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Foxconn's plant plan is changing. People in Wisconsin worry about $4 billion 100 million in subsidies.

via:博客园     time:2018/10/30 17:11:35     readed:581

On October 30th, Wisconsin reached an agreement with Apple's foundry Foxconn in 2017: Foxconn promised to spend $10 billion to build a 10.5-generation LCD screen manufacturing facility in Wisconsin and create 13,000 jobs for the region. The local government provides huge subsidies of up to $3 billion. Over time, Foxconn's plan to build changes has been repeated, and subsidies have increased to $4.1 billion. Local people are increasingly worried that the money will be “drinking”.

In July 2017, Wisconsin Governor Scott · Scott Walker and Foxconn Chairman Terry Gou held a veritable love feast in Milwaukee, announcing plans to be in southeastern Wisconsin Establish a manufacturing plant that can enjoy huge subsidies. Walker is praising Guo Taiming for calling him "one of the most outstanding business leaders in the world". Guo Taiming responded by saying: “In this world, I have never seen a governor or leader like Walker. & rdquo; Although Guo Taiming's comments are enthusiastic, but it gives an ambiguous impression.

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To attract Foxconn to build a factory, Wisconsin Governor Scott · Scott Walker promised to provide billions of dollars in huge subsidies

The most dramatic scene of the deal occurred when Guo Taiming and Walker met for the first time. The details of the agreement were written on the back of the napkin: Foxconn spent $10 billion to build a 10.5-generation LCD manufacturing plant to help create 13,000 jobs. At the same time, Walker’s promised subsidies are equally impressive. This is undoubtedly the largest incentive program in the history of Wisconsin and the largest subsidy the US government provides to foreign companies.

Like most states in the United States, Wisconsin has previously subsidized businesses, but the subsidy for each job is no more than $35,000, and the state's subsidy for Foxconn is $230,000 per job. When Walker was elected governor in 2010, he promised to create 250,000 new jobs for the state during his first term. After six years in office, the goal of achieving this goal is still far away. In order to win his third term in 2018, he desperately needs a huge victory.

The agreement with Foxconn far exceeded Walker’s expectations. Many predict that this will bring companies that produce equipment for Apple and many other tech giants to Wisconsin, which will give birth to “Wisconsin Silicon Valley”. For a state far from the “high-tech hotbed”, this is by no means a trivial matter. Conservatives expect the deal to even help Walker re-elect for the second time.

But in real life, the seemingly simple things written on napkins have become complicated and confusing. As the scale of subsidies gradually expanded to a staggering $4.1 billion, Foxconn’s repeated changes to the plant’s plan made it undoubtedly skeptical about how many jobs it would create locally. Foxconn now says it will build a much smaller 6-generation plant locally rather than the promised 10.5 foundry.

This only requires a one-third investment that Foxconn originally promised, even though the company insists it will eventually reach a $10 billion investment target. Foxconn executives now also say that their goal is to create an “ecosystem” and describe it with a buzzword called “AI 8K+5G”, which uses robots to do production tasks instead of hiring a lot. Human workers make panels for 75-inch TVs.

Polls show that most Wisconsin voters do not believe that the subsidy program will pay taxpayers, and Walker did not even mention the agreement in his November 2007 announcement of re-election. Today, he is lagging behind the less popular Democratic candidate in the re-election campaign, the moderate Wisconsin public education director Tony · Tony Evers.

All of this used to seem to be very encouraging, so why is it going to the point of today?

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Foxconn construction site in Racine County

When Walker signed an agreement with Foxconn in November 2017, the details were in line with the negotiations on the napkin: the Wisconsin government promised that if Foxconn invested $10 billion to build a factory that could create 13,000 jobs, the government would provide 30 A subsidy of US$100 million. As stated in the agreement, which was adopted by the Wisconsin State Assembly six weeks later and signed by Walker, the state's subsidy scale soon expanded.

By December 2017, public costs had increased to include a $716 million new tax subsidy from the local government of Racine County, which is only 40 minutes south of Milwaukee. Other additions include the construction of $164 million in roads and highways dedicated to servicing the plant. There is also a $140 million new transmission line to the Foxconn plant, which will be paid by the 5 million taxpayers of the power company We Energies. Together with other small costs, Foxconn's total subsidy amounted to $4.1 billion, and Wisconsin's households shared an average of $1,774.

