Foxconn's $7 bln U.S. bet goes beyond politics

Terry Gou, founder and chairman of Taiwan's Foxconn Technology, shown on a screen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province, China November 17, 2016. REUTERS/Aly Song

HONG KONG (Reuters Breakingviews) - Foxconn’s $7 billion U.S. bet goes beyond politics. Building a huge TV-screen factory in America would fit neatly with President Donald Trump’s push to create domestic jobs. Grabbing a share of the U.S. market could also help the Taiwanese iPhone maker revive recently acquired subsidiary Sharp.

On Sunday, Foxconn founder Terry Gou sketched out a project to make display panels in America, building on details revealed accidentally last month by his friend, SoftBank boss Masayoshi Son.

This may not happen: Gou has a history of talking up big investments that do not materialise. But on paper at least, this looks like a big deal. To compare, heavyweight Samsung Electronics spent just over $9 billion in capital expenditure for its display business last year. And Foxconn’s new plant could create up to 50,000 jobs.

If so, Foxconn would score political points. Trump has lashed out against foreign and domestic companies alike for sacrificing American manufacturing jobs and threatened to increase tariffs on imports from countries like China. Foxconn, known formally as Hon Hai Precision Industry, looks particularly vulnerable to any potential U.S.-China disputes: the $46 billion group relies on huge, labour-intensive manufacturing operations in the People’s Republic.

Building in the United States could also work on its own terms. Foxconn is trying to revitalise the ailing Sharp, which it took over last year. Key to that is boosting the Japanese group’s TV business by selling more sets, not just display panels. To that end, Sharp and its parent have already earmarked $8.8 billion for a new factory in China and have stopped supplying technology to rivals Samsung and Hisense, according to media reports.

Localising screen production could help the company save on transport costs. And the good publicity could also help sell more high-end Sharp-branded sets in the United States, the world’s second-biggest TV market. That would be a programme shareholders could get behind.


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