In July, President Trump announced the decision by Taiwanese electronics firm Foxconn to open a new manufacturing facility in Wisconsin, a historically manufacturing-focused state in the Midwestern United States. The planned facility, which would produce LCD panels, represented an estimated $10B investment by Foxconn with the long-term possibility of creating 13,000 new high-quality manufacturing jobs. The announcement of Foxconn’s investment was a highly touted and symbolically important instance of two emergent trends – the so-called “nearshoring” of advanced manufacturing from East Asia to the United States, and the heavy use of government incentives to shape the sourcing decisions of corporate executives.
Foxconn should be wary of near-termism and shallow incentives shaping its commitment to manufacturing in the US in the long-term. The superficial political benefit of Foxconn’s decision to US officials is underscored by the significant investment of taxpayer dollars in the Foxconn project – nearly $3B against the overall $10B investment, primarily in the form of state income tax credits for job creation and capital expenditure. While the heavy up-front offset of site expansion costs is no doubt attractive to Foxconn’s leadership, the supply of skilled labor in places like Wisconsin represents a long-term threat to the viability of its US-based operation. Analysis by Deloitte Consulting LP and the Manufacturing Institute that the so-called “skills gap” in US manufacturing is likely to leave 2 million of an estimated 3.5 million manufacturing jobs unfilled between now and 2025. The US has underinvested in terms of the vocational skills and STEM fields that are essential to supporting an innovative and competitive manufacturing sector.
The long-term consequences of this sourcing decision will be obscured by the spike in investment and activity to bring the Wisconsin facility online, which is currently estimated to take 6 years. During that time, Foxconn will likely surge staffing as a short-term stopgap to constructing its facility and attempting to bring the plant up to full operating capability.
In the medium-term, the step they will take to address the shortfall of qualified workers is more problematic. Foxconn’s solution to cost and skills issues relating to labor is conventional – pursuing cost effective operations through automation. Beyond the apparent jobs-creation fanfare of the Wisconsin announcement, Foxconn is one of Asia’s leading proponents of headcount reduction via the introduction of robotics. Faced with the substantially higher cost of labor in the US, combined with the skills gap in manufacturing and the increasing affordability of robotics, the most likely medium-term solution for Foxconn will be to replace planned human jobs with automated functions in their Wisconsin facility.
Automating the Wisconsin facility will not be as easy a process as Foxconn may hope or expect. The nature of the incentives they have been offered is highly political and rooted in an insurgent brand of economic populism around job creation for displaced workers. The Wisconsin Economic Development Corporation stipulated in its contract with Foxconn specific time-based targets for job creation to receive the full benefit of the tax credits in the investment package, with additional clawback provisions for long-term failure to meet those targets. The result is that Foxconn may find the economics of his $10B investment rapidly souring as it confronts the reality of the long-term challenge in attracting and employing enough qualified workers for his US-based operation.
What Foxconn should do is proactively seek to define the skills gap narrative by forging partnerships with area universities, technical colleges, and vocational schools to specifically train the workers for Foxconn’s future operations. For the relatively low cost of investment in specific manufacturing- and STEM-focused educational programs, Foxconn gains the dual benefit of not only identifying an extended pipeline of qualified workers for its Wisconsin operations, but also preempting criticism of future efforts to automate or streamline its Wisconsin facility in accordance with Foxconn’s operational needs. Foxconn should place the near- and medium-term onus on the state to direct part of its investment in tax credits and additional incentives toward earmarked training programs for Foxconn workers. Creating political upside in the field of education and training programs is another safe hedge against future mendacity or fickle behavior from elected officials with respect to Foxconn’s presence in Wisconsin.
Given the complex situation in Wisconsin and competing long-term incentives, one key question is how should Foxconn evaluate future opportunities to pursue state-backed expansion in manufacturing in the US?
Additionally, what is the right balance for public officials to strike in the provision of taxpayer-supported incentive packages to private firms? In answering this question, consider that Wisconsin is effectively paying as much as $250,000 to $1 million to Foxconn per $54,000 per year manufacturing job created, and that according to nonpartisan analysis the state will not break even in terms of tax receipts on the investment until 2042.
 Bauer, Scott. 2017. “Trump Announces $10 Billion Foxconn Plant In Wisconsin”. PBS Newshour. https://www.pbs.org/newshour/politics/watch-live-trump-expected-announce-foxconn-plant-wisconsin.
 Mark, Maley. 2017. “Foxconn In Wisconsin: Facts And Figures”. Inwisconsin.Com. http://inwisconsin.com/wp-content/uploads/2017/07/FOXCONN-WISCONN-MEDIA-KIT.pdf.
 Deloitte Consulting LP, The Manufacturing Institute. 2015. “The Skills Gap In U.S. Manufacturing: 2015 And Beyond.”
 Allen, John, and Dean Kamen. 2016. “Investing In America’S Future Through STEM Education”. Brookings Institution. https://www.brookings.edu/blog/order-from-chaos/2016/06/03/investing-in-americas-future-through-stem-education/.
 Wakefield, Jane. 2016. “Foxconn Replaces ‘60,000 Factory Workers With Robots'”. BBC News. http://www.bbc.com/news/technology-36376966.
 Thomas, Arthur. 2017. “WEDC Board Signs Off On Foxconn Job Targets, Clawbacks In Staff Review”. Biztimes Media Milwaukee. https://www.biztimes.com/2017/ideas/government-politics/wedc-board-signs-off-on-foxconn-job-targets-clawbacks-in-staff-review/.
 Paquette, Danielle. 2017. “Analysis | Foxconn Deal To Build Massive Factory In Wisconsin Could Cost The State $230,700 Per Worker”. Washington Post. https://www.washingtonpost.com/news/wonk/wp/2017/07/27/foxconn-deal-would-cost-wisconsin-230700-per-worker/?utm_term=.134e9829b9eb.
 Culpan, Tim. 2017. “America And The Foxconn Dream”. Bloomberg Businessweek. https://www.bloomberg.com/news/articles/2017-07-27/america-and-the-foxconn-dream.
 Paquette, Danielle. 2017. “The Foxconn Deal Trump Championed Won’t Make Wisconsin Money For 25 Years, Report Says”. Washington Post. https://www.washingtonpost.com/news/wonk/wp/2017/08/09/the-foxconn-deal-trump-championed-wont-make-wisconsin-money-for-25-years/?utm_term=.0a84a951f363.