When returning to the $3 billion subsidy, the Wisconsin Legislative Finance Agency estimated that taxpayers would need to recover all subsidies by 2043. The payback cycle is so long because Walker and Republicans reduced the state's corporate income tax to zero in 2011. This means that the subsidy for Foxconn is not a tax credit, but a multi-billion dollar cash that will be repaid by the national income tax paid by Foxconn workers. After the subsidy has reached $4.1 billion, the state's payback period may be until 2050 or later.

Some people even wonder if the subsidy can really be recovered. Jeffrey Dorfman, a professor of economics at the University of Georgia, wrote in Forbes magazine: “In fact, it provides $100,000 in subsidies for each job, and the payback period is not 20 years. It’s not 42 years, it’s hundreds of years, and it’s never going to pay off. Providing a $230,000 (or more) subsidy for each job is almost impossible to recapture. ” After the subsidy rose to $4.1 billion, the subsidy for each job reached $315,000.

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Traffic condition of I-94 near the Foxconn factory in Racine County

In retrospect, Walker apparently played an important role in the negotiations with Foxconn. Since a large amount of water is needed to clean the glass used to make LCD screens, Foxconn's factory has to be located in the water-rich Great Lakes region. However, none of the states covered by the Great Lakes offers $4.1 billion in subsidies like Wisconsin. Michigan is the closest, but it can only provide $2.3 billion in subsidies, and is largely a tax subsidy rather than a cash subsidy. As for Ohio, Republican governor John · John Kasich even condemned the Wisconsin agreement, saying it would "do not use money to buy an agreement."

Throughout the summer, Walker responded to these criticisms in a tit-for-tat manner. He said in July last year: “Many people are scrambling to find a reason not to like this deal. They can sit down and drink lemonade, and the rest of us will cheer up and find ways to get the deal done. & rdquo; A few weeks later, Walker called the deal a "a once-in-a-lifetime opportunity", for the state, this would be a "change". He also said: "These LCD monitors will be produced in the US for the first time, in Wisconsin. ”

The Walker government did not respond to requests for comment from reporters many times, that is, when taxpayers will withdraw subsidies to Foxconn. In May of this year, the Nikkei Asia Review reported that Foxconn is significantly reducing its size in Wisconsin. Foxconn “definitely” denied this claim, but by the end of June, the company’s executives admitted that they would not establish the size of the factory that Guo Taiming originally promised to Walker.

Foxconn said it will build a six-generation plant that will produce glass panels of 5 feet by 6 feet instead of 10 feet by 11 feet for 10.5 foundries for 75-inch TV screens. Bob O'Brien, a partner at Display Supply Consultants, said that building a 6-generation plant would require an investment of about $2.5 billion instead of the $10 billion that Foxconn originally promised.

Foxconn had hoped that Corning, a New York-based company, would build a plant nearby because the large glass panels required by the 10th generation plant could not be transported over long distances. But Corning executives made it clear that they needed to get two-thirds of the cost of building the plant, and because of continued criticism of Foxconn subsidies, Walker government officials ruled out the possibility of further subsidies. The Walker government does not seem to have reviewed whether Foxconn can deliver on its promise without help.

A Foxconn spokesperson said that the glass factory associated with the 6th generation factory will no longer be a necessary facility. He said: "We can ship from other places (glass) because the glass panels needed are much smaller. "Foxconn executives also said that the company is still committed to investing 10 billion US dollars and creating 13,000 jobs. They added that Foxconn may eventually build a 10.5 foundry, but this will be “staged”. At the moment, these "stages" have not been specified.

Just seven weeks later, at the end of August, Foxconn announced that the plan has changed and that the change is much larger. A Foxconn spokesperson said that Foxconn will not add 10.5 foundries to its Racine County campus, despite previous statements because the Chinese market will be occupied by other manufacturers when the plant is completed. Even 6th generation LCD screens may not be produced in Racine for too long.

