Apple supplier Foxconn announced plans to open a new production facility for LCD displays in Wisconsin yesterday. The company and the state of Wisconsin pointed out that the facility's construction would support 10,000 jobs in each of the next four years, as well as 6,000 indirect jobs. Foxconn would eventually employ 13,000 people with an average salary of $54,000.
Yesterday, we didn't know how exactly Wisconsin Governor Scott Walker convinced the world's largest contract electronics manufacturer to set down roots in the state. Today, we're getting a better idea. In a phrase: lots and lots of tax breaks.
Wisconsin will offer up to $3 billion in tax breaks to the Taiwanese company over 15 years. Up to $1.5 billion of that tax credit is for job creation; $1.35 billion is for capital investment; and up to $150 million is for the sales and use tax exemption (or no sales tax for construction materials). Wisconsin says these incentives will cost between $200 million and $250 million a year. Once fully staffed, the government estimates that Foxconn will spend $700 million a year. Still, the facility won't be operational until 2020, if everything stays on track.
Bloomberg Businessweek technology columnist Tim Culpan calculated some other figures: Wisconsin is paying as much as $1 million per job. He also points out in his piece that along with investments that Foxconn has already made around the world this year, including in India and China, it now has $27.5 billion worth of commitments, which is more than the flagship company has spent in the past 23 years.
Wisconsin says it's building in protections and that the tax credit is "tied to actual performance" and won't be provided if the company doesn't end up creating jobs or investing capital. Still, Foxconn could ultimately build its facility, hire some people, and rely on automation to offset initial cost. The promise of manufacturing jobs could be better than reality.