
Foxconn Weighs $7B U.S. Display Plant - adventured
https://www.bloomberg.com/news/articles/2017-01-22/foxconn-weighs-7-billion-u-s-factory-with-apple-nikkei-says
======
Nokinside
Link to orginal, more complete article:
[http://asia.nikkei.com/Business/AC/Foxconn-considers-7bn-
US-...](http://asia.nikkei.com/Business/AC/Foxconn-considers-7bn-US-display-
facility-with-Apple?page=2)

>"In the future they may be paying some $500 more for [U.S.] products, but
those do not necessarily work better than a $300 phone," he said, after urging
U.S. authorities to provide concessions on land and electricity to facilitate
Foxconn's manufacturing operations.

>Despite such U.S. investment, China remains a key market and the primary
manufacturing base for Apple and Foxconn, and neither company is leaving
anytime soon.

>"Yes, we will continue to add to our investments in China," Gou told
reporters. "China is the world's biggest market, and why should we turn down
the biggest market?"

>Meanwhile, although Apple's sales in the greater China region declined 30%
year-on-year through the end of the September quarter, chief executive Tim
Cook remained optimistic about the Chinese market.

This is another piece in the puzzle. For Apple, defending North American
market is essential. Starting manufacturing in US might be admitting that it
has lost Chinese and Asian markets.

Is China the biggest market as Gou told? For many consumer products and
electronics China is the biggest or becoming the biggest market. Surprisingly
many products are released first China only.

[http://money.cnn.com/2015/10/14/news/economy/china-middle-
cl...](http://money.cnn.com/2015/10/14/news/economy/china-middle-class-
growing/)

>China's middle class is now the biggest in the world, and growing much faster
than America's, according to research by Credit Suisse. There are 109 million
Chinese with wealth of between $50,000 and $500,000.

~~~
ec109685
Why do you think they would exclusively manufacture components in the US?

~~~
Nokinside
If they partner in massive $7 billion high volume display factory that mostly
produces display's for Apple, it's unlikely that they go trough the effort to
replicate all that special tooling and quality management for other markets.

~~~
IBM
It likely won't be for Apple exclusively and it's certainly not the only
source of displays for Apple. Several suppliers are investing in OLED
production in order to meet Apple's supply requirements.

~~~
Nokinside
There is trade-off between redundant supply and cutting edge design.

If Apple pushes for all-glass design and fully adopts OLED it it may have to
choose between the technological edge and diversified supply-chain.

Sharp (owned by Foxconn) is good candidate and this joint investment
speculation supports it. Having joint operation would mean that Apple can be
more involved in the process process.

------
dilemma
The purchasing power arbitrage is disappearing as Chinese wages increase, the
yuan appreciates, and real American wages stagnate or decrease together with
the dollar.

I think this, along with augmented production systems requiring fewer workers,
is why this factory is being contemplated.

~~~
adventured
Real American wages increase with the dollar, not decrease.

The dollar climb has boosted American purchasing power dramatically. That is
especially important for a nation that imports as much as the US does.

Americans can buy more with their wages than they could prior to the dollar
climb. That covers nearly every economy the US imports from, as the dollar has
gained against essentially every currency on the planet. Simultaneously, real
wage growth has been outpacing inflation for years now and is set to continue
to climb at an accelerating pace due to a dramatic decrease in labor slack in
the last five years.

~~~
DrScump

      Real American wages increase with the dollar
    

I don't follow. I can see how the wage earners' _buying power_ for _imports_
improves with the dollar's rise against corresponding foreign currencies, but
not a generalized wage increase.

~~~
pyromine
In general, an increasing dollar does not have effects on the real price of
domestic goods, but decreases the real price of imports. Because that is no
change and increased purchasing, it results in a real increase in purchasing
power which is therefore an increase in real wages. You can buy a larger
basket of goods because the imports cost less.

