June 23, 2017 12:38 am JST

Foxconn's Gou vows to invest more than $10bn in US, create jobs

Taiwanese iPhone assembler still confident of winning Toshiba chip unit

DEBBY WU, Nikkei staff writer

Foxconn Chairman Terry Gou is planning to build panel facilities in the U.S. (Photo by Nozomu Ogawa)

TAIPEI -- Chairman Terry Gou of key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, said on Thursday that his business empire would invest more than $10 billion and create employment in the U.S., focusing on Republican heartlands and swing states.

"We will provide tens of thousands of jobs," Gou told reporters after the company's annual shareholders' meeting. "It is possible [Foxconn and Sharp together] will invest more than $10 billion, not all at once, but probably over a five-year span." Foxconn bought struggling Japanese display maker Sharp last year.

"I am bringing next-generation automated production and a comprehensive panel supply chain to the United States," the Taiwanese tycoon said, without mentioning whether the investments will be connected to iPhone maker Apple.

 

During the shareholders meeting, Gou said that the six states where he is currently considering investing include Indiana, Michigan, Illinois, Ohio, Pennsylvania and Wisconsin, although he replaced Illinois with North Carolina when talking to reporters after the meeting. 

He said that he met three governors in four days in early June in the western Japanese metropolis of Osaka to discuss details.

The swing states of Michigan, North Carolina, Ohio, Pennsylvania and Wisconsin were vital to Donald Trump's victory in the 2016 presidential election. Trump's Vice President Mike Pence used to be the governor of Indiana.

The Taiwanese tycoon named a few specific cities that Foxconn is exploring: Madison, Wisconsin; the area around Cleveland and Dayton in Ohio; Harrisburg and Pittsburg in Pennsylvania.

Further, he said that Foxconn was in talks with Milwaukee, Wisconsin-based Rockwell Automation to form a joint venture to build servers to help automated manufacturing in the U.S.

Rockwell did not immediately respond to an email seeking comments. 

Trump effect

Gou also appeared to approve of Trump's efforts to boost U.S. manufacturing.

"Whether you like Trump or not, but there's this Trump effect: he wants to create jobs for Americans," Gou said. "Trump propelled every governor to be very aggressive in attracting investors...it is almost a U-turn from the era of the previous president."

He said that he would decide on the first three states to invest in late July, and probably pick another three during the next six months. It is possible that Foxconn and Sharp would invest in all six states, he said.

Gou said that he was code-naming Foxconn's U.S. investment initiative "flying eagle," adding that he wants to manufacture in America to be "closer to the market."

He also said that he would spend July in the U.S. to learn more about the development of artificial intelligence.

The Taiwanese tycoon appears to be expanding on an earlier U.S. investments pledge. In late January he said he was considering setting up a $7 billion panel facility in America.

Following his initial plan, sources told the Nikkei Asian Review that Foxconn and its Japanese subsidiary Sharp were now planning to build a panel facility that makes mid-sized displays for smartphones and cars, and another factory to produce large-sized TV screens.

In late April, Gou and his close aides met Trump and his son-in-law and senior adviser Jared Kushner in the White House to discuss Foxconn's plans.

The Nikkei Asian Review reported in November that Apple asked Foxconn to consider investing in the U.S. as early as last June as the U.S. company considered the scenario where Trump would push big American businesses to bring manufacturing jobs back home.

A source told the Nikkei Asian Review that Foxconn's preliminary investments in America in the first few years would now have little to do with Apple. Rather, the initial projects would be more related to the Taiwanese group's efforts to grow its non-iPhone-related businesses.

Apple accounts for more than 50% of Foxconn's total revenue.

Not giving up on Toshiba

Meanwhile, Gou suffered a setback on Wednesday when embattled Japanese conglomerate Toshiba announced that it would prioritize negotiations with a consortium led by the public-private Innovation Network Corp. of Japan (INCJ) regarding the sale of its memory chip business. The consortium also consists of U.S. investment fund Bain Capital and South Korean chipmaker SK Hynix.

Foxconn has joined the competition to win Toshiba's semiconductor unit, but it is not the favorite to take over due to fears in Tokyo that the Taiwanese company could leak advanced technology to China through its huge mainland operations.

On Thursday, Gou told reporters that he was not giving up yet.

"I am confident that we still have a more than 50% [chance] to win," Gou said. "Toshiba has now become a story similar to Sharp."

Gou waited for more than four years before completing the acquisition of Sharp, having faced opposition from Japanese officials during that period.

He hinted that a court injunction sought by Western Digital in California to prevent Toshiba from selling its chip business, in which the U.S. company is a joint venture partner, without its consent could hamper Tokyo-backed efforts for INCJ and its partners to acquire the Japanese conglomerate's chip business.

"Let's see what happens in a year," Gou said.

He again criticized the Japanese government's interference, characterizing the bidding process as "an international joke" and "a big scam".

Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 67,038.5M
Shares: 17,328.73M
Asia300

SK hynix, Inc.

South Korea

Market(Ticker): KRX(000660)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 43,348.54M
Shares: 728.00M

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