Foxconn job promises falling short
Taiwanese company has been rethinking details of Wis. project
It’s been 18 months since the Taiwanese electronics giant Foxconn Technology Group announced to great fanfare that it was building a $10 billion factory to make TV screens on farmland in southeastern Wisconsin.
The plan was as big as it was audacious: Fueled with billions in taxpayer subsidies, Foxconn would build a 22 million-square-foot campus, filled with 13,000 highly paid workers. In the process, it would transform the sleepy village of Mount Pleasant, Wis., into a hightech international manufacturing hub.
But a year and a half later, a central question remains: Where are the jobs?
Foxconn had only 178 employees on board as of December, missing its first year-end hiring target of 1,040 jobs and leaving millions of dollars in incentives on the table.
Billed as the largest greenfield investment by a foreign-based company in U.S. history based on job creation, the promises in the July 2017 memorandum of understanding between the state of Wisconsin and Foxconn were unequivocal. The project would create 13,000 jobs by 2032 on the sprawling Racine County site, at an average annual salary of nearly $54,000.
In return, the state offered Foxconn $3 billion in tax credits and other state incentives.
With substantial changes being floated from the initial agreement — notably, a greater emphasis on research and development — there is growing doubt the company will reach its ambitious goal within 15 years, if ever.
“It doesn’t strike me as a feasible project,” said Susan Helper, an economics professor at Case Western Reserve University. “How do you find 13,000 people that go to a facility like that?”
Labor experts say that the plant faces significant head winds if it is ever to meet its promised hiring goals. A low 3 percent unemployment rate in Wisconsin and intense compe-
tition nationally for hightech labor have already proved challenging for Foxconn to lure talent to its nascent campus.
Filling new jobs was the central justification of devoting significant taxpayer resources, and the early hiring shortfall has left Foxconn and economic development officials scrambling to reassure taxpayers that everything is on track.
A manufacturing renaissance
The Foxconn deal, announced in July 2017, was championed by President Donald Trump and then Wisconsin Gov. Scott Walker as a way to create thousands of new manufacturing jobs in the U.S. The company was planning to make large-screen TVs, staffing up over time and turning the region into the “electronics manufacturing capital of North America,” according to county executives.
It would join prominent businesses like the massive new headquarters of packaging supplies distributor Uline and Amazon’s giant fulfillment center in an area better known for cheese shops and bratwurst.
The deal immediately faced skeptics. Some thought the nearly $4 billion in state and local incentives — among the largest ever offered to a foreign manufacturer — made the deal too pricey to pay off, while others questioned whether Foxconn would follow through, based on several previous projects elsewhere that had fizzled out.
Recent flip-flops by executives have only fueled the doubt, but the company is reaffirming its commitment to the project.
“Foxconn is continuing its Wisconsin project,” the company said in a statement. “The company remains committed to its long-term investment and creating 13,000 jobs in Wisconsin.”
To be sure, the main campus, dubbed Wisconn Valley Science and Technology Park — think Silicon Valley, but near Kenosha — has begun sprouting up in the bucolic village 30 miles south of Milwaukee and 60 miles north of Chicago in Racine County.
It is unclear, though, how much of the facility will be devoted to manufacturing. The company has given multiple statements in recent weeks saying that engineers may account for anywhere from two-thirds to 90 percent of staffing — a far different mix than the bluecollar manufacturing haven originally envisioned.
The recent doubts kicked off late in January when Louis Woo, special assistant to Foxconn Chief Executive Terry Gou, told Reuters that his company was rethinking its commitment to the project.
“In terms of TV, we have no place in the U.S.,” he was quoted as saying. “We can’t compete.” He said that the Wisconsin plant would become more of a research hub.
Foxconn’s position shifted once again after the company, citing a conversation between Trump and Gou, said it would keep the manufacturing plans moving forward.
But still, the plans keep changing. Foxconn said the facility will now make smaller screens for smartphones and tablets, as opposed to large-screen TVs, reflecting changes in the global market.
The company also outlined construction plans over the next 18 months, which include a liquid crystal module packaging plant, a system integration assembly facility, a research and development center, and a town center to support people working in the park.
Reality meets the hype
Yet through all the talk, Foxconn fell short of the minimum 260 jobs needed by the end of 2018 to qualify for a portion of the first round of state incentives, and looks likely to miss its annual tax credit targets until at least 2020, raising questions about both the scale of the project, and the availability of qualified talent in southeastern Wisconsin.
“It’s not surprising that Foxconn has had difficulty finding workers, as the labor market is very tight,” said Noah Williams, an economics professor at the University of Wisconsin at Madison who wrote a favorable evaluation of the original Foxconn proposal.
Shifting to a research and development focus may make it even harder for Foxconn to meet its hiring targets, with the pipeline of engineering graduates in Wisconsin not large enough to fill thousands of new jobs, Williams said.
In November, The Wall Street Journal reported that Foxconn, desperate for talent, considered bringing in engineering talent from China. The report drew a swift denial from Foxconn, but it underscored the hard sell the company faces as it tries to recruit against established tech hubs such as Silicon Valley.
Williams said the Chicago area is a better potential talent pool for Foxconn.
“If the labor in demand shifts toward more engineers and knowledge workers, then the (recruiting) problem … would be even more difficult,” Williams said. “There has been an effort to recruit from Illinois, and that is likely to intensify.”
Mark Hogan, CEO of the Wisconsin Economic Development Corp., which oversaw the Foxconn deal, said Tuesday that if the project scales down and fails to meet its target employment goals, taxpayers will be protected.
“WEDC’s performancebased contract with Foxconn provides the company the flexibility to make these business decisions, and at the same time, protects Wisconsin’s taxpayers,” Hogan said in a statement. “As has been reported, Foxconn will not qualify for tax credits until, at the earliest, 2020, and then only if the company meets its annual job creation and capital investment requirements.”
That however, does not reflect other significant costs already incurred, like the $50 million that Mount Pleasant has committed to obtain more than 1,000 acres for the project, or the $300 million in infrastructure improvements undertaken by the village and county.
New Wisconsin Gov. Tony Evers, who defeated Walker in November, called the Foxconn development “a broken political deal” during his campaign. He nonetheless took the company at its word that the factory would move forward with a revised plan to build smaller LCD screens.
“I’m comfortable that they’re still committed to the state … but that doesn’t mean we won’t continue to encourage them to be more transparent and more consistent,” Evers said Feb. 1.
But for Case Western’s Helper, the former chief economist at the U.S. Department of Commerce during the Obama administration, a shift to higherpaying research and development jobs would essentially put Foxconn’s target goal of 13,000 employees out of reach.
“I’ve never heard of an R&D lab with 13,000 people,” Helper said.
Beyond the unwieldy scale of the project, luring large numbers of engineers to southeastern Wisconsin would be a challenge, given competing opportunities available in more fertile tech climates, she said.
“You move to Silicon Valley, that job doesn’t work out, there’s hundreds of other employers that conceivably you could go to,” Helper said. “But you go to Mount Pleasant, Wis., and put down roots, what’s the next job for you?”