~~~
throwaway40483
A strong dollar also reduces export, so how does this pan out net-net?

~~~
pyromine
Just saw this, but American consumers are more sensitive to import prices than
export, because consumers generally do not directly receive the proceeds of
exports.

Net-net, it'd be hard to say what happens long term in the economy because
that has a lot to do with long-term changes in the macro environment, if
economic growth remains strong consumers will continue to make out better, if
the strong dollar ultimate hurts the economy (and that isn't impossible), a
weakening economy hurts consumers more than the stronger dollar.

------
theptip
This might be a good prize to offer Trump in exchange for allowing Apple's
untaxed offshore profits to be repatriated at a discount rate.

~~~
tootie
Foxconn is building it, not Apple. If Trump wants to encourage it, he's going
to have to back all his anti-trade policy with China.

~~~
theptip
The first words of the article are

> Foxconn Technology Group Chairman Terry Gou told reporters in Taipei the
> company is considering a joint investment with Apple Inc. for a display
> manufacturing facility in the U.S.

I think that provides enough of a kernel of truthiness for Trump to declare
"Apple is building a $7b factory, it's going to be yuge!".

------
brianshaler
> questioning whether U.S. consumers will be willing to pay much higher prices
> for equipment of equal quality

There's also the threat of substantially increased tariffs that could make a
panel manufactured by a <$3/hour worker cost as much or more than a panel
manufactured by a >$10/hour American worker.

~~~
codeddesign
Just keep in mind that you will not find $10 workers in a mass factory
setting. After you bring in labor unions + healthcare + workers comp + misc.
addionals, it easily brings u.s based factory workers to $18+. This does not
include the fact that you have to train people and have a plethora of workers
to support this (hr, trainers, etc.)

While everyone in the U.S. I think would agree that securing jobs for
Americans would be great, you just can't bend the math enough to make it
economical.

~~~
jlarocco
> While everyone in the U.S. I think would agree that securing jobs for
> Americans would be great, you just can't bend the math enough to make it
> economical.

I'm not so sure in this particular case.

People who buy Apple products are (usually) already choosing a more expensive
product based on fashion and image. I can see Apple increasing the price a bit
and having a big marketing campaign about being "Made in the USA."

In general though, I don't know how it's expected to work. Ironically, I think
a lot of the people making the biggest fuss about bringing back manufacturing
jobs will be the ones least able to buy the products once the prices
skyrocket.

~~~
muninn_
No. People like my parents buy iPhone because it works and because it's a
serious phone. Nobody associates iPhone with status. It's a ubiquitous
commodity device.

~~~
jlarocco
Are you seriously claiming Apple products aren't significantly higher priced
than similar alternatives?

I don't even know why I'm replying here if you really don't know your parents
could have bought an Android device that also works and is also a "serious
phone" for half the price.

~~~
muninn_
Nope. Don't think I made that claim anywhere. What Android device could they
have bought for half the price?

------
dmix
The original article is much more informative. Note is has multiple pages.

[http://asia.nikkei.com/Business/AC/Foxconn-considers-7bn-
US-...](http://asia.nikkei.com/Business/AC/Foxconn-considers-7bn-US-display-
facility-with-Apple)

------
cobookman
I wonder what Trump's concessions would be for this plant. He criticized apple
directly in his campaign, and this plant would be a big win for him.

~~~
dmix
That's a good question but it's not necessarily something Trump controls
directly (nor should he), it is more likely up to the local government/state
where the plant is located who could work on incentivizes. That's what
happened with the Carrier deal in Indiana largely because that was Pence's
state and he could help directly.

This is how it happens in China too. The article mentions that a Chinese city
would help invest $8.7 billion, rather than the central state.

> On Dec. 30, Gou announced that Osaka-based subsidiary Sakai Display Products
> and the southern Chinese city of Guangzhou would jointly invest 61 billion
> yuan ($8.77 billion) in an advanced panel facility.

And Pennsylvania trade office is working with Foxconn on another plant.

> In addition to the proposed display facility, Gou said Foxconn plans a new
> molding facility in the U.S., with the state of Pennsylvania a possible site
> following investment discussions with local officials. A representative from
> the Pennsylvania trade office attended Foxconn's party Sunday.

It's typically not the exec branches job to set up those deals. But it is
great that Trump is willing to get on the phone to help get the deals done,
that's seems unprecedented in recent years.

Most likely Trump would be focusing on the trade policy more generally or
working with congress to reduce federal regulations. The Dept of Commerce
could help promote the idea of operating in America. As well as via the
Treasury Dept to simplify the tax code. And Congress to reduce taxation. Again
this would apply to all companies, or whole industries, and (most likely) not
give any individual companies special benefits in return for opening up shop.

