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What Foxconn - Apple's Largest Manufacturer - Is Up To In Wisconsin

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17:34   |   Jun 27, 2019

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What Foxconn - Apple's Largest Manufacturer - Is Up To In Wisconsin
What Foxconn - Apple's Largest Manufacturer - Is Up To In Wisconsin thumb What Foxconn - Apple's Largest Manufacturer - Is Up To In Wisconsin thumb What Foxconn - Apple's Largest Manufacturer - Is Up To In Wisconsin thumb

Transcription

  • This is the site where the Gen6 Fab will be constructed.
  • Wisconsin was ready to receive Foxconn.
  • It was ready to receive industrial manufacturing.
  • Foxconn. It's a name that's been in the news a lot lately for this huge
  • electronics factory it's building in Wisconsin.
  • So far it's just one building.
  • Tech giant Foxconn is rethinking plans for a multi-billion dollar plant
  • touted by the president that was supposed to bring thousands of jobs.
  • So what does Foxconn do?
  • It's the world's largest contract manufacturer of electronics.
  • Foxconn specializes in making things like PCs, servers, power supplies,
  • connectors and smartphones.
  • In fact Foxconn is Apple's largest iPhone assembler.
  • Other big name customers include Dell, Samsung and Sony.
  • Though not a household name in the U.S.,
  • Foxconn is renowned in China where it's the largest private employer.
  • If there's one company that's going to be at the heart of international
  • trade, geopolitics, electoral politics and technology, it's not Google or
  • Facebook or Apple.
  • It's Foxconn.
  • Now Foxconn has come into the U.S.
  • and it's in the midst of building a big contentious factory in Wisconsin.
  • America does not have a single LCD Fab.
  • We are going to change that.
  • As part of the deal, Foxconn said it would invest 10 billion dollars to
  • build a high tech manufacturing facility for liquid crystal display, or
  • LCD, screens.
  • I think we can say this is, we can say, the eighth wonder of the world.
  • Foxconn also pledged to create 13,000 jobs in exchange for around four
  • billion dollars of incentives from the state of Wisconsin.
  • But things haven't gone as planned.
  • Foxconn has made promises to a number of places, but hasn't always followed
  • through on them.
  • Clearly the deal that was struck is no longer in play.
  • So we went to Wisconsin to find out, what is Foxconn?
  • And what is it really doing in the farmlands of Wisconsin?
  • Foxconn, simply put, manufactures electronics for a variety of
  • companies, specifically what's known in the industry as the three Cs:
  • computer, communication and consumer electronics.
  • Foxconn is the world's largest contract manufacturer for electronics.
  • They make a lot of iPhones.
  • They make a lot of Sony PlayStations.
  • They make a lot of Nintendo Switch gaming consoles.
  • There's a really good chance that in your house you already have products
  • that were assembled in a Foxconn facility.
  • All those electronics brought Foxconn $157 billion in revenue in 2018.
  • It employs around a million people all over the world, with manufacturing
  • facilities in 24 countries including Mexico, the Czech Republic, Hungary
  • and of course China, among others.
  • The Taiwan-based company is best known for its partnership with Apple,
  • assembling iPhones, iPads and other products.
  • Apple is very important to Foxconn. Apple is
  • Foxconn's largest customer.
  • When Apple does well, Foxconn tends to do well. And
  • when Apple stumbles a little bit, Foxconn tends to stumble as well.
  • So when iPhone sales slumped earlier this year, Foxconn took a hit.
  • The company reported that profits were down 17.7
  • percent in the first quarter of 2019.
  • Now, President Trump is imposing tariffs on Chinese companies and both
  • Apple and Foxconn have been caught up in the US-China trade tensions.
  • Foxconn'S business has probably been affected more than any other company
  • on earth by the US-China trade war. Because
  • Foxconn's the number one exporter of value from China, they've been hit
  • hardest by Donald Trump's tariffs and they will continue to be hit hardest
  • by them as well as by Apple's downturn and a lowering of the sales
  • of iPhones.
  • At an investor's conference earlier this month, Foxconn said it is prepared
  • to deal with the risks from the trade dispute.
  • Although both Apple and China's Huawei technologies have made some changes
  • to their orders, Foxconn says it faces limited impacts and that it has
  • enough capacity outside China to meet Apple's demands in the American
  • market.
  • Twenty years ago, Steve Jobs asked Terry Gou if he could make Apple
  • products and manufacture them in the United States, so the Apple products
  • could say Made in USA. At
  • that time, Terry Gou said, "No, that's way too expensive.
