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Foxconn puts America first with $10 billion Wisconsin facility

Domestic demand for displays is huge, but company coy on future US investments

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Terry Gou, chairman of iPhone manufacturer Foxconn, negotiated with U.S. President Donald Trump and other officials to bring a plant to Wisconsin.   © Reuters

MILWAUKEE, U.S. In what is set to be the largest green-field investment by a foreign company in U.S. history, Taiwanese contract electronics manufacturer Hon Hai Precision Industry, also known as Foxconn Technology Group, will spend $10 billion on building a liquid crystal display panel plant in the state of Wisconsin.

The investment will employ over 3,000 people and eventually help create 13,000 jobs, announced U.S. President Donald Trump alongside Foxconn Chairman Terry Gou on July 26.

Sources say that the Wisconsin facility will churn out large TV panels, rather than screens for smartphones.

Gou was optimistic about the demand for the advanced display panels that will be made at the facility, saying they can be used in a wide range of fields, including health care, medical treatment, sports and entertainment.

"The [capacity] of the facility we will build will not be able to meet [the] demand of the U.S. market at all," Gou told a small number of journalists on July 27, adding that he decided to invest in America for its large market size.

BRINGING BACK JOBS The Nikkei Asian Review first reported last November that Foxconn had been studying the possibility of moving iPhone production to the U.S. at the request of Apple -- one of the company's principal customers.

It is not immediately clear whether the Wisconsin facility will produce anything for Apple, or whether the facility is connected to the U.S. tech giant's plan to build three plants in the country, as Trump claimed in a recent Wall Street Journal interview.

Some see Foxconn's U.S. investment as a result of Trump's push to bring manufacturing jobs back to the country, especially in the Rust Belt area, which has lost tens of thousands of jobs to automation and outsourcing.

The tycoon added that along with the LCD panel facility, he is trying to create a comprehensive "ecosystem" in the country. Previously, Gou had said that he wants to establish a complete supply chain for the U.S. panel industry.

But Gou did not answer a question about whether Foxconn will invest additional money on top of the $10 billion. He said during the annual shareholders meeting in June that the company could possibly invest more in the U.S.

Other states still contending for Foxconn facilities include Michigan, Ohio, North Carolina, Illinois, Indiana and Pennsylvania.

Before the group interview, Gou and Wisconsin Gov. Scott Walker signed an agreement and briefed local media and community leaders about the upcoming investment at the state's iconic Milwaukee Art Museum. While they did not provide any new details, Gou tried hard to win over the crowd. "This is our home, my home, Wisconsin," he told those gathered.

Gou was accompanied by his family and several Foxconn executives at the event. Among them were Foxconn's de facto chief financial officer Huang Chiu-lian, Chairman Wang Jyh-chau of Foxconn's display unit Innolux, and Leonard Wu of Foxconn's health care business group. Wu is also the brother-in-law of Gou's wife.

The decision to set up shop in Wisconsin came more than two weeks after Gou left on a trip to the U.S. to discuss investment terms with competing states.

The Wisconsin project is not Foxconn's first large TV panel plant. The company has a similar facility, Sakai Display Products, in Osaka, and another one under construction in the southern Chinese city of Guangzhou.

Yet the large TV panel market poses significant pricing challenges due to a supply glut created by Chinese companies.

For years, Innolux and its Taiwanese rival AU Optronics struggled to stay afloat. Though Innolux began to turn a profit last year and remained profitable in the three-month period through June, it warned in a recent earnings call that large TV prices are likely to fall in the current quarter. SDP suffered losses last year, according to sources.

Further, the industry is capital-intensive, requiring massive funds for research and development to stay competitive. In 2016 alone, Samsung Electronics' capital expenditure for display technology reached 9.8 trillion won ($8.73 billion). By comparison, Foxconn's net profit last year was about $4 billion.

Samsung is the global leader in display technology. Its advanced organic light-emitting diode, or OLED, panels will be used in iPhones for the first time this year.

Foxconn's Japanese subsidiary Sharp has been playing catch-up on OLED technology, but market watchers say it will not be an easy task.

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