Foxconn said that we are not very interested in TV, although the company wants to manufacture the first thin film transistor (TFT) available in the United States for LCD products. Instead, workers at the Wisconsin facility will focus on finding new ways to use Foxconn's display, cellular technology and artificial intelligence technology to create the so-called “AI 8K+5G” ecosystem.

All of this means that Foxconn only needs fewer assembly line workers. The company spokesperson said: “If you asked my workforce six months ago? I will come up with our experience in China, saying that 75% of assembly line workers + 25% of engineers and managers. But now it seems that about 10% of assembly line workers + 90% of knowledge workers are needed. "He added that almost all of the actual assembly line work will be done by robots. This is an amazing change for Foxconn's plant construction plan. First, it ended the hope of local government officials that low-skilled, mainly ethnic workers from Racine and Milwaukee could find jobs.

Wisconsin is not Foxconn's first government to change its commitments. Foxconn has promised to invest $5 billion in India to build 50,000 jobs, but only partially fulfilled some of its promises. According to the Washington Post: “The same result also appeared in Vietnam, and Foxconn committed to invest $5 billion in 2007. In Brazil, Foxconn announced in 2011 that it would invest $10 billion, but these ambitious goals have not been achieved. In addition to Harrisburg, PA, Foxconn is committed to investing $30 million and hiring 500 workers, but this promise has never been fulfilled.

Foxconn said in a statement that the company is still "working to create 13,000 high-value jobs in Wisconsin and investing $10 billion." The company also said that its plans are always linked to the phased development of the Wisconn Valley Science and Technology Park. The first phase includes the 6th generation thin film transistor facility, and the next phase includes &ldquo ;The next generation of R&D and manufacturing facilities”.

The Walker government did not respond to requests for comment on how to evaluate the feasibility of Foxconn's original plan, changes in plant types, and changes in the types of workers required.

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Foxconn's construction site in Racine County

At the same time, concerns about the environmental impact of the construction of Foxconn have also intensified. Peter Adriaens, professor of environmental engineering at the University of Michigan, said that Foxconn's LCD screens require benzene, chromium, cadmium, mercury, zinc and copper. These materials can have quite dangerous consequences if not properly discharged.

A report by the Milwaukee City Legislative Reference Office on Foxconn's history states: “As of 2013, between 25 and 60 million acres of arable land was contaminated with heavy metals by electronics factories, and Foxconn is an important contributor. "Foxconn said it will establish a zero liquid discharge system that will exceed any local, state and federal requirements related to industrial water use."

The Walker government also exempted Foxconn from complying with environmental regulations in the state, allowing it to discharge materials into the wetlands during construction and operation, and to change the flow of the river. In addition, the state exempts the company from environmental impact assessment requirements. Foxconn ultimately needs more than 11 square kilometers of land, most of which is farmland. Adrians said the exemptions and the fact that Wisconsin allowed Foxconn to build a plant near Lake Michigan were “danger signals”.

The Walker government also agreed that Foxconn would take water from Lake Michigan. Foxconn will use up to 7 million gallons of water a day, 39% of which will be lost due to evaporation. Environmentalists have accused the plan of violating the Five Great Lakes agreement signed by the states of the Great Lakes region and the provinces of Canada, and have taken legal action to stop the plan.

Foxconn's filings with the Wisconsin Department of Natural Resources also show that the company will cause severe air pollution every year, including emissions of hundreds of tons of carbon monoxide, particulate matter, sulfur dioxide, nitrogen oxides and volatile organic compounds. The Foxconn plant also releases enough volatile organic compounds and nitrogen oxides to make it one of the most serious sources of pollution in southeastern Wisconsin.

The US Federal Environmental Protection Agency (EPA) may obstruct Foxconn's plan to build a factory, but its former director Scott & Middot; Scott Pruitt made a ruling that overturned the Obama administration's pollution standards and gave it Foxconn has more room for manoeuvre. As a result, the Racine plant will eventually emit 229 tons of nitrogen oxides, 240 tons of carbon monoxide, 52 tons of particulate matter, 4 tons of sulfur dioxide and 276 tons of volatile organic compounds per year. Foxconn said in a statement that it will do its utmost to reduce pollution and will “invest in world-class control technology to reduce plant emissions”.

Regarding Foxconn and the government's targeted environmental protection measures, the Walker government did not respond to requests for comment.

