Foxconn Is Reconsidering Plan for Manufacturing in Wisconsin

By Natalie Kitroeff and Patricia Cohen

A Foxconn logo before the arrival of President Trump for a groundbreaking ceremony in Mount Pleasant, Wis., last June.CreditCreditDarren Hauck/Reuters

Foxconn, the giant Taiwan-based company that announced plans for a $10 billion display-making factory in Wisconsin, now says it is rethinking the project’s focus because of “new realities” in the global marketplace.

The project was hailed by President Trump at a groundbreaking last June as the “eighth wonder of the world” and an example of his efforts to attract foreign investment to create manufacturing jobs.

The company said Wednesday that it remained committed to creating as many as 13,000 jobs in Wisconsin, and continued to “actively consider opportunities” involving flat-screen technology. But it said it was also “examining ways for Wisconsin’s knowledge workers to promote research and development.”

“The global market environment that existed when the project was first announced has changed,” Foxconn said in a statement. “As our plans are driven by those of our customers, this has necessitated the adjustment of plans for all projects, including Wisconsin.”

But the company said its presence in Wisconsin remained a priority, and said it was “broadening the base of our investment” there.

The statement followed a Reuters report quoting Louis Woo, a special assistant to Foxconn’s chairman, Terry Gou, as saying that the costs of manufacturing screens for televisions and other consumer products are too high in the United States.

“In terms of TV, we have no place in the U.S.,” Mr. Woo told Reuters. “We can’t compete.”

Foxconn is a supplier to Apple and other tech giants. It was lured to Wisconsin in 2017 after former Gov. Scott Walker and state lawmakers agreed to more than $4 billion in tax credits and other inducements over a 15-year period. Those subsidies amounted to $15,000 to $19,000 per job annually, for a plant that the company said would employ as many as 13,000 workers in Mount Pleasant, near Racine.

The prospective shift by Foxconn was met with dismay. “This news is devastating for the taxpayers of Wisconsin,” said Assemblyman Gordon Hintz, the Democratic minority leader. “We were promised manufacturing jobs. We were promised state-of-the-art LCD production. We were promised a game-changing economic opportunity for our state.”

Some Wisconsin Republicans blamed the company’s change in plans on the election of Gov. Tony Evers, a Democrat, to succeed Mr. Walker, a Republican, in November.

In a joint statement, Assembly Speaker Robin Vos and the Senate majority leader, Scott Fitzgerald, said it was “not surprising Foxconn would rethink building a manufacturing plant in Wisconsin under the Evers administration.”

President Trump, center, Gov. Scott Walker, left, and Foxconn’s chairman, Terry Gou, at a groundbreaking event for the Foxconn facility in Mt. Pleasant, Wis., last June. Mr. Trump hailed the project as an example of his efforts to attract foreign investment to create manufacturing jobs.CreditEvan Vucci/Associated Press

The lawmakers added: “The company is reacting to the wave of economic uncertainty that the new governor has brought with his administration.”

The plans for the plant — including what it would produce, and the composition of its work force — have changed over time. Early estimates called for a majority of the staff to be hourly workers assembling flat-screen devices. Last August, Mr. Woo told The Milwaukee Business Journal that “at least 80 percent would be engineers or R&D scientists,” as the facility became more of a research campus.

Ever since the deal was announced with much fanfare at the White House in July 2017, critics have raised questions about the growing size of public funds and tax credits officials offered the company, and the possibly shrinking number of promised jobs.

The agreement with the Wisconsin Economic Development Corporation “does protect the state to some extent if Foxconn falls short of promised job creation,” said Timothy Bartik, an economist for the Upjohn Institute in Kalamazoo, Mich. “But the capital investment tax credit, in particular, does not seem to fully adjust for this if Foxconn ends up doing a much less job-intensive and more capital-intensive project.”

He said Foxconn had apparently already failed to fulfill its job-creation pledges because it created fewer than 260 jobs in 2018. This year, the company is eligible for a jobs-related credit if it creates at least 520 full-time jobs, and an investment credit that can be scaled back if job creation falls short.

Mr. Bartik said Foxconn had been vague about whether the promise of 13,000 jobs refers solely to those created by the company or includes related jobs among retailers or along the supply chain. Foxconn, for example, has said that each job it creates will generate 2.7 jobs down the line. That means Foxconn might be looking at directly creating just 4,815 jobs.

Megan Randall, a research associate at the Urban Institute in Washington, noted that Foxconn had failed to follow through on other plans in the past. In 2013, for example, the company announced that it would invest $30 million in a high-tech factory in Pennsylvania that would create 500 jobs. The factory never materialized.

The company laid out ambitious plans in Brazil, too — for 100,000 jobs — that were mostly left on the table.

“Part of the concern about the Foxconn deal originally is that Foxconn has a history of not delivering on its jobs and manufacturing commitments that it’s made,” Ms. Randall said. “These types of instances are exactly why accountability measures are so important in state and local tax-incentive deals.”

Mr. Bartik said Foxconn’s rationale about changing global conditions was puzzling. “It is hard for me to see how global conditions have dramatically changed the competitive position of the U.S.’s labor costs in producing flat-screen TVs from when the project was announced in 2017,” he said. Wage growth has accelerated as the labor market has tightened in the past 18 months, but increases have been modest.

It could mean that “this project will end up mostly being a R&D operation in Madison, with a much smaller factory in southeast Wisconsin,” Mr. Bartik said.