Record Foreign Investment Targets U.S. Industrial with $10’s of Billions
Taiwan’s mega-manufacturing powerhouse, Foxconn, will announce location of its $10 billion U.S. investment in July, building on the billions other Asian firms have recently invested.
The world's largest contract electronics manufacturer and a major Apple supplier is planning to invest more than $10 billion in a 5-year mega project to build a display-making factory in the United States. Taiwan-based Foxconn has been conducting a site selection process for some time and will decide on the location of the plant next month.
Foxconn is currently considering Wisconsin, Ohio, Michigan, Pennsylvania and North Carolina as possible locations, according to the company. "In July we will make a conclusion," Foxconn CEO, Terry Gou told reporters after the company's annual shareholders meeting on Thursday.
Foxconn already has limited operations in Pennsylvania, and Gou said that an agreement announced four years ago to invest in Harrisburg, Pennsylvania, was still pending.
Foxconn operates some of the world’s largest facilities in China and employees an army of workers a million strong. It makes most of Apple's iPhones there, but so far Foxconn’s manufacturing might has remained a local phenomenon. It has not invested heavily in the U.S. or elsewhere. But that’s about to change to the tune of tens of billions of dollars.
"This time we go to America, it's not just to build a factory, but to move our entire supply chain there," Gou told shareholders. Foxconn’s American factories wouldn’t employ quite as many people as its demand, labor intensive Asian facilities, Gou added. Its new plants would rely more on automation and advanced manufacturing techniques.
"In the U.S., the state governors' sincerity and confidence to attract investment ... is beyond my imagination," Gou said.
Among these are Governor Rick Snyder of Michigan, who—after the signing a new $1 billion dollar brownfield reinvestment bill—confirmed to reporters that he recently took a trip to Asia to make the case to Foxconn for building in Michigan. When asked whether the trip was a success, Snyder said, "Yes. How much success? I'll have to wait and see" if the company chooses the state.
In Wisconsin, an unusual appropriation in Racine County could possibly be related to efforts to land the Foxconn mega factory. The Racine County Board has agreed to funnel $500,000 to the area’s economic development organization in the form of a letter of credit “to cover expenses related to economic development projects."
Foxconn’s $10 billion plan is even more than it had previously announced it would invest. Originally, the company only planned to invest $4 billion and then $7 billion to set up a display-making plant in the U.S. The prospects for its U.S. investment must have improved, which is a sign of the times.
Foreign companies are investing record amounts in the U.S. This week Samsung became the latest foreign company to announce substantial investments in the U.S. The Korean manufacturing conglomerate said it plans to open a $380 million factory in South Carolina and employ almost a thousand people. Samsung plans to open the new facility in a former Caterpillar factory in the town of Newberry, South Carolina about 40 miles northwest of the state capitol in Columbia. It will manufacture washing machines and other home appliances and undertake research and development.
In February, LG, another South Korean company, said it would open a 600-worker factory in Tennessee also to make washing machines. Louisiana has landed two billion dollar build-outs by foreign companies investing in the U.S. China's Wanhua Chemical recently announced it will build a $1.12 billion plant in Louisiana. Meanwhile, China’s Yuhuang Chemical is already constructing a $1.85 billion methanol complex in St. James Parish.
Japanese investor Masayoshi Son has announced plans to invest $50 billion in the U.S. and create at least 50,000 jobs. We’ve come a long way since the first foreign car makers started to enter the U.S. in the early 1990’s—first the Japanese, followed by the Europeans.
Now the trend pulling capital to the U.S. (and North America) is accelerating and the U.S. is breaking Foreign Direct Investment (FDI) records. Interestingly, this environment is manifesting in a period of relatively poor capital investment in the U.S. Public infrastructure is barely sufficient at the federal level and patchy at the state and local level, at best. U.S. companies have shunned capital investment in favor of increasing dividends to shareholders and buying back their own stock. And they have maintained a multi-trillion horde of cash overseas.
With so much pent-up demand for capital investment and so much capital clawing to get in, now would seem to be the perfect time for U.S. policy makers to marry the two.
The private sector is there already. The U.S. has dominated the global recovery. According to a global survey of more than 5,000 CFOs and decision-makers conducted each year by AT Kearney, the U.S. became the top spot for investment in 2012. It’s now taken the top spot as the #1 preferred destination in the world for the 5th consecutive year in 2017. And it looks set to top A.T. Kearney’s FDI global confidence index again next year running away.
Big industrial projects are back in America, and energy is a primary reason why. Tesla’s gigafactory is a massive and game-changing battery production facility that will scale production up and drive costs down. Since 2010, U.S. exports of crude oil and petroleum products have more than doubled, which will pale compared to what’s coming. Many new and enormous Liquified Natural Gas (LNG) export terminals are being constructed and will shake-up the global energy order. Deliveries to Europe and Asia are already underway, some squeezing huge LNG ships through the newly expanded Panama Canal.
The U.S. has a substantial competitive advantage thanks to abundant, cheap energy. U.S. manufacturers are more optimistic than ever. U.S. companies other than Tesla and LNG exporters, such as Cheniere, are building out large-scale industrial projects too. The $1.3 billion Big River Steel plant near Osceola, Arkansas was recently completed. Now it’s Arkansas' biggest electricity consumer.
We're going to need a lot of energy to power a planet with 8, 9 and then 10 billion people on it in the economy of the future. For the foreseeable future, the U.S. has more than enough to compete and then some. There's plenty of U.S. energy to go around to feed a power hungry planet, and the positive effects are already starting to ripple through the entire economy.
Update Saturday 07/08/2017: The Chicago Tribune reports "House Speaker Paul Ryan said Friday he met with officials from the Taiwanese company Foxconn as it considers building a plant in Wisconsin that could employ up to 10,000 people. Ryan told reporters that his southeast Wisconsin congressional district "still could be" in the running for the plant, even though the city manager of his hometown Janesville said the factory would not be going there." The Tribune reports a slightly different dollar value and list of states than previously reported: "Foxconn Chairman Terry Gou has mentioned Wisconsin, Michigan, Ohio, Pennsylvania, Illinois, Indiana and Texas as manufacturing states with which the company hopes to work." Whatever the ultimate size, it's a massive investment that may benefit multiple states depending on its location.
Update Wednesday 07/26/2017: Wisconsin wins! Find BL's complete coverage here: Wisconsin Wins the Hunt for Foxconn Mega Factory with Heavy Charm Offensive and Heavier Incentive Package
Banner image courtesy of Foxconn. Visit Foxconn's website here.