When Taiwanese electronics manufacturer Foxconn announced its $10bn investment towards a production campus in Wisconsin in 2017, then president Donald Trump boasted his grand visions for the project, envisioning a “Silicon Valley of the Midwest” and a “rebirth of American manufacturing.”
Aimed at creating 13,000 jobs, the site in Mt. Pleasant was one of the largest greenfield investments announced by a foreign company in the US. Fast-forward nearly four years since the project's announcement and the reality is a far cry from Mr Trump’s visions of a midwestern tech hub.
Today, mostly vacant buildings occupy the 3000-acre Foxconn site, which never fulfilled its original purpose to create advanced LCD displays. Moreover, the project has created just 550 jobs of the 13,000-job target.
After much local scrutiny of the ambitions and steep tax incentives of the project, Foxconn announced in April a renegotiated contract with the state of Wisconsin, which substantially scales back the $10 billion investment.
The new contract reduces the original investment to $672m and decreases the job creation target to 1,454.
The project has garnered scepticism since its inception in 2017, with both local and national critics voicing doubt over whether these ambitious targets could be met.
There were practical concerns: industry executives stressed that the necessary flat-panel display suppliers for the plant were nowhere near Wisconsin, posing significant geographic hindrances to operations.
And there were tax concerns: the original contract authorised $2.85bn in performance-based tax credits to construct the plant that — combined with local tax incentives, and road and highway investments by state and local governments — hiked the total tax-payer subsidies to more than $4bn.
The amended agreement, signed by Foxconn officials and the Wisconsin Economic Development Corporation (WEDC), reduces these performance-based incentives to just $80m and shortens the life of the contract from 15 years to six.
“Under the old agreement, the state had to set aside roughly $210m annually for incentive payments for the entire 15 year term,” WEDC secretary Melissa Hughes tells fDi. “That was a 15-year burden that Wisconsin taxpayers were facing, but by right-sizing the contract, we’ve been able to free up that burden.”
In a press statement, the Taiwanese tech company states that “Foxconn is happy to have worked with the administration of governor Tony Evers to significantly lower taxpayer liability.”
Foxconn’s renegotiated contract in Wisconsin lends itself to the broader debate about the cost of foreign company incentives for taxpayers. Some swear by the necessity of performance-based incentives for achieving job creation and other targets, while others question their efficacy altogether.
In August 2020, Timothy Bartik, senior economist and authority on incentives at the WE Upjohn Institute for Employment Research in Kalamazoo, Michigan, told fDi in August 2020 that, according to his research, the same local job creation would have occurred without the incentive at least 75% of the time.
Hence, the stakes are high in cases such as this, where the original incentive package ranged from $172,000 to $290,000 per job, according to Mr Bartik.
The renegotiated incentives, Ms Hughes explains, “give Wisconsin the opportunity to spread economic development investments across communities and businesses, rather than investing in just one company.”
Future of Wisconn Valley
Despite the fizzled visions of a Midwestern tech hub, Foxconn said it is “looking forward to working with WEDC and our local partners to attract market-driven development to the park.” It mentioned potential uses for the site, which include the manufacturing of electric vehicles, digital health and robotics using artificial intelligence, as well as semiconductors and 5G technologies.
Situated “strategically” in Mt Pleasant, the company maintains that the Foxconn site still has the potential to “make Wisconsin one of, if not the largest manufacturer of data infrastructure hardware in the US”.
Becoming a major tech destination could be on Wisconsin’s horizon. According to Ms Hughes, in 2020, “the Brookings Institution ranked the entire Madison–Milwaukee region as the most promising next-generation tech hub in the US and proposed spending $1bn annually for the next 10 years to further develop it as a regional innovation centre”.
While these studies suggest the region still has potential to become a tech hub, both the state and Foxconn seem to be resting easy with the renegotiated deal.