered near-term estimates, and market research firms are piling on, with IDC downgrading its outlook for smartphones and PCs and DigiTimes Research slashing its notebook shipment forecast by a third or more.

In a timely column on CIRCUITS ASSEMBLY, EMS expert Sue Mucha lays out a strategy for handling sharing bad news with suppliers and customers. “Transparency matters,” she says. “The goal shouldn’t be to paint a rosier picture than the situation dictates. The goal is to fill the communications void and establish trust that your company will provide news as the situation evolves.”

That begs the question, why haven’t more firms come forth with sales or profit warnings? Are Apple, Foxconn, Jabil and Plexus the only ones that will be affected? Or are they simply the vanguard?

Should Terry Gou for It?

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Terry Gou, Foxconn founder and chairman, is contemplating a run for the presidency of Taiwan. Should he go for it?

Given his wealth – an estimated $7.8 billion – and stature in Taiwan, some comparisons to US President Donald Trump will be inevitable. There are distinct differences in upbringing and temperament, however. Gou is a self-made man, having launched Hon Hai as a components supplier in the early 1970s. He built the company brick by brick, expanding into new markets as opportunities arose, and taking advantage of mainland China’s proximity and low cost-model. When the West started looking for cheaper manufacturing alternatives, he was ready.

He has generally been media-shy throughout his career. It was only after Foxconn came under scrutiny as workers started jumping off its roofs that NGOs began putting pressure on Apple, Foxconn’s largest customer, and Western media took note. Long articles in The New York Times, Wall Street Journal and Forbes followed.

It has been reported Gou wants to bring a business- and China-friendly approach to Taiwan. That would in some ways run counter to the current president Tsai Ing-wen, which has given Beijing a colder shoulder. Her administration is coming under criticism for stagnant wages among Taiwan’s middle class, however, opening the door for a challenger.

But is Gou the guy? Whether his domineering approach will be welcome even in Asian cultures today is unclear. In the wake of the Enron collapse, in 2007 the WSJ quoted him as saying, “Even for those of us who lived through Enron, it’s hard not to come away disgusted. I always tell employees: ‘The group’s benefit is more important than your personal benefit.’ ” At the time, a typical mid-level assembly-line worker in Taiwan earned about $230 a month, including overtime pay, while Gou was a multibillionaire.

Neither is the inherent conflict-of-interest with China, where Foxconn has the majority of its manufacturing capacity and business interests and employs hundreds of thousands of residents. Taiwan’s self-styled independence stature could be in question were Gou come to office. How would he priorities decisions that could mean risking his financial standing?

Citing divine inspiration, Gou told media that he seeks “peace, stability, economy and future.” Those are worthy goals. Given his track record as an employer and his financial dependence on China, how he will achieve them deserves scrutiny.

Foxconn Whiplash

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You are to be forgiven if you have whiplash from the multiple changes in direction of Foxconn last week. The world’s largest ODM and EMS company announced it was essentially pulling out of Wisconsin, scaling down its much publicized multi-million square foot campus in favor of a couple of small R&D centers. Then, after pressure from the US government, it quickly reversed course once again, saying the plans were still on.

Wisconsin taxpayers might feel a little like Charlie Brown getting the football yanked out from under him again. Not only does it look ever-less likely Foxconn will create anything close to the 13,000 local jobs it promised, but towns like Mt. Pleasant are already on the hook for hundreds of millions of dollars, the net effect of bonds it issued to pay for the initial construction. And if Foxconn doesn’t deliver, the state must pick up whatever the municipalities cannot pay back.

In any case, when it comes to Foxconn, actions speak way louder than words. Let’s wait to see whether anything actually gets built before commencing with the back-patting.

Steve Jobs’ Biggest Legacy?

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The decision of Foxconn to enter the semiconductor manufacturing market gives additional heft to the premise that the US created a monster determined to swallow everything in its path.

As reported by Nikkei Asian Business today, Foxconn is working on a potential joint venture with its Sharp subsidiary to “invest” as much as $9 billion in the new plant, which would be the company’s first foray into IC development. (We put “invest” in quotes, because 1. the gulf between Foxconn’s reported investments and its actual investments tends to be oceanic in size and 2. in this case, the investment is reportedly coming from the Chinese government.)

Foxconn already is likely the world’s largest consumer of chips, so getting into the OEM business would cause reverberations among its major suppliers. Moreover, it returns us to the sad refrain: What is Foxconn’s end-game? The company dominates the electronics supply chain from boards to assemblies to box build, makes other components (connectors, displays, motherboards, etc.),
operates retail stores, invests in 5G … you name it.

Personally, I blame Steve Jobs. The iPhone was a revelation, for which Jobs deserves every ounce of credit he has received. But in looking for assemblers, he could and should have looked further than Foxconn. There simply is no major company in the electronics industry today that is more aggressive and yet has a worse record of worker treatment than Foxconn. I’ve worked in the industry since 1991. Foxconn remains the only company that I’ve ever received direct complaints from its employees about their treatment. (And that came from US workers. I can only imagine what their Chinese counterparts might say.)

And yes, I realize it was Michael Dell, not Jobs, who gave Foxconn and Terry Gou its entry into the US computer industry. But it was Apple that gave Foxconn its biggest stage, boosting the Taiwanese company from a third-party motherboard maker to a partner in the most revolutionary electronics device the world had seen to that point.

When criticized for his reliance on Foxconn, Jobs would fire back that the US didn’t have the engineers to build what Foxconn could build. But I don’t think it was an issue of talent, or availability. I think it was an issue of greed. Jobs couldn’t acquire the volume of talent needed at the price he wanted. Foxconn could.

And so that’s Steve Jobs legacy. Foxconn is a $150 billion company and growing. Its revenues are larger than any of its customers. And, being traded on the Taiwan Exchange, it has access to financial markets without the transparency of public companies in the US or Europe. A monster is present among us, and will eventually devour us all.