Foxconn to begin by hiring assembly workers

Firm expects to generate $200M in state next year

With state and local agreements in place, Foxconn Technology Group is poised to move forward quickly on its plans for Wisconsin, beginning with an assembly-only operation expected to generate billions of dollars in sales even before the company’s massive manufacturing plant in Racine County is built and running.

Foxconn expects that assembly work it moves to Wisconsin — presumably to a building the firm already has leased in Mount Pleasant — will be rolling quickly enough to generate more than

$200 million in sales next year. That would grow to as much as $1 billion in 2019, and $2 billion in 2020.

The projections come from an analysis by the staff of the Wisconsin Economic Development Corp. of Foxconn’s plans to build a $10 billion, 13,000-employee flat-screen manufacturing campus in Mount Pleasant.

The wide-ranging review, prepared as the agency weighed approval of up to $3 billion in taxpayer-funded subsidies to Foxconn, provides details on how the project will unfold and on the financial wherewithal of the corporate entities involved.

The 22-million-square-foot factory complex to be built just east of I-94 and north of Highway KR will take four to five years to complete, but Foxconn will begin significant hiring much sooner, the review indicates.

The company expects to have at least 1,040 employees in Wisconsin by the end of next year, and another 1,040 by the end of 2019.

Many of those likely will be working at the assembly operations that will precede the opening of the main factory. The review shows that Foxconn expects to hire 400 “operators” next year and 399 more in 2019.

Those production workers will be paid an average starting wage of $23.02 an hour. That amounts to $47,881 a year for full-time work. The average wage for production occupations in Wisconsin was $18.05 an hour, or $37,540 a year, as of May 2016, according to the U.S. Bureau of Labor Statistics.

Full-time employees at Foxconn will average $25.90 an hour, or almost $54,000 a year, the company has said.

Of the 13,000 employees projected by the end of 2022, just under 5,000 would be operators, according to the review. Another 3,655 would be “equipment technicians” hired at an average hourly wage of $26.31.

Not quite 3,500 would be classified as some type of engineer, with the remaining 870 in business support functions.

The company will pay 100% of individual health insurance including dental and vision coverage, and 50% of family insurance, according to the review. Employees will get 10 holidays per year, life insurance and a 401(k) plan, the review says.

Nearly $4.7 billion is budgeted for construction of buildings, and more than $5 billion is budgeted for machinery and equipment in the plant. The balance of the $10 billion investment will go toward such things as furniture, fixtures and information technology.

Spending on the plant is expected to total $543 million next year, then rising to an annual peak of nearly $3 billion in 2020 before tapering off through 2022.

Foxconn believes the Racine County plant, which will build large liquid crystal display panels for consumer and commercial use, will generate about $7 billion in annual revenue when it is complete. But the initial operations are expected to lose $269 million over the first three years.

Exactly what sort of work will be involved there isn’t yet clear. The WEDC staff review says only that Foxconn will relocate “an assembly operation” to Wisconsin beginning in 2018. A company representative did not immediately respond to questions.

Hon Hai Precision Industry Co. Ltd. — the formal name of Foxconn — enjoys a strong cash position and a low debt-to-net-worth ratio, indicating an ability to get financing for future projects, the WEDC review says.

At the same time, the company has a relatively low profit margin, according to the analysis.

Hon Hai draws 54% of its annual revenue from a single customer, the review says. That customer is almost certainly Apple Inc., for whom Hon Hai/Foxconn makes the iPhone.

Hon Hai, which netted $4.5 billion last year, is the chief guarantor that Foxconn will deliver on its pledges to Wisconsin. The company has guaranteed repayment of as much as $375 million to the state if it fails to meet minimum jobs thresholds.

The vast majority of the $10 billion investment in the manufacturing complex here, though, would come not from Hon Hai but from units of SIO International Holdings Ltd., a company 89% owned by Foxconn Chairman Terry Gou.

SIO has a net worth of about $1 billion, the great majority of it derived from its 8.5% stake in Japanese electronics firm Sharp Corp. and in its majority ownership of Sakai Display Products Corp., a maker of large-screen LCD panels measuring 60 inches or more diagonally.

It was Sakai’s plant in Osaka, Japan, that a Wisconsin team led by Gov. Scott Walker visited in June amid the quest to win the Foxconn factory for the state.

SIO earned $26 million in 2014 and $13 million in 2015, but lost $216 million last year, according to the WEDC review. That was due to losses at Sakai, the great majority of which stemmed from one-time accounting charges.

Another factor in Sakai’s 2016 performance, though much less significant, were losses related to international currency translation. If those issues continue, they could pose a concern for SIO, the WEDC review says.