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Foxconn tells Wisconsin it never promised to build an LCD factory

Foxconn tells Wisconsin it never promised to build an LCD factory

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Wisconsin stands by its rejection of the company’s subsidies, but both sides signal openness to amending the contract

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A man walks past an office building with the Foxconn name displayed outside on Wednesday, May 8 2019 in Milwaukee, Wisconsin.
A man walks past an office building with the Foxconn name displayed outside on Wednesday, May 8 2019 in Milwaukee, Wisconsin.
Photo by Joshua Lott for The Verge

In October, Wisconsin denied Foxconn subsidies because it had failed to build the LCD factory specified in its contract with the state. As The Verge reported, it had created a building one-twentieth the size of the promised factory, taken out a permit to use it for storage, and failed to employ anywhere near the number of employees the contract called for. Nevertheless, Foxconn publicly objected “on numerous grounds” to Wisconsin’s denial of subsidies. 

Documents obtained through a records request show Foxconn’s rationale: it doesn’t think it was specifically promising to build an LCD factory at all. According to a November 23rd letter to the Wisconsin Economic Development Corporation (WEDC), Foxconn does not think the factory specified in the contract, an enormous Generation 10.5 LCD fabrication facility, was actually a “material” part of the contract. (“Material” is a legal term that means relevant or significant.)

“As you confirmed on November 10, 2020, the only reason the WEDC made the determination that the Recipients are ineligible for tax credits is because the WEDC believes the Recipients have failed to carry out the ‘Project,’” Foxconn wrote. “Thus, WEDC’s determination of ineligibility is based off its belief that the Generation 10.5 TFT-LCD Fabrication Facility is a material term of the Agreement.”

“Thus, WEDC’s determination of ineligibility is based off its belief that the Generation 10.5 TFT-LCD Fabrication Facility is a material term of the Agreement.”

Rather, Foxconn claimed it and WEDC had a “mutual understanding” that it would build something more vaguely defined, “a transformational and sustainable high-tech manufacturing and technology ecosystem in Wisconsin that brings long-term investment and jobs.” However, Foxconn did express openness to amending its contract to allow for more flexibility in what it was building in exchange for lower subsidies.

Foxconn’s letter was written in response to repeated requests from WEDC to explain why exactly Foxconn was objecting to WEDC’s denial of subsidies. “Your notice of objection stated that there are numerous grounds on which the Recipients object, but it did not detail what those were,” a WEDC lawyer wrote to Foxconn earlier in November.

WEDC is standing by its denial of subsidies. In a letter dated December 4th, the agency wrote that the definition of the project as a Gen 10.5 LCD factory was in fact central to the contract, calling Foxconn’s claim that jobs and investment were the only terms that mattered “incomplete and flawed in several respects.” (It also noted that Foxconn hasn’t performed on the jobs or investment parts of the contract, either.)

Foxconn also expressed openness to amending its contract

The contract explicitly defined the project as a Gen 10.5 LCD factory, and its enormous size and economic impact was the justification for the record-breaking subsidy package Foxconn received, WEDC pointed out, as it has numerous times before. “Without a Generation 10.5 TFT-LCD Fabrication Facility, there is no justification, or consideration, for the enormous tax credit incentives or expense to Wisconsin taxpayers,” WEDC wrote. 

WEDC ended the letter by reiterating it was open to amending the contract to reflect Foxconn’s current plans. There are signs that such an agreement might be close. After claiming the specifics of what it was building were never important, Foxconn added that it does wish to discuss amending the contract to “lower the taxpayer liability in exchange for a flexible business environment in Wisconsin.” Foxconn has previously expressed interest in an amendment only to revert to insisting it was building an LCD factory after all, but it’s possible that with President Trump exiting the White House, the company will feel less pressure to maintain the facade that it’s building the project Trump touted. 

“Incomplete and flawed in several respects.”

But such an amendment hinges, as always, on Foxconn telling Wisconsin what it is actually building. In a November 24th email, WEDC CEO Missy Hughes wrote to Foxconn executive Jay Lee expressing enthusiasm for revising the contract and imploring the company to provide its plans, something the company has refused to do for over a year and a half.

“WEDC’s practice is to understand the company’s plan and award incentives based on that plan and its projected impact on Wisconsin’s economy,” Hughes wrote. “We base our investment on the company’s plans. Should these plans change, WEDC is prepared to amend the contract. But fundamental to an initial award is an understanding of the company’s plans. Accordingly, the next clear step for WEDC and Foxconn is to meet and for Foxconn can outline its plans for Wisconn Valley, its planned investment, and job creation. By providing specific plans about what Foxconn will build, the type of business, the types of jobs and salaries, WEDC will be able to run our analysis of the taxpayer’s return on investment.”

An amendment hinges, as always, on Foxconn telling Wisconsin what it is actually building

A Foxconn lawyer responded with an email agreeing to a video meeting on December 4th, saying, “I am confident that after months of discussions we are on the brink of coming to acceptable terms that will lead to an exciting future for our smart manufacturing park in Mount Pleasant.” 

Neither WEDC nor Foxconn responded to a request for comment on the status of negotiations or to questions about whether Foxconn provided the required plans and projections. However, an interview with Hughes published yesterday indicates a continued lack of clarity around the project. Talks are ongoing, she told the Milwaukee Business Journal, and “Foxconn is helping WEDC understand what their plans are and helping us understand what their projections are so that we can analyze that and think about how we support it from the taxpayer side.” 

But Hughes seemed to acknowledge that Foxconn itself is still figuring out what to do. “For Foxconn, because they’re right at the beginning stages, there’s a lot of different ways that they’re thinking about what they’re going to be working on, whether it’s artificial intelligence or smart manufacturing, and so understanding that — and I will say get overwhelmed by the terminology and the different things — but I do think they’re very forward thinking and I think if there’s anything that Wisconsin can benefit from, from Foxconn, is that forward thinking mindset.”

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