Pixel Envy

Written by Nick Heer.

Politics, Not Necessarily Business, Is Helping Shape Foxconn’s American Manufacturing Plans

Alex Webb, Bloomberg (autoplaying video warning):

A month after Donald Trump was elected president, Taiwan-based Foxconn was one of the first companies to announce plans to invest billions to help create jobs. Michigan, Wisconsin and Ohio are fighting to secure the factory, according to people familiar with the process. The logic behind those sites has as much to do with political imperatives as it does business.

[…]

Yet there’s less business rationale for favoring the Midwest over other places, according to Freund and other analysts. The region is isolated from many of Foxconn’s customers, has mediocre transport connections and fewer skilled workers than other regions. Contract manufacturers like Foxconn also lean on extensive supplier ecosystems on their doorstep in Chinese cities like Shenzhen and Zhengzhou. The U.S. Midwest doesn’t have those networks.

According to Webb, Detroit, Columbus, and Racine are the areas being considered by Foxconn. Of these, Detroit has the largest population, at over 700,000 for the city proper and around 4,000,000 for its greater area. Columbus has a similar city population and fewer in its region, while Racine has less than 200,000 people in its entire metro area. For comparison, Foxconn employs over a million people in China alone.

But population doesn’t matter nearly as much as the optics of these factories, especially when you consider that they would be largely-automated affairs making displays, not iPhones:

Bringing display manufacturing to the U.S. may help Foxconn convince the Trump administration not to impose import duties on the iPhone. Since the rationale for such a tax bill would be to create U.S. jobs, Foxconn could argue that it’s already doing this, making levies redundant.

“It’s a politically expedient thing for Foxconn to do, to bring jobs to the U.S.,” said Shannon Cross, an analyst at Cross Research. “It’s trying to head off incremental pressure from the U.S. administration.”

Building factories in the United States will create some real jobs, regardless of their reason for being. But the resulting economic impact — especially when you consider the reported “hundreds of millions of dollars” of tax credits and other incentives that Foxconn is demanding, and the long-term impacts of automation — could be unrewarding, leaving politics as those factories’ only rationale.

See Also: Scot Ross in the Cap Times, a local Madison, Wisconsin paper.