  • I can't do that."
  • But now with rising labor costs in China, there are comparable abilities
  • in other places.
  • Although there's no indication iPhones will be manufactured in Wisconsin,
  • Foxconn did tell us it now plans to make much more than the originally
  • planned 75 inch televisions.
  • So a building this size, what volume of product can we expect to see
  • pumping out of there once it's at full capacity?
  • I mean that's that's a challenging metric to tell you, because the products
  • that are associated with us are multiple products.
  • We will do commercial TVs up to 65 inch, but it also has multiple liquid
  • crystal display sizes that we can produce that are applicable in a variety
  • of industries, from automotive to education to entertainment to health
  • care to medicine to sports, security and smart city application.
  • To understand its ever changing promises for the factory in
  • Wisconsin, let's first take a look at Foxconn's history, its rapid growth,
  • and what it's up to in other countries.
  • The company had humble beginnings. Terry Gou
  • founded Foxconn with just 75 hundred dollars in 1974, calling it Hon Hai
  • Precision Industry, a name that's still used today.
  • The story of Foxconn goes way back when, you know, he started by making a
  • certain kind of knob for televisions and he would come to the United
  • States and sell them and really barnstorm businesses to get them to buy
  • his parts. Coming
  • from that to where he is now, where Foxconn is now, you have to say it's
  • had a huge rise.
  • Foxconn's first manufacturing plant opened in China in 1988.
  • It hit the global stage in 2001, when American based Intel hired Foxconn
  • to manufacture its motherboards over a major competitor Asus.
  • By 2012, Foxconn was manufacturing about 40 percent of consumer
  • electronics worldwide.
  • Today, Foxconn has diversified across a multitude of businesses, from
  • making circuit boards and home appliances to industrial computers and
  • semiconductors. It acquired Japanese electronics maker Sharp in 2016 and
  • it was a major investor in Future Mobility, a car startup that aims to
  • sell all electric vehicles by 2020.
  • And just last year, Foxconn announced it will buy electronics manufacturer
  • Belkin International, which owns well-known router and computer
  • accessories brands Linksys and Wemo.
  • And these days, founder Terry Gou is no longer solely focused on making
  • electronics.
  • Terry Gou is now running for president of Taiwan.
  • And as a result of that, Terry Gou's business interests in Foxconn are
  • running directly into his political interests as a candidate for president
  • of Taiwan.
  • Still Gou and Foxconn have accomplished a lot since the company's early
  • days. In fact Foxconn was so successful that it was 25 years before the
  • company reported an annual dip in revenue.
  • But the company's revenue has decreased in the past three quarters, going
  • from about 43 billion in Taiwan new dollars to about 13 billion, thanks in
  • part to a decline in iPhone sales.
  • Foxconn has also received a fair share of bad press for issues at its
  • factories.
  • The scandal that made Foxconn into a household name in the United States
  • was in 2010, you had 14 of its factory workers commit suicide sometimes by
  • jumping off of Foxconn factory buildings.
  • These people were 16 hour shifts and they live very close together in very
  • small dormitories.
  • It's a very grim existence.
  • It's gotten so bad that Foxconn has had to put nets up around the
  • buildings to catch people when they jump off the roof.
  • In a statement Foxconn says, "Immediately following the tragic incidents in
  • 2010, Foxconn implemented company wide comprehensive measures to mitigate
  • against these tragedies being repeated."
  • Foxconn has also been criticized for a series of deals that didn't work out
  • as promised.
  • Terry Gou and Foxconn talked about setting up a plant in Brazil, but that
  • never happened.
  • In 2013, he talked about setting up a plant in Pennsylvania and that
  • didn't happen.
  • Now those deals weren't as far along as the one in Wisconsin, but still,
  • Terry Gou has a track record of promising a lot and delivering a little.
  • Which leads us back to Foxconn's latest deal, the promise of what would be
  • one of the largest electronics factories in the world on 3,000 acres of
  • farmland, 30 miles south of Milwaukee, in the village of Mount Pleasant,
  • Wisconsin. The deal first started when the White House called the
  • Wisconsin Economic Development Corporation in April 2017.
  • Days later then-Governor Scott Walker was in a meeting with Foxconn
  • founder Terry Gou and Wisconsin EDC head Mark Hogan.
  • I met with Terry Gou in the White House on April 28th of 2017.
  • That was the first time we met with the company.
  • And so I've been involved from day one.
