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Foxconn underestimated the difficulty of manufacturing returning to the US

February 11, 2019 05:08
Author: Wang Xinxi
source: Pinway Business Review

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According to media reports earlier, Hon Hai may reduce LCD production plans or even abandon the plant, while Guo Taiming’s special assistant Hu Guohui said that Foxconn is still evaluating the Wisconsin project. He pointed out that in the United States, where labor costs are relatively high, the cost of manufacturing advanced TV displays is very high. As far as the TV field is concerned, we have no place in the United States and we cannot compete.

Later, there were media reports that Assistant Director Guo Taiming had an interview with the media on January 30, saying that "Foxconn's plan to build a plant in Wisconsin, USA may have to shrink, especially the panel factory, or it will be put on hold." It seems that Foxconn's establishment in the United States is not smooth, and it is a bit of a dilemma.

However, it was reported that on the evening of February 1, President Trump had found Guo Taiming to conduct a private interview. After the interview, Foxconn issued a statement in a timely manner, saying that Foxconn’s commitment to investing and creating jobs in Wisconsin has not changed. It will continue to advance the construction plan of the panel factory in the United States and reaffirm its commitment to “ I look forward to expanding investment in the United States and continuing to expand in the local area."

And Trump is alsoTwitterIt was quite proud to say: "When I talked with me, Foxconn sent good news." From here we can actually see that Foxconn, which is building a factory in the United States, is now showing a dilemma and a difficult mentality. Some insiders pointed out that Guo Taiming now really wants to leave the United States to build a factory, but now the United States does not let him go.

As early as 2017, Foxconn announced that it would invest $10 billion to build an LCD factory in Wisconsin, USA, which Trump called a model for manufacturing employment to return to the United States. In June 2018, Guo Taiming held a groundbreaking ceremony for investment factories in the United States, saying that he would create about 13,000 jobs for the United States.

Trump also gave Foxconn a large tax cut, and the corporate income tax rate fell directly from 35% to 15%. In addition, there are special offers - as long as Guo Taiming comes to build a factory, it will provide a tax benefit of 3 billion U.S. dollars in the next 15 years, in addition to about 764 million U.S. dollars in public expenditure subsidies, and about 100 million U.S. dollars in associated channel construction costs. A total of nearly 4 billion US dollars.

It can be said that Trump gave Foxconn relatively good investment conditions and market environment. Trump has been flaunting the need to revive the US manufacturing industry, hoping to introduce a manufacturing giant such as Foxconn to make a good start, and drive more and more manufacturing to return to the United States, but for Foxconn, take the lead to reinvigorate the US manufacturing Industry, the task is still a little harder.

On the one hand, the manufacturing environment in the United States is not good, and the salary requirements of American workers are much higher than domestic. There is data showing that in the United States, ordinary workers are six times more likely to pay in China. In the United States, in addition to the high wages of workers, the cost of other production equipment and components is also quite high. According to the media quoted by Foxconn spokesperson Louis Woo, the cost of producing sophisticated TV monitors in the US is too high. An important reason that may be downsized or temporarily put on hold.

On the other hand, skilled workers are not easy to find in the United States. Foxconn’s number of recruits in the state has not achieved its goals, and some preferential policies have been withdrawn. The media said that at a rally in Taiwan’s Hon Hai Group, Guo Taiming took the initiative to raise Trang’s Putonghua and reiterated that the group would never give up manufacturing in Wisconsin, but also told Trump that after Trump took office, the economy improved and unemployment The rate has dropped dramatically, so there is no employee at all, and even a veteran background employee is required.

According to the media, Hon Hai plans to build a rear panel packaging factory including LCD panel modules, a high-precision module molding factory, a system integration assembly plant, a research and development center, etc. in the next 18 months; the group will continue to invest in American talents in the United States. And Weizhou to build AI, 8K, 5G ecosystem.

Therefore, in summary, for Foxconn, the troubles for setting up factories in the United States include the lack of skilled industrial workers and raw materials production facilities, and the lack of a complete upstream supply chain industrial cluster. It takes time to hire a large number of skilled industrial workers, which has led to a significant increase in costs. In the early years of the German "World News", the United States disappeared nearly a quarter in less than 20 years. Friedman, a well-known American columnist and author of The World is Flat, once said that the United States is now a town with 200 start-ups, each employing 50 people. It is difficult for traditional "Made in the USA" factories. Come back again.

The disappearance of supporting facilities in the manufacturing industry means that its profit and market are far from being compared with China. In general, Guo Taiming should be very clear beforehand. To build a factory in the United States is not a cost-effective business. Its core business - smart phone manufacturing, LCD panel and other services, the entire manufacturing industry chain is in China, blindly moved to the United States to build factories, itself is contrary to market rules and business logic.

