Foxconn Wisconsin Plant: Why?

The on-again, off-again nature of the Sharp Corp/Foxconn Technology Group’s plan to build a massive LCD panel fab in Wisconsin recently became cloudier with the company apparently stuck in the eye of a U.S. political storm it helped create.

Supply-chain, manufacturing and R&D realities with the Wisconsin deal are difficult to reconcile. The idea of making large LCD panels in the U.S.—where few TV parts are made and TV assembly is rare—seems to defy logic.

In the latest twist, plans to build the $10 billion large-format LCD flat-panel display plant in Mount Pleasant, WI, appear to have changed for a second time, according to a Reuters interview with a prominent Foxconn official who said plans were off for the LCD panel portion of the operation.

The reported $4.1 billion subsidy the company was to receive from Wisconsin to build the facility would instead be used on a more modest R&D facility, calling into question the promised 13,000 manufacturing jobs.

Then, the story changed again after a reported phone call by President Donald Trump to Foxconn Chairman Terry Gou, and word was that the original plan was back on.

Exactly which LCD fab was not clear, though. Is it the massive 10.5 Gen. fab for large 8K TV and monitor screens, among other things, or the scaled-down Gen 6 fab for smaller displays, as announced just before the facility’s groundbreaking last summer?

Presumably, it will be the latter since Foxconn has said that Corning would require a major subsidy to build a glass plant for the needed massive mother glass sheets required to make the panels. The smaller Gen 6 fab could use smaller mother glass shipped from a Corning facility in Kentucky. At this point, it’s hard to tell what will get built, who will be employed and what Wisconsin will get for its promised multi-billion-dollar subsidy.

So, if the original plan appears to defy supply chain, manufacturing and emerging technology realities, why did Foxconn propose it in the first place?

Some sources connected with the company suggested to us two years ago that President Trump’s threatened tariffs on China-made products—specifically video displays—might have been part of the strategic calculation. That was before the president lessened that advantage by excluding televisions and certain display components from the tariff list (so far).

Foxconn does have broader plans in the U.S. market, which features its investment in Sharp Corp. and supposedly brings display panel manufacturing back to the U.S. to prepare for a future 8K ecosystem.

Exactly how Foxconn intended to market those U.S. made panels was never defined. Certainly, building very large screen displays in the market where they are intended to be sold provides cost and logistics benefits. However, only one U.S. TV assembly facility—the Element factory in South Carolina—exists.

As for the potential consumer TV business, Sharp’s original Japanese management licensed the Sharp brand U.S. TV marketing rights to Hisense for five years. That was before Gou closed his investment in Sharp. The Hisense license ends in two years, which would be just about time for the LCD fab and assembly operation to go online.

As we previously reported here, Gou fought aggressively to get the Sharp brand rights back from Hisense, before backing down. Instead, Foxconn continued with the TV/display final assembly plant Wisconsin plans, but by groundbreaking time, Sharp/Foxconn officials downscaled the plan from a 10.5 Gen panel fab to a 6 Gen fab, which typically makes smaller-screen products than most 8K displays are typically expected to require.

Why? Global display marketplace realities are changing faster than Foxconn can build.  There are currently several 10.5/11 Gen LCD panel fabs being built in various parts of Asia, offering the near-term potential for a large-format LCD glut. This will force lower prices, and lower profits to panel makers.

At the same time, momentum and sales are climbing for new display technologies like organic light emitting diode (OLED) displays and new self-emissive MicroLED screens, which some believe will eventually evolve to be the replacement for LCD as the next dominant display technology for the global market. Further, MicroLED displays won’t require massive mother glass sheets like 8K LCDs.

As for the Sharp brand, in two years Foxconn will be faced with having to rebuild an upscale market for Sharp-branded televisions and monitors in North America. This will come after the brand has spent five years in the Hisense stable, which included a Foxconn legal fight against Hisense alleging the Chinese TV maker was devaluing the brand by building “shoddily made” products. Given the contentious fight, it’s hard to imagine that Hisense USA has much incentive to build the Sharp brand during the remaining two years of its licensing agreement.

Rebuilding an upscale brand from an entry- to mid-range one isn’t ideal if the high-end TVs don’t feature the most advanced display technology. Perhaps, instead of LCD, Foxconn could build in Wisconsin flat panels based on these new technologies. Right now, it’s not clear what might get built there.