Foxconn to build TV fab in US…Foxconn to build something in US
But there are a number of issues that would surround such a fab that are now coming to the surface, making the project, should it become a reality, a slightly different animal. First, the infrastructure necessary to build and operate an ultra-large format LCD fab is substantial, with many Gen 8 and larger fabs built in Science Parks, where a significant number of supporting companies have facilities to supply the large fab. These Science Parks are common in Taiwan, South Korea, and China, and are being developed for other regions like Vietnam and India, but do not exist in the US for the display industry, as little display production is done in the US.
Second, Foxconn has decided to revive the Sharp (6753.JP) brand, as an outgrowth of their controlling stake taken last August. Toward that end they ended supply agreements with both Samsung Display (pvt) and Chinese TV brand Hisense (600060.CH), in order to channel Sharp’s TV panel production toward its own brand. While we still question the necessity of such a move, it came after Sharp had licensed the Sharp brand in the US to Hisense through 2020. When Foxconn requested that Hisense terminate the agreement so Foxconn could sell the Sharp brand here, Hisense refused, not surprisingly so, which boxes Foxconn out of the US market with the Sharp brand. The necessity for Foxconn to produce TV panels in the US makes little sense given that circumstance, and the chance that a TV panel fab will be built in the US remains low.
The new story is that Foxconn is considering a Gen 6 fab that will focus on production of small to medium sized displays for “IoT applications, including automotive, medical care, and mobile terminal displays”[1]. This new tact falls in line with the fact that Foxconn is Apple’s (AAPL) primary OEM, and producing displays for Apple products in the US would assuage administration ire over the importation of consumer products made in foreign countries. That said, providing the technology, infrastructure, and cost structure necessary to build high volume product for Apple in the US would still be a daunting task for Foxconn, but when faced with the specter of high import tariffs threatened by the administration, there could be a case made. More likely such a fab would provide less demanding and more premium oriented products for a variety of applications that are less sensitive to competitive cost structure, and not as critical to the world’s most valuable brand.
But, when all cards are laid on the table, it will come down to the potential deals that Foxconn can make with the Federal, but more likely state and city governments for ‘incentives’ to lighten the cost burden of producing displays outside of Asia. We would expect something to be built eventually, maybe a display fab, or an automated assembly plant, as the photo-ops have already been taken and tacit commitments have been made, but we do not expect a shift in the world’s display production to the US to any large degree, despite what gets said by CEOs as they try to keep the US from creating an untenable trade situation that will upend the consumer electronics industry even more than it already is. JOHO.
[1] According to Taiwan-based supply chain makers, as per Digitimes