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Foxconn Innovation Center near the Foxconn manufacturing site in Wisconsin

At the same time as this happens, Foxconn is buying real estate for the “Innovation Center” to invest in the state. In February 2018, Foxconn announced that it would purchase a seven-story building in downtown Milwaukee as its North American headquarters and “Wiscon Valley Innovation Center”. In June of this year, it was reported that Foxconn would purchase a six-story building in Green Bay to establish another “innovation center”, employing more than 200 engineers. In mid-July, Foxconn announced the establishment of the third “Innovation Center”, this time in Eau Claire, which will begin operations in early 2019 with 150 employees.

In both cities, Foxconn said it hopes to attract top talent from local universities. But there are only a few smaller universities in Milwaukee, Green Bay and Eau Claire. It is unclear why these graduates can't drive directly to the Racine factory to apply for work. Equally unclear is Foxconn's economic advantage in having three different small innovation centers across the state. Foxconn executives used almost the same wording when setting up innovation centers in Green Bay and Eau Claire, the goal of which was to “inspire innovative ideas in the region and drive cutting-edge solutions from businesses and entrepreneurs”.

But critics say the addition of these small centers is to help Walker prove that the deal with Foxconn will benefit the state. By the end of August, less than three months after the election, Foxconn announced more tips: it will invest $100 million to establish a new research facility at the University of Wisconsin-Madison and spend $25 million to set up a new State-owned venture capital fund. This $125 million represents only 3% of the company's $4.1 billion subsidy.

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A wall erected on a Foxconn construction site in Racine County

Shortly after the signing of the Wisconsin agreement, Walker advertised an agreement with Foxconn in a statewide campaign speech. But by October 2017, just one month after the legislature passed the Foxconn deal, a poll showed that only 38% of the factories in southeastern Wisconsin believed that the plant would have a positive impact on the state. . Subsequently, in a poll in March 2018, 66% believed that their local businesses would not benefit from Foxconn's transactions, and only 25% had a positive opinion.

Even after seven months of announcement of the new Innovation Center and other contributions, the Foxconn agreement did not help much in the election. Polls still show that most people in the state don't believe Foxconn's deals can help them. This was a terrible news for Walker, who suddenly stopped talking about Foxconn. In his speech to announce his re-election in November 2017, he did not even mention the deal. For Foxconn, this is also bad news, because every Democrat who runs for the governor has begun to condemn the deal. Walker and Foxconn now need to sell this agreement to voters.

As Marquette Law School polling expert Charles · Charles Franklin said, if Foxconn really wants to get all the promised benefits, they must support more to negotiate the deal. The current governor, not the less familiar Democratic governor.  quo; Foxconn still insists that it will create 13,000 jobs by 2023. Foxconn's manufacturing facilities and labor force elsewhere may expand rapidly, but for Foxconn, hiring so many “knowledge workers” in Wisconsin seems to be an incredibly ambitious plan.

In fact, since Walker has squandered his influence, Foxconn has little need to invest so much money or create so many jobs as promised. With Foxconn's commitment to capital investment and job creation, the government's full subsidies will be paid in increments. But all other subsidies worth more than $1 billion, no matter how much you invest or how many jobs you create, will be enjoyed by Foxconn. Smaller factories and less employed workers can significantly reduce their tax incentives, but this actually makes the state government spend more on each job.

Wisconsin Democracy Campaign executive director Matthew Rothschild said the deal was a ridiculous way of economic development. It reveals a lie that we have been repeatedly told that we don't have enough money to build a school, build a road, or provide health care. But when a big company knocks on the door, suddenly there is a $4 billion taxpayer's money to spend. We could have used this money to help many small businesses. ”

However, the local government has begun to use the “requisition rights” to purchase houses and expel the residents of the Racine County where Foxconn is building the factory. The Wisconsin government and local governments have invested heavily in the infrastructure needed for Foxconn. If Walker fails, it will be difficult for the Democratic governor to cancel the agreement. Regardless of the impact of Foxconn on the Wisconsin economy, the money has to continue to be paid. For Wisconsin taxpayers, their children, and perhaps their grandchildren, Foxconn's deal will increase their future cost of living.

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