  • Foxconn put out a request for proposal.
  • Wisconsin and the Village of Mount Pleasant offered the company almost
  • four billion dollars in subsidies if it creates the promised number of
  • jobs with an average salary of just under 54,000 dollars. For
  • Foxconn, the site location makes sense.
  • It takes a huge amount of water to clean the glass used in manufacturing
  • LCD screens and Mount Pleasant is less than 10 miles from Lake Michigan.
  • No other Great Lakes State came close to Wisconsin's almost 4 billion
  • dollar deal.
  • Why is it worth almost four billion?
  • It's worth the dollars because of the industry that it's bringing to the
  • state, to the United States and to Wisconsin, the jobs.
  • But it's very scalable.
  • So if this ended up being an employer that employed 5,000 6,000 8,000
  • 10,000 jobs in a state that we have employment of three million people,
  • that's still a very significant investment.
  • So why did the state want the deal so badly.
  • And they offered the richest economic development deal to Foxconn in the
  • history of the United States.
  • Donald Trump wanted to revive American manufacturing and have a symbol of
  • it. Paul Ryan wanted this plant to be in his district and it was.
  • Scott Walker wanted to be seen as the jobs governor.
  • All three of them have been sorely let down.
  • Hogan, who's stepping down later this year, has a different official take
  • on why Wisconsin wanted the Foxconn project.
  • Manufacturing is very much a part of Wisconsin's DNA.
  • It's our legacy for 150 years, over 150 years manufacturing has been
  • critical to what we do.
  • It represents almost 20% of our workforce, 20% of our GDP.
  • And the fact that Foxconn was going to bring an industry that did not
  • exist in the United States that was very compelling and very intriguing
  • from our perspective.
  • Racine County, where Mount Pleasant is based, has promised Foxconn 750
  • million dollars.
  • This is a great day for American workers and manufacturing and for everyone
  • who believes in the concept and the label Made in the U.S.A.
  • Less than a year after Trump announced the deal, Gou was in Mount Pleasant
  • breaking ground with him.
  • Foxconn's original promise was impressive but plans have continued to
  • change ever since.
  • This will be one of the largest jobs ever built in the world.
  • Foxconn was initially supposed to build a generation 10.5
  • factory to manufacture screens up to 75 inches for TVs and other devices.
  • In February Foxconn announced it would build a generation six factory
  • instead, which will manufacture smaller screens.
  • There are multiple Gen 10.5
  • facilities around the world and there's a glut in that market.
  • So really business is market driven and the Gen 6 factory gives us a
  • greater variety of products to be effective in the marketplace.
  • So far Foxconn has also fallen short on the jobs it promised to create.
  • It lost out on a 9.5
  • million dollar tax incentive in 2018 because it's created 182 jobs, 78
  • short of the 260 promised by the end of that year.
  • But that doesn't seem to worry Hogan.
  • That just proves that the contract works.
  • They didn't create the jobs.
  • It's a performance based contract.
  • They don't get the tax credits.
  • They understand that.
  • There are tax incentives for Foxconn if we meet certain criteria within the
  • contract with the state and we're dedicated to that.
  • That in a nutshell is how Wisconsin says it's protected.
  • If Foxconn doesn't deliver, it won't get all that nearly $4 billion in
  • subsidies promised by the state.
  • They're moving an industry to the United States so they really have to get
  • up and running.
  • This is a marathon, it's not a sprint.
  • But some people, including Wisconsin's new governor Tony Evers, are
  • questioning Foxconn's promises.
  • Governor Walker lost re-election to Evers in 2018.
  • Clearly the deal that was struck is no longer in play.
  • And so we we will be working with individuals at Foxconn and of course
  • with WEDC to figure out how a new set of parameters should be negotiated.
  • Tom Stringer has decades of experience negotiating big construction deals
  • and says that Foxconn in Wisconsin just doesn't make sense.
  • The math would never have pointed to this being a location in the first
  • place that could have executed a project of this scope.
  • I mean the numbers just don't lie.
  • The workforce wasn't there, the skill sets aren't in the U.S.
  • The margins aren't there to globally compete unless we wanted to
  • substantially pay more for LCD related products and I think the market is
  • dictating that we don't.
  • So it's trying to find the business reason, I think that's something that
  • only Foxconn can answer.
  • So we asked them.
  • Wisconsin possesses an excellent education system both in our technical
