Foxconn in Wisconsin: Some Supply Chain Realities
Dan Gardner
President of supply chain, logistics & trade compliance consultancy, co-founder of tech-enabled freight forwarder & customs broker. MBA, Licensed U.S. Customhouse Broker, Bilingual (SP)
While the announcement of Foxconn's plan to build LCD plant(s) in Wisconsin is great news for the U.S., there are a number of supply chain realities that will make its success challenging. Consider the following...
1) Foxconn owns a big piece of Sharp, which already has plants around the world, including Mexico. Depending on the type of LCDs (e.g. big screen TV vs. smart phones), Foxconn could be competing with itself. In fact, goods coming out of Sharp MX already qualify for NAFTA (driven by Change in Tariff Classification and/or Regional Value Content requirements). Safe to say that the landed cost of LCD's coming out of MX will be much less than anything a plant in Wisconsin could produce.
2) The raw materials supplier base for an LCD plant is scant in the U.S. That means that the majority of raw materials and sub-assemblies will be coming in from Asia. Depending on the nature of the goods, they might move via ocean and then rail into Chicago (or maybe via the CN in Canada), but most likely via airfreight. That makes landed costs for raw materials prohibitive, especially to the middle of the country...Wisconsin doesn't exactly offer comparative eographic advantage for a manufacturer.
3) The U.S. exported its manufacturing know how a long time ago and the pool of highly skilled manufacturing personnel (or lack thereof) is going to be a problem. Translation? Low productivity and quality issues (at least at the beginning of operations).
4) Fully loaded labor costs for a line manufacturing position with be in the neighborhood of $50k per year (if not more). With Chinese and/or Mexican workers making less than a fifth of that, cost of goods sold for Foxconn will be prohibitively high.
With over $3b in tax credits given to Foxconn by the state of Wisconsin, one has to wonder just how good of a deal this really is. Given the above (as well as other considerations), the great state of Wisconsin will have its hands full competing globally, or for that matter, in the U.S. market.