Foxconn’s broken pledges cast doubt on Trump jobs plan
HARRISBURG, Pennsylavania: For some residents of this small city, there was something familiar about Foxconn’s recently announced plan to hire up to 50,000 US workers, one of the many hiring pledges from companies rounded up by President Donald Trump in the first weeks of his administration.
The only difference was the scale.
In 2013, Foxconn’s chairman sent a jolt through this state capital when he said his company - best known for making Apple iPhones in China - would invest US$ 30 million ( RM135 million) and hire 500 workers for a new high-tech factory in central Pennsylvania.
Locals were giddy. Foxconn had a small office here, but this seemed like the start of an entire new industry. Pennsylvania’s governor boasted about the deal. The Brookings Institution think tank hailed Foxconn’s decision as a sign of US manufacturing’s strength.
But the factory was never built. The jobs never came. “It just seemed to fade to black” after the announcement, recalled a local official. It was the start of a mystery, created by a chief executive known to promise projects all over the world that never quite pan out. Yet few people seem to notice. Foxconn and others continue to get credit for deals that never take place. In December, Pennsylvania’s economic development staff was still touting the US$ 30 million factory that never was.
What happened in Harrisburg provides a skeptical lens for viewing the waves of corporate investment promises being used by Trump as evidence that he is following through on his campaign pledge to reinvigorate US manufacturing. “I’m delivering on everything we promised,” Trump said Thursday during a meeting with manufacturing executives at the White House, noting how firms have announced new hiring and factories. “People are saying they’ve never seen so much happen in 30 days of a presidency.”
Foxconn, for example, announced shortly after Trump’s election that it plans to invest US$ 7 billion and hire up to 50,000 workers in the United States. Such a hiring spree would catapult Foxconn from a couple thousand US workers to a major employer on par with Chrysler.
Other companies, too, including SoftBank, Alibaba, Intel and IBM, have made an unusual display of loudly announcing their intentions to invest in the United States - all with price tags in the billions of dollars and the promise of tens of thousands of jobs - much to Trump’s delight.
“Foxconn is going to spend a tremendous amount of money on building a massive plant,” Trump said the day after the investment was revealed, “and probably more than one.”
But, as Harrisburg learned, the gulf between these eye-popping announcements and what takes place on the ground can be huge - and frequently overlooked.
“They are scrambling to look good,” Mark Selden, senior research associate at Cornell University’s East Asian programme, said. “It’s a sign of the pressure that Trump is placing on everyone in the world to deliver on his agenda.”
Companies tend to view these announcements as an opening bid in a negotiation, said Alberto Moel, a senior analyst with Bernstein Research in Hong Kong. Firms know politicians like the splashy headlines. And if everything falls into place - the business climate improves, they extract enough concessions such as tax breaks and free land - they might be able to make it happen.
“It actually puts the onus on the US in a way,” Moel said. “They are saying: ‘ I’m along for the ride. Here’s my proposal.’ ”
If the deal falls apart, as it often does, no one is going to talk about it.
“The government themselves aren’t going to remind you of that, Trump has no intention of helping you remember that,” Moel said. “What’s the downside?”
Trump is far from alone in using corporate announcements as political backdrops. It’s why ribbon- cuttings and ceremonial shovels exist.
In 2012, former President Barack Obama visited a new US$ 5 billion Intel computer chip plant in Chandler, Arizona, citing it as “an example of an America that is within our reach.” But the facility, known as Fab 42, was never completed. Last week, Intel chief executive Brian Krzanich stood in the Oval Office with Trump to announce a US$ 7 billion investment - essentially, Fab 42 was back on track, with a new price tag and a new president. Trump tweeted his praise.
Even before he was sworn in, it was clear Trump placed greater importance on these job announcements than past administrations.
Among the first signs came in December when Tokyo-based SoftBank’s chief executive, Masayoshi Son, stood with the president- elect to announce a plan to invest US$ 50 billion and create 50,000 new US jobs.
Two days after Trump’s inauguration, Foxconn chief executive Terry Gou told reporters in Taiwan that his company planned to spend US$ 7 billion on a US factory to make computer displays. It wasn’t iPhones - which Trump has said he wants to be “Made in the USA” - but Gou said the factory could create 30,000 to 50,000 US jobs. Details were few, but one clue seized on was the presence of a Pennsylvania state trade representative at Gou’s talk.
Foxconn said in a statement that it is “exploring a potential investment that would represent an expansion of our current US operations.” But the company could not confirm “the number of jobs that might be created.”
Foxconn is a coveted hardware manufacturer because of its size. Last year, it reported US$ 136 billion in revenue. It has more than one million employees, mostly in China. A single factory making iPhones or LCD screens can employ tens of thousands of workers. When Foxconn says it will invest in a new plant, the decision can transform a region. That’s why countries all over the world are eager to lure Foxconn to their shores.
Gou, Foxconn’s founder, for years has described the United States as a “must-go market.”
In 2014, as the Pennsylvania deal was quietly dying, Gou teased the opening of a LCD display factory in the states. His company talked with officials in Colorado and Arizona. Nothing happened.
That same year, the company signed a letter of intent to invest up to US$ 1 billion in Indonesia. That investment still has not occurred.
Foxconn said it would invest US$ 5 billion over five years in India as part of an ambitious expansion in 2014. The deal would create up to 50,000 jobs, Gou said. But Foxconn’s investment in India has amounted to only a small fraction of what it originally promised.
Similar results were seen in Vietnam, where Foxconn committed to a US$ 5 billion investment in 2007, and in Brazil, where Foxconn spoke of a US$ 10 billion plan in 2011. The company made its first major foray in Vietnam only last year. In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of expectations.
“There’s a pattern here,” said Moel, the analyst.
Gou’s plans for Harrisburg were revealed in 2013 while he was in the United States on a tour with other Taiwanese business officials to, in part, drum up support for Taiwan’s bid to join the Trans-Pacific Partnership, known as TPP. (Coincidentally, Trump pulled the United States out of the trade treaty in his first days in office.)
It was a surprise when Gou said Foxconn planned to invest US$ 30 million over two years in a factory to make technology equipment and servers. Gou noted his company’s history in Harrisburg. He said the goal was to create “high-precision, high-tech, high value- added manufacturing in the US”
Gou also said Foxconn would donate US$ 10 million to Carnegie Mellon University in Pittsburgh for robotics research.
“iPhone maker Foxconn to invest US$ 40 million in the US,” wrote the China Post. “Foxconn to build plant in Pennsylvania,” CNN said. Local media quoted state officials as saying Gou would sign a memorandum of understanding and the company was busy scouting sites.
“There was this intense buzz,” recalled David Black, president of the Harrisburg Regional Chamber. — WP-Bloomberg