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Foxconn starts US production of servers and network gear

Plant built during Trump presidency amid pressure on companies to create jobs

TAIPEI -- Foxconn, the world's largest contract electronics manufacturer, has begun making servers and other 5G networking gear for a handful of clients, including Cisco, at its manufacturing complex in the U.S. state of Wisconsin, according to multiple sources familiar with the matter.

The move marks the iPhone assembler's first significant production -- albeit small in scale for now -- at the factory, which broke ground during the Trump administration as part of the former president's call to bring more manufacturing jobs to the U.S.

Initial plans were for a $10 billion plant to manufacture cutting-edge 10.5-generation displays, but Foxconn later scaled back the project several times, citing an incomplete supply chain and a glut of displays at the time. The Taiwanese company later said it was considering building a wide range of products, including servers, software and artificial intelligence-related products, in the U.S. It is still in negotiations with the Wisconsin state government over details of the change in its production plans.

Foxconn originally said the plant would create 13,000 jobs. In a report recapping 2020, issued by Foxconn earlier this year, it said it has "hundreds" of employees in Wisconsin, though did not give a precise number.

Company Vice President Lu Fang-ming on Thursday confirmed it has begun trial production runs at the plant. "We've started the production there for a while now. ... It's for networking-related products, and we plan to introduce Foxconn's 5G 'smart factory solutions' there." 

Smart factory solutions include setting up a 5G private network with Foxconn equipment and employing its advanced AI-heavy autonomous mobile robots to increase production efficiency. The company sees AI and 5G, along with electric vehicles, as key drivers of its future growth.

Although Lu declined to name any clients or specific products, Nikkei Asia learned from other sources that the main items to be made in Wisconsin include servers and 5G network equipment for clients such as Cisco. The company began talks in late 2018 with networking equipment clients to manufacture on American soil, after the U.S. imposed punitive tariffs on Chinese imports, including servers, according to multiple sources.

The Trump administration repeatedly raised cybersecurity concerns over networking-related products made in China. That spurred many U.S. companies, including HP, Dell, Cisco, Google, Amazon and Super Micro, to ask their suppliers to shift some production out of China. In response, large manufacturers of servers, such as Foxconn, Quanta Computer and Inventec, have shifted part of their capacity from China to Taiwan and elsewhere.

Foxconn's Wisconsin project, which originally dovetailed with Trump's call for a renaissance in U.S. manufacturing, was praised by the former president as the "eighth wonder of the world" when the company broke ground on the plant in June 2018 at a ceremony attended by the U.S. president and Foxconn's then-chairman, Terry Gou.

Young Liu, Foxconn's current chairman, told reporters on Tuesday in Taipei that the company is also considering manufacturing electric cars in Wisconsin or Mexico, where the company also has manufacturing capacity, to expand its electric vehicle business presence in North America.

"We have to find which product is good to make over there," Liu said. "Previously we tried panels and realized panels are not good products to be built there. We also then tried servers, and servers are good products, so we are actually making some servers there."

Liu added that the company recently discovered that electric cars could be good to make in the U.S., given Wisconsin's proximity to the country's traditional auto-manufacturing region in neighboring Michigan.

Foxconn declined to comment for this story. Cisco declined to comment on the details of any specific business relationship, citing company policy.

Additional reporting by Cheng Ting-fang.

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