Foxconn In Wisconsin: This Makes More Sense

Wisconsin Governor Tony Evers announced in a tweet yesterday an amended agreement between the Wisconsin Economic Development Commission (WEDC) and the Foxconn Technology Group for the company’s Mount Pleasant site. The decision has to go to the WEDC board for approval today. When then President Donald Trump and Governor Scott Walker broke ground for the original project, it was promised to be a Gen 10.5 liquid crystal display (LCD) factory. That was never practical; the new agreement sounds much more grounded in reality.

The original plan was never going to happen because the State had decided not to subsidize key supply chain partners like Corning GLW who would provide the “mother glass,” and with no glass factory across the street, there was no practical way for Foxconn to build an LCD fab there. The glass is both thin (a half millimeter thick) and huge (larger than a king-sized bed). Every other Gen 10.5 fab in the world has a glass plant nearby, with the sheets of glass transported through tunnels connecting the factories.

The Mount Pleasant factory is going to be making computer servers, as well as other products to be determined in the future. That’s a good start – there is a lot of demand from the hyperscale datacenter operators like Amazon Web Services, Microsoft MSFT , Google GOOG , Facebook, and others for this kind of product. Manufacturing is clean, and it wouldn’t hurt to bring some of that work back from Asia. It’s a growth business, though the profit margins are much less than what they used to be.

Amidst all of the hand-wringing and speculation of the last few years, the company has built or is close to completing four buildings. There is a 120,000 square foot multipurpose building, a 993,460 square foot Advanced Manufacturing Facility, a 296,000 square foot Smart Manufacturing Center, and a 100 foot tall globe that will be the network operations center for its high performance computing (HPC) cluster built in modular containers. Google pioneered the use of modular containers containing computer servers and communications gear. It’s a cost-effective way to get a lot of scalability, and the company probably plans to sell these more broadly. Foxconn claims to have invested $850 million in the state so far (including salaries).

I have commented in the past about how the Asian style of decision making is more of a “start driving, then figure out where you are going” model. The original big promises and high expectations were not helpful to the local residents and property owners. But a company doesn’t build out 1.45 million square feet unless it plans to use it productively. It sounds like Foxconn and the state have figured that part out for now.