  • colleges and also in our advanced degree, our universities.
  • And we bring the best in manufacturing technology to marry with the best
  • in workforce and that's a recipe for great success and quality product.
  • But the fact remains that if Foxconn does follow through it would be a very
  • big deal.
  • It is the first-ever TFT LCD factory in the United States, the first one
  • ever. This is a major undertaking.
  • To make way for Foxconn's huge project, the land and some Mount Pleasant
  • locals have undergone massive change in the last two years.
  • This pad itself is equivalent to 17 football fields.
  • If you're a basketball fan, 221 basketball courts.
  • This summer we'll start the vertical building.
  • The floor itself, the slab that the site will be on, is a 125,000 cubic
  • yards of concrete and that's 12,500 truckloads.
  • The new Wisconn Valley Science and Technology Park is so big, nearby I-94
  • is being expanded from six lanes to eight.
  • And big enough that dozens of people have been moved so their homes could
  • be leveled to make way for the project.
  • Things have changed a lot.
  • There was 12 other homes that were in this neighborhood and they've all
  • been torn down.
  • Jim Mahoney grew up in Mount Pleasant and unlike his neighbors, decided not
  • to take Foxconn's offer to buy him out.
  • He's so set on staying he was planting trees in the yard when we arrived
  • unannounced.
  • It totally feels like a bad dream.
  • One day I'm the happiest I can be.
  • I got a nice place out in the county and then five minutes later
  • somebody's telling me I got to get out of it.
  • Leslie Maj and her husband bought their Mount Pleasant home in 2017 with
  • the hope of living in a quiet rural town.
  • But part of their yard is now being taken through eminent domain to expand
  • the street leading to Foxconn's plant.
  • And I feel Racine County, Mount Pleasant and the state of Wisconsin got
  • sucker punched.
  • The environmental impact has been another sticking point.
  • The project was allowed to skirt environmental regulations with the state
  • of Wisconsin making an exception on several points including how much
  • water Foxconn can pipe in from nearby Lake Michigan and how much natural
  • habitat can be impacted.
  • We peaked last summer at 90 parts air pollution and the EPA standard for
  • acceptable is 70.
  • Now that's without Foxconn.
  • Our air and our water are important.
  • Our health is important.
  • And we feel like we have just been railroaded right over.
  • We are expendable.
  • Foxconn insists this is not the case.
  • We're committed to following all environmental laws and regulations and
  • we're committed to being good stewards of our community.
  • People really have to be able to look and understand what the benefits are
  • to their area and I think over a longer period of time people will be on
  • board with the decision to be in Mount Pleasant.
  • But for now residents we spoke to remain concerned by a lack of
  • transparency in Foxconn's plans.
  • I mean I understand Lake Michigan is right there but I don't know why they
  • picked right here.
  • This stuff is not supposed to happen in Mount Pleasant.
  • But Foxconn remains unwavering in its commitment to Wisconsin.
  • I've talked to our corporate and they have reiterated that we are committed
  • to 13,000 jobs and the investment in the state.
  • And it's even set a firm deadline for beginning production on those
  • American made LCD panels: fourth quarter of 2020.
  • We've met every challenge to date and we'll meet every challenge that comes
  • up in the future.
  • So you're hopeful?
  • I'm very positive about it and it's exciting to be a part of it from the
  • ground up literally.

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Description

Foxconn is the world's largest contract manufacturer of electronics and the biggest assembler of Apple products. Now it's building a massive factory in a village in rural Wisconsin. In a deal heralded by politicians including President Donald Trump and then Speaker of the House Paul Ryan, Wisconsin offered Foxconn close to $4 billion in subsidies to bring the project there. In return, Foxconn promised 13,000 jobs and a $10 billion investment in Wisconsin.

In the last two years, however, plans have changed many times and locals have been forced to move to make way for the 3,000 acre project. CNBC got a rare chance to sit down with Foxconn and the Wisconsin official who helped broker the deal to ask: what's really going on with the project? Watch the video to learn more about the international giant trying to build one of the world's largest factories - in the United States.

Clarification: Jim Mahoney decided not to take “a buyout offer” from the town of Mount Pleasant, not directly from Foxconn.

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What Foxconn - Apple's Largest Manufacturer - Is Up To In Wisconsin