Because in the modern economy, industrial agglomeration determines the status of manufacturing. If there is an integrated industrial-related manufacturing cluster in the United States, it is very difficult to raise high-rise buildings. Insiders pointed out: "Now Foxconn and its production of LCD panels in the United States, it is better to produce in China and Japan and then shipped to Mexico for final assembly, and then import the finished products to the United States, so the profits will be higher." The reality is that Trump needs Guo Taiming came to whitewash his achievements, and Guo Taiming did not particularly need the US market.

On the other hand, when Guo Taiming chose to go to the United States to build a factory, he did not clearly understand the manufacturing conditions of the United States. In the past 40 years, the scale of industrial employment in the United States has fallen sharply. Therefore, for many years, the slogan that the United States has been shouting is that to make the manufacturing industry return, Foxconn has its strong foundation and strength in the manufacturing field, but it still underestimates the difficulty of building a factory in the United States, because the problem in the United States is labor cost. High, the manufacturing industry cluster is not as large as China, with a high degree of automation, fewer skilled workers, and fewer and fewer manufacturing jobs and employment. Today, it is more difficult for Americans to return to the waterline and work like blue-collar workers in China, Vietnam, and Southeast Asia.

However, Foxconn’s decision to build a factory in the United States has its own inexplicable meaning, helplessness, and careful thinking. This kind of helplessness includes Trump’s pastapplePressure, asked Apple to move the factory back to the United States. Under pressure, in the past, Apple had proposed to Foxconn and Heshuo United Technologies to withdraw all Asian production lines to the United States. Many suppliers did not respond at the time, and Heshuo Technology rejected the proposal. The reason behind Foxconn's response is that it needs to hold Apple's thigh tightly and share the pressure to win more orders from Apple in the future.

In addition, in response to Trump's new government's manufacturing return call, part of the profit can be obtained from Trump's new government's policy dividends for manufacturing, looking for a new direction for industrial layout, and integrating manufacturing into the US market for its international competitiveness. It is also beneficial to upgrade and absorb better technology and talents. After all, although the US manufacturing industry itself is declining, it has always been at the top of technology R&D and accumulation and the power of the industry chain. Foxconn has to become an upstream and downstream connection. Super giants need to stand on the basis of the accumulation of American manufacturing and technology research and development.

Due to its own manufacturing genes, most of Foxconn's employees have long been the screws on the product line, and rarely participate in upstream research and development. Although Foxconn faces the problem of skilled workers in the United States, it also has the opportunity to absorb more sophisticated scientific and technological talents and participate in the upstream research and development of the US manufacturing industry, driving the overall innovation.

Therefore, for Foxconn itself, going to the United States to build a factory actually has the meaning of completing the industrial upgrading and seeking transformation, which helps to break the brand label of the Foxconn foundry. Moreover, export to domestic sales can not only greatly enhance Foxconn's brand premium, but also increase the price and profit of its products. Foxconn can also build its brand awareness and influence internationally with its layout in the US manufacturing industry.

However, for Foxconn, although the US factory can obtain tax incentives provided by the local local, state and federal governments in the next few years, the current problem is that if the manufacturing industry matures the soil and supporting facilities and related skills The lack of mechanics, everything starts from 0, the cost investment may be a bottomless pit, and the return on investment is still unknown.

This is why Foxconn's factory in the United States is not a previously promised 10.5-generation LCD manufacturing plant, but a smaller 6th-generation LCD factory. Because the US lacks raw materials for LCD panels, it does not produce in US companies. With such a large infrastructure glass, the production capacity of this 10.5-generation LCD panel is basically concentrated in places such as China, Japan and Korea. Native American companies do not produce such a large basic glass. This is the problem of Foxconn.

If Foxconn wants to fulfill its commitments, there are two ways. One is to go to China or other countries to import 10.5 generations of substrate glass, and the other is to invest in a basic glass factory to produce, but this kind of investment investment. The cost may be far beyond Foxconn's expectations.

This has led to the recurrence of Foxconn, and it is also an important reason why local people in Wisconsin are increasingly doubting whether Hon Hai can fulfill its recruitment commitment.

Foxconn’s investment plan in the United States was once regarded as a white knight who saved the American manufacturing industry. The reason why the Cavaliers say that the profit-oriented enterprise itself is an economic account, but here at Foxconn, there is also a good relationship. mean. There have been research institutions abroad.AnalystIt is clear that Foxconn is trying to circumvent the increasing pressure from the US government.

However, today's international environment and the US manufacturing situation have placed it in a difficult position. In the US construction plant plan, from the past to the present, we can see that Guo Taiming has been in a passive situation and has been pushed away. How to control the initiative and resolve the current embarrassment is a difficult problem facing Guo Taiming.

(Article source: Pinway Business Review)

                (Editor: DF395)

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