Foxconn Renegotiates Wisconsin Subsidy Contract
Last week, Foxconn Technology Group, along with the Governor’s office of the State of Wisconsin, released news that the two sides had agreed on a renegotiated contract for subsidies for Foxconn manufacturing in the State. The renegotiated deal between the Wisconsin Economic Development (WEDC) and Foxconn apparently puts an end to the idea of LCD manufacturing and reduces the maximum obligation of the State by 97%.
“When I ran to be governor, I made a promise to work with Foxconn to cut a better deal for our State—the last deal didn’t work for Wisconsin, and that doesn’t work for me,” said Wisconsin Governor Tony Evers. “Today I’m delivering on that promise with an agreement that treats Foxconn like any other business and will save taxpayers $2.77 billion, protect the hundreds of millions of dollars in infrastructure investments the State and local communities have already made, and ensure there’s accountability for creating the jobs promised.”
Under a contract amendment approved April 20th by the WEDC Board of Directors, Foxconn is eligible to receive up to $80M total in performance-based tax credits over six years if it meets employment and capital investment targets. The right-sized contract includes comparable rates and incentives to those offered to other companies by WEDC. The original contract negotiated in 2017 authorized $2.85B in performance-based tax credits to build a Generation 10.5 plant, not including new tax incentives from local governments and road and highway investments by the State and local governments, which brought total taxpayer-funded subsidies to more than $4B.
In the statement from Foxconn, the company said, “We are grateful to Governor Evers, Missy Hughes, her team, and our team at Foxconn for finding a solution that works for the State, our local partners, Wisconsin taxpayers, and our shareholders. We are pleased with the clarity and certainty that this agreement provides Foxconn, our affiliates, our joint ventures, and our global business partners. Foxconn is happy to have worked with the Evers administration to significantly lower taxpayer liability. Original projections used during negotiations in 2017 have at this time changed due to unanticipated market fluctuations.”
The renegotiated deal apparently brings an end to the idea of LCD manufacturing at the Wisconsin site. The original deal was signed by then-Governor Scott Walker in 2017 and announced at a special event with President Trump in the White House. Trump participated in a ground-breaking event at the Wisconsin site in June 2018, but by that time, there were doubts about Foxconn’s Gen 10.5 plans. Until last week, Foxconn had insisted in its public statements that it planned to make LCDs in Wisconsin.
President Trump, Foxconn Chairman Terry Gou, House Speaker Paul Ryan, Wisconsin Governor Scott Walker at Foxconn Groundbreaking Event, June 2018
The new agreement allows Foxconn to receive subsidies for any activity related to technology and manufacturing, whereas the original $2.85B agreement specified a Gen 10.5 TFT-LCD fabrication facility. Foxconn Chairman Young Liu was quoted last month suggesting that the Wisconsin site might be suitable for electric vehicles considering the company’s recent agreement with Los Angeles-based electric vehicle startup Fisker, Inc. However, the Foxconn statement made no reference to electric cars, but rather to digital infrastructure:
“The amended terms in the agreement are based on Foxconn’s current projections for digital infrastructure hardware products through 2025. As Foxconn’s business partners and customers, who include many of the world’s leading consumer electronics brands, evaluate their supply chain sources for secure, reliable, and US-manufactured products, Foxconn is strategically positioned within Mount Pleasant to make Wisconsin one of the—if not the—largest manufacturer of data infrastructure hardware in the United States.”
A comparison between the amended deal announced this week and the original deal shows how Foxconn’s plans for the site have been diminished greatly:
Our readers may recall that DSCC signed an agreement with the State of Wisconsin for consulting services after Governor Evers took office in 2019. My contacts with the State of Wisconsin indicated that DSCC reports and information were helpful in its negotiations with Foxconn, and they expressed contentment with the deal. The governor’s office was prepared for an even more aggressive approach, considering that Foxconn was in default of the original deal and should receive nothing, but political pressure from the Republican-led legislature and the threat of ongoing litigation led the State to accept a limited subsidy deal.
Although Foxconn’s original deal with the WEDC provided a maximum of $2.85B in subsidies, additional deals with county and municipal entities pushed the total price tag close to $4B. The local village funded infrastructure improvements with a $350M bond issue that assumed Foxconn’s original Gen 10.5 plans for 20M square feet (1.9M square meters) of manufacturing space. Foxconn’s current footprint covers only 1.3M square feet. The new deal with the State includes a clawback provision if Foxconn defaults on any local tax obligations.
My sources in Wisconsin tell me that the $672M of capital investment in the new deal includes money already invested. The deal includes a schedule from Foxconn for expected investments out to 2024; the schedule includes little in building improvements, with most of the money allocated for equipment. DSCC has no information to suggest that any of that equipment would be related to displays.