Foxconn considers building another plant in Midwest
After wooing Wisconsin, Taiwanese electronics manufacturer is reported to be eyeing Michigan. But do hoped-for benefits outweigh the risks?
SAN FRANCIS CO Score another win for the Midwest in its pursuit of tech jobs.
Or, is it merely another tax boondoggle?
Those are the conflicting takeaways from news that Foxconn Technology Group, the Taiwanese electronics manufacturer and major Apple supplier, is considering opening a facility in Michigan.
Michigan Gov. Rick Snyder, on a nine-day trade trip in China, told The Associated Press there is a “strong possibility” Foxconn will come to Michigan after it chose neighboring Wisconsin for a $10 billion display panel plant with 3,000 employees that could swell to 13,000.
Snyder told the AP he met with Foxconn Chairman Terry Gou and discussed the autonomous vehicle industry and advanced manufacturing.
But the Wisconsin deal comes with a major caveat: It requires up to $3 billion in subsidies from state taxpayers — or $231,000 per job for 13,000 jobs. Put another way: State lawmakers are mulling a subsidy package nearly 50 times bigger than any previous one.
“Throwing money into incentives makes a slippery slope,” Steve Deller, a professor of agriculture and applied economics at the University of WisconsinMadison, told the Milwaukee Journal Sentinel.
“(People) get so wrapped up in the winning game, in the headline of ‘we got it,’ that they lose sight (of the) pretty steep price. Hard to say because we don’t know what the package looks like.”
Yet those are risks tech-hungry states — particularly in the Midwest — are likely to take in pursuit of a fast-growing industry that expanded 2% last year to about 7.3 million workers as demand for jobs in software, cybersecurity and cloud computing flourish, according to Cyberstates 2017, an analysis of the country’s tech industry by technology association CompTIA.
Foxconn’s actions are feeding an evolving narrative, post-presidential election, that could change the contours of what has been predominantly a coastal- based industry. President Trump campaigned tirelessly to bring jobs to the heartland, which has energized some Midwesterners to return home and seed aging rural and manufacturing centers in the Midwest bypassed by the tech boom.
“There will be more marketdefining, multibillion-dollar companies coming out of (the Midwest) in the next 10 years as ever before,” says Nick Solaro, an exGoogler who is a partner at Drive Capital, which moved to Columbus, Ohio, in 2014. The VC firm boasts former members of Sequoia Capital in Silicon Valley.
“This was not a quality-of-life change but a professional opportunity,” Solaro says. “Just as (legendary venture capitalist and Sequoia Capital founder) Don Valentine saw opportunity in the South Bay with nothing but orchards years ago, we see the same long-term opportunity here.”
From 2010 to 2014, 65 companies with a Midwestern headquarters went public or were acquired for at least $1 billion. Among them: ExactTarget, an Indianapolis-based seller of marketing software, acquired by Salesforce.com for $2.5 billion in
2013; in Chicago, Groupon went public in an IPO pegged at
$15 billion in 2011, and three years later, so did Grubhub, valued at $2.7 billion. Cleversafe, a Chicago-based developer and manufacturer of object-based storage software and appliances, was purchased by IBM for
$1.3 billion in 2015, and services procurement provider Fieldglass of Chicago was acquired by SAP for $1 billion in 2014.
The latest: Health care giant McKesson’s in April completed its $1.1 billion acquisition of CoverMyMeds, a fast-growing maker of software to make it easier to fill prescriptions.
Trump also has exerted political clout to meet with leading tech executives and make his case about jobs.
Foxconn, a major supplier of iPhones, announced the plant in Wisconsin in a White House ceremony a day after Trump told The Wall Street Journal that Apple CEO Tim Cook promised him the company would build “three big plants, beautiful plants” in the U.S. Trump didn’t specify where the plants will be constructed or when they’d completed, but his boast amounted to a political and economic win in his vow to revive American manufacturing.
Apple, with manufacturing facilities in California and Texas, has declined to comment on specific plans. During Apple’s quarterly financial call this month, Cook hinted an announcement could come later this year.
“There will be more marketdefining, multibilliondollar companies coming out of (the Midwest) in the next 10 years as ever before.”
Nick Solaro, an ex- Googler who is a partner at Drive Capital, which moved to Columbus, Ohio, in 2014