Monday, January 23, 2017

Apple supplier Foxconn mulling $7-billion investment in US to create 50,000 jobs

The world’s largest contract manufacturer of electronics, the principal supplier of iPhones and iPads, has let it be known that Pennsylvania may be the home of a massive investment in U.S. manufacturing. Bloomberg reports:
Foxconn Technology Group is considering building a U.S. display-making facility for upwards of $7 billion, a major investment for Apple Inc.’s main manufacturer that may create tens of thousands of American jobs during President Donald Trump’s first year in office.
The company is considering a joint investment with Sharp Corp.[1], the Japanese display supplier it bought last year, but details have yet to be hammered out, Reuters cited Chairman Terry Gou as telling reporters in Taipei on the sidelines of a company event. Foxconn confirmed the report Monday.
Foxconn is a massive company that walks a political tightrope.  It is based in Taiwan yet does much of its manufacturing in Mainland China.  It received massive amounts of bad publicity from suicides among its workers and for alleged child labor exploitation.  Political considerations are part of its daily operations.
A potential strategic shift by Foxconn unnerves Chinese authorities because the company employs roughly a million workers across the country. Major factory job cuts have been known to trigger protests in the past, even as maintaining social stability remains among the top priorities of the ruling Communist Party.
China has plenty of worries over its economy right now.  Cheaper labor markets are encroaching on its industries from below, and automated manufacturing technologies are poaching jobs from above.  And the new POTUS is openly promising to change our trade relationship and ending the Two-China policy.  China’s bargaining position has a lot of considerations to watch and a lot to lose.
The possible investment was telegraphed early after Trump’s victory:
The idea took shape after Gou spoke with Masayoshi Son, chairman of SoftBank Group Corp. and a close business partner. Son, who’s announced his own plan to invest $50 billion in the U.S., asked Gou for his views. A document Son held up for reporters after a December meeting with Trump included the words “Foxconn” and “$7 billion” alongside SoftBank’s numbers.
“I thought it was a private conversation, but then the next morning it was exposed,” Gou told reporters according to Reuters. “There is such a plan, but it is not a promise. It is a wish.”
On Sunday, Gou also told reporters he sees American protectionism as “inevitable” and warned about the subsequent threat to economic development.
Chairman Gou no doubt will be having further discussions with the Chinese leadership as they figure out how to approach the vital relationship with the U.S.  Keep in mind that the Chinese government primarily is seeking to preserve what it has.  That defensive posture opens the door for gains for the man who wroteThe Art of the Deal.
It is too soon for Pennsylvania to start looking for factory sites for Foxconn, but just the idea of bringing manufacturing jobs in the thousands to a state that has been losing jobs for decades is a tonic, and a reinforcement of the idea that under Trump that things are going to be different and better.
Hat tip: Ed Lasky
[1] In the interest of full disclosure, Sharp Corporation was long ago a consulting client of mine.


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