Foxconn now declines to say it plans to build type of factory named in state, local contracts

Rick Romell , Molly Beck | Milwaukee Journal Sentinel

Foxconn Technology Group on Wednesday said again that it will create 13,000 jobs in Wisconsin and invest $10 billion in its planned manufacturing campus, but declined to say it still plans to build the type of factory specified in its contracts with state and local government.

Responding to criticism from Democrats over changing plans for a project that could receive some $4 billion in public subsidies, Foxconn reiterated that it is committed to the jobs and investment numbers.

But in a shift from its stance of two months ago, the company on Wednesday did not offer assurances that it still plans to build the type of liquid crystal display panel plant the contracts cite.

Known as Generation 10.5 fabrication facilities, or fabs, such plants are the largest and most expensive in the display industry. They produce very large panels, such as 65-inch or 75-inch television screens, that are cut from ultra-thin pieces of “mother glass” measuring about 9.5 feet by 11 feet.

Foxconn’s original plans last year called for building a Generation 10.5 plant, and both the state and local agreements reached with the company define the project that way.

The first indication that things had changed came in June, when Foxconn executive Louis Woo told BizTimes Milwaukee that the company now planned to first build a Generation 6 plant — a smaller, less costly type of factory that produces smaller display panels from smaller sheets of mother glass.

A week later, the company said that while it indeed would first build the smaller factory at its chosen site in Mount Pleasant, “Foxconn is still planning to build Generation 10.5 TFT-LCD and other next-generation manufacturing facilities at that location.”

“TFT” stands for thin-film transistors, which are used in flat-screen display panels.

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Foxconn’s changing plans drew fire Wednesday from Assembly Minority Leader Gordon Hintz (D-Oshkosh) and Rep. Dana Wachs (D-Eau Claire), a Wisconsin Economic Development Corp. board member.

Hintz told reporters at a news conference in the state Capitol that Gov. Scott Walker should provide taxpayers with updated investment figures, job numbers and compensation estimates, given recent news reports about the changes.

“It’s critical that the governor pay attention to what’s going on with taxpayer dollars and make sure that the public investment is sound and makes sense,” Wachs said. “What in the world is going on? This could be the mother of all bait and switches.”

A spokeswoman for Walker said Foxconn said "is committed to 13,000 good-paying, family-supporting jobs and a $10 billion investment in Wisconsin," but did not answer whether Walker believed the project would be as transformational for the state's economy if the project ends up being smaller.

Responding to criticism from Hintz and Wachs, Foxconn said the 13,000-job, $10-billion-investment commitments stand.

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The firm said its phased approach in building its Racine County manufacturing campus would ensure that it could meet current and projected demand for LCD panels. The decision to build a Gen 6 plant in the first phase is in line with that strategy, Foxconn said.

The company was less specific about what will follow.

“In the next phase of the development, Foxconn is planning to build future generation research and development and manufacturing facilities at that location,” the firm said.

Asked subsequently whether Foxconn still plans to build a Gen 10.5 plant, the company said it “is still planning for an advanced fab facility in the near future after the completion of the first phase. Whether it is Gen 10.5 or something else depends on the market and economic situations at the time.”

Speaking to The Journal Times on Tuesday, Woo said that by the time a Gen 10.5 plant could be built, "it would have so much competition from others in China that the market would be glutted," the Racine newspaper reported.

Mark Hogan, secretary and CEO of the Wisconsin Economic Development Corp., said Wednesday that Foxconn needs flexibility to respond to changing markets, and he is not concerned that the company has changed its plans.

The state contract — a pay-for-performance agreement that awards Foxconn tax credits after it invests money and creates jobs — protects taxpayers, Hogan said. The most the state would pay in the first two years of the contract is $9.5 million, he said, providing an opportunity to see how work progress.

“Nobody wants the taxpayers to be on the hook for this, and I feel better about the contract every day,” he said.

In a written response to Hintz, Hogan pointed to Foxconn’s size ($155 billion in 2017 revenue) and said its success “has been based on the company’s ability to be at the leading edge" of technology.

“We have confidence Foxconn will continue to be at the forefront of demand-based technology changes,” Hogan wrote.

Apparently citing the contract’s definition of the Foxconn project as the economic investment activities of building the company’s “Generation 10.5 TFT-LCD Fabrication Facility and supporting operations,” Hogan wrote that the agreement should be viewed not piecemeal but as a whole.

“Taking any individual section from WEDC’s contract with Foxconn, especially a definition, does not provide appropriate context to the requirements found when the contract is reviewed in its entirety," Hogan wrote.

“WEDC’s contract clearly contains provisions that ensure the taxpayers’ investment is protected. The contract also provides the company the flexibility to make the necessary business decisions to ensure the success of the project, something I am certain you want to see accomplished,” Hogan wrote.

Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, echoed Hogan's description of the taxpayer protections in the contract.

Sheehy also said digital technology companies operate in markets that by their nature are highly unpredictable, and that firms such as Foxconn have to be flexible.

It appears, he said, that Foxconn is being held to a different standard than other companies receiving state aid. If, for example, German candy-maker Haribo concluded that market forces dictated it should make something different from gummy bears at its planned Kenosha County factory, "we're not going to have a headline story that Haribo makes popsicles instead of gummy bears," Sheehy said.