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Happy Halloween from Hong Kong where stock markets, despite today’s modest rally, are still spooked by the U.S.-China trade war. China tech investors took fright on Monday, as the U.S. Commerce Department, citing national security concerns, announced plans to block Fujian Jinhua Integrated Circuit, a state-owned Chinese tech firm, from buying American components. Analysts say the move could seal the company’s doom.
Tuesday brought fresh horrors as the U.S. Justice Department charged two Chinese intelligence officers with stealing technology for a jet engine being developed by a French and U.S. company. Meanwhile, a recent Wall Street Journal report summing up travails of China’s once-vibrant tech darlings all but called them The Walking Dead: gasping to raise capital, staggered by regulatory restrictions and governance blunders, and reeling from collapsed cross-border investment deals and sinking post-IPO stock prices.
But for my money, the week’s most chilling U.S.-China tech story is this one published in The Verge, and mentioned in the Data Sheet yesterday, alleging that Foxconn’s vow to build a $10 billion factory in Wisconsin is morphing from treat to trick. The plan, which called for locating the facility in Racine County about 40 minutes south of Milwaukee, was announced to great fanfare in July 2017 by governor Scott Walker and Foxconn chairman Terry Gou. The deal was famously inked on a napkin at the two men’s first meeting. The state would chip in $3 billion in subsidies and, in return, Foxconn would build a $10 billion state-of-the-art plant to manufacture liquid crystal displays, generating 13,000 jobs. Walker promised the plant would help deliver on his 2010 campaign pledge to create 250,000 new jobs in the state during his first term.
The Verge says public costs have since ballooned to more than $4 billion, including $764 million in new tax incentives from local governments in Racine County, $164 million for a road and highway connections, and $140 million for a new electric transmission line. All told, public subsidies have risen to more than $315,000 per job, and aren’t expected to be recouped by the state until after 2050–if ever.
Scott and Foxconn declined comment for The Verge story. But the report parses recent statements to local press by Foxconn spokesman Louis Woo suggesting that the company now plans to build a less advanced facility, then eventually shift from TV screens to thin-film transistor fabrication. The company still promises to create 13,000 jobs, although it doesn’t say by when. But Woo says the plant will require assembly line workers for only about 10% of jobs, and less defined “knowledge workers” for the remaining 90%.
Donald Trump, barnstorming in Wisconsin earlier this month, took credit for bringing the Foxconn plant to Wisconsin, calling it “the most incredible thing I’ve ever seen.” But polls suggest a majority Wisconsin voters now doubt the factory will benefit the state. Walker, locked in an unexpectedly tough re-election campaign, generally avoids mentioning it on the stump.