Sunday, December 1, 2019

Raw Research on Foxconn

Here is some raw research I did on Foxconn - with links. Be sure to
download the George Mason Study - and if you're into numbers, etc the
first part will razzle dazzle you. Near the end you get to summations
and conclusions which I find far more interesting. *WARNING* A lot of
stuff is here.

I reviewed the George Mason University report - and I believe that
page 29 sums up what will actually happen:
" For example, it’s been reported that the LCD industry will
experience a surge in supply in coming years as multiple new
Generation 10.5 plants come online, meaning that the best, and least
wasteful, option—from a global economy perspective—might be for
Foxconn to abandon its plans for an LCD manufacturing facility in
Wisconsin, especially considering the higher labor cost there as
compared to other factory locations.128 Subsidies, especially those
with strings attached or clawback clauses, make it harder for a firm
like Foxconn to adapt to changing circumstances.129 Eligibility
restrictions and clawbacks can compound the problems with subsidies by
motivating unwise investments. At any one moment in time, these
policies can cause resources to be wasted, but these policies are also
inefficient from a forward-looking, dynamic perspective. Large,
mandated investments can create path dependency, locking in particular
production technologies and processes. Even worse, subsidized jobs are
not sustainable in the long run, putting workers who are lured into
these positions at risk. This risk exists not only because of the
potential for future layoffs, but also because the particular skillset
the workers developed at the subsidized company may have less
long-term career value than the skillsets they might otherwise have
developed at an unsubsidized, dynamically efficient company".

Corning Opens World’s Largest LCD Glass Substrate Facility in China
How Did They Make My Big-Screen TV? A Peek Inside China's Massive BOE
Gen 10.5 Factory

"What most people don’t realize is how complex and sophisticated the
manufacturing process is.  The entire world’s supply is made within
two time zones in East Asia.  Unless, of course, the factory proposed
by Foxconn for Wisconsin actually gets built".
And - *WOW* Foxconn wants to get out of the 10.5 Gen Business?

Foxconn Looking to Sell New Gen 10.5 Plant?

Reuters reported this week that Foxconn is in discussions to appoint
banks to find a buyer for its LCD factory that is being built in
Guangzhou. While Foxconn replied in a written statement that “As a
matter of company policy, Foxconn does not respond to market rumors or
speculation,” Reuters reported that multiple contacts within Foxconn
were involved in the discussion. If true, the sale of such a new plant
would be unprecedented in the flat panel display industry.

Reuters reported that Foxconn is reviewing its businesses in light of
the US-China trade war, which is disrupting global supply chains.
While Reuters referred to “slowing demand for large-screen televisions
and monitors”, DSCC would characterize the situation as a growing
oversupply that has far outstripped demand growth. Foxconn questioned
the need for the Guangzhou plant: “Existing plants are already not
running at full capacity ... why need another one?”

The Guangzhou fab is expected to start mass production in late
September or early October, and celebrated a lighting up ceremony on
July 31st and already rolled out its first 65”panel according to
Digitimes. The plant is a joint venture between the Guangzhou
government and Sakai Display Products (SDP), which owns the Gen 10 LCD
plant in Sakai City, Japan, built by Sharp. In its years of financial
distress in before being taken over by Foxconn in 2016, Sharp sold
portions of the SDP business to some suppliers and to Foxconn founder
Terry Gou. Sharp and Gou remain minority owners of SDP, but Foxconn
does not directly have a stake except through its majority share of

As originally envisioned, the Guangzhou Gen 10.5 was targeted to
manufacture 65” and 75” TV panels and expected to generate an annual
revenue of CNY 92 billion ($US 13 billion) from an investment of CNY
61 billion (US$ 8.7 billion). However, such a revenue projection was
unrealistic to begin with, and appears fantastic given the recent
trend. TV panel prices have fallen by 50% since the project was
originally conceived, and at current prices the annual revenues from
the plant, selling 65” panels at 90% yield and utilization, would
amount to only $1.3 billion.
Foxconn did hold talks with China players for selling 10.5G LCD line,
say sources
Corning is building more Gen 10.5 glass plants, just not in Wisconsin

New York-based Corning Inc. will build two Gen 10.5 glass plants in
China with at least three-quarters of the investment in each coming
from customers or other stakeholders, the company announced Monday.

Why do the investments matter in Wisconsin?

When Foxconn Technology Group originally announced plans in 2017 to
invest $10 billion in Wisconsin, the company said it would build a Gen
10.5 plant. Project supporters were quick to point out the project
would also require a $1 billion investment and 400 jobs at a Corning
glass plant on the same site.

Those plans were complicated when Corning chairman and CEO Wendell
Weeks said two of every three dollars for any new display capacity
investment would need to come from other sources. Wisconsin leaders –
having approved a $3 billion incentive for the Foxconn plant—balked at
the idea of providing additional subsidies for the project.

Foxconn opted to move forward with a Gen 6 facility that would use
smaller glass and allow for more product flexibility. The shift also
meant glass could be shipped from a Corning facility in Kentucky
instead of being made on site.

Among the reasons Foxconn cited for the shift last year were an
oversupply of Gen 10.5 displays and global economic uncertainty.

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