~~~
blackguardx
I think we need "free trade zones" like they have in some asian countries. If
you have a mfg business in the zone, you pay zero or reduced taxes on your
produced goods and inventory. Maybe throw in some subsides to help comply with
regulations as well. These zones can be spread all throughout the country in
economically depressed regions.

These programs should be open to all companies, not just the Teslas and tbe
Apples of the world. Governors and Presidents should not intervene on behalf
of a single company. That isn't capitalism.

~~~
dmix
I'm more in favor of a federalist approach instead of specialized city states.
Basically less federal oversight and more state oversight (besides maybe
environmental stuff which crosses state lines, or give money to other states
based on your carbon output). That way if you want to live in a euro-style
social services high tax area you can move to Washington. Or if you want mixed
go to New York. Market oriented people can go to Texas - for example. States
can set up voluntary cross border zones so the regulations and taxation is
more consistent for industries that are more disparate. Cross state trade
wouldn't be regulated and federal law can focused on national security,
foreign trade, currency, and tax collection.

That way if something does work better (like ending the drug war) in one
state, there will be a ton of data to reference and eventually good ideas will
be adopted by other states.

States like California are big enough to be their own small countries anyway.

This was basically the idea when the US was founded but the federal government
has only grown and every 4yrs the presidency becomes more important and given
responsibility for everything. So no wonder the exec branch is growing in
power - the citizens keep expecting them to be responsible for everything.
It'd also protect against Donald Trump's from happening, the whims of one man
should never be so influential.

------
snarfy
How long before those jobs are done by robots?

[https://www.engadget.com/2016/05/25/foxconn-
replaces-60000-h...](https://www.engadget.com/2016/05/25/foxconn-
replaces-60000-humans-workers-with-robots/)

------
norea-armozel
This part of the article I find amusing: Gou told reporters according to
Reuters. “There is such a plan, but it is not a promise. It is a wish.”

So much for Trump's claim that the 50 billion investment is a guarantee. This
is why I despise anyone who aids him in making up stuff. It gives false hope
when we need to buckle down and realign our economy and government.

------
saretired
Taiwanese companies such as Foxconn with extensive operations on the mainland
may be particularly vulnerable if the Trump government insists on making the
one China policy a bargaining chip in trade negotiations. We’ll see how it all
plays out, but the worst case would obviously impact Apple and a few other US
tech companies.

------
delluminatus
According to the article, this plant would employ 30k-50k people. The
secondary effects of these jobs would be equally massive. While I would prefer
an American company operating the plant, merely employing this many people
would be a serious boon.

~~~
woodandsteel
But Foxcon is pushing very hard on replacing most of its workers with robots.
The numbers will probably be more like 3k-5K, not 30k-50k. And they will be
high-tech jobs that most of those millions of unemployed factory workers in
our country couldn't qualify for.

------
funkyy
I do not understand why such a company would not go for central European
company where it would get the price for quality ratio much better than in the
US. I know that building a factory by Foxconn is probably a way to pay
building tax, but the question is if that outweighs revenue.

~~~
many_bells_down
Central Europe, unlike _central_ America, does not have Trump as its champion.

~~~
funkyy
It's sad that YN gets extremely political lately. "Trump" is a bad word here
lately...

------
siculars
But, uh, I thought manufacturing jobs were never coming back stateside. So
strange...

~~~
geomark
Maybe most of the jobs in the factory will be performed by robots and not
humans.

~~~
jfoutz
Also, why ship the panels half way around the world for assembly? Part of
China's glory is having manufacturing for everything close by.

