Wisconsin’s Foxconn deal part of a much bigger shift in global economy
Those who dwell on the fine print in the state of Wisconsin’s $3 billion contract with Foxconn Technology Group run the risk of missing the screaming headlines of global change.
Will the rest of the 21st century be a second “American Century” like the 20th, or a Chinese Century in which the world’s most populous nation dominates trade, technology, and innovation?
The answer to that question remains up for grabs. States such as Wisconsin that are positioned for the inevitable competition with China —– and other rising powers in Asia — stand to come out ahead.
In the same week Gov. Scott Walker’s team completed an agreement with Taiwan-based Foxconn to invest up to $10 billion and hire up to 13,000 workers in Wisconsin, President Trump visited China as a part of a larger Asian tour.
It was a timely stage to announce about $262 billion in deals between Chinese firms and U.S. companies vested in everything from mobile phone chipsets to soybeans to jetliners. It was all done in hopes of increasing bilateral trade and narrowing a yawning trade deficit, currently in China’s overwhelming favor.
Meanwhile, the trade winds were also blowing in Vietnam, where 11 countries left behind 10 months ago when Trump pulled the United States out of the Trans-Pacific Partnership announced Nov. 8 they are close to an “agreement in principle” to trade more with China. For Beijing, it’s an insurance policy against American trade sanctions.
China is also placing on-shore bets. Chinese companies such as Tencent Holdings Ltd., which is about the size of Berkshire Hathaway Inc. in the United States, are busily working deals here.
Best known for its WeChat messaging app, Tencent recently became one of the largest investors in Snap. The company is also an investor in Tesla and has invested in 40 U.S. tech startups since 2011, joining reported fundraising rounds of $3.5 billion. The trend is consistent with Tencent’s goal to stay current on ideas and products from America’s tech sector.
Is it all part of larger Chinese plan? Yes, and it’s called Made in China 2025. Announced in 2015, the goal is to dominate cutting-edge technologies such as advanced microchips, artificial intelligence, and electric cars within a decade.
China is directing billions of dollars to invest in research at home and to acquire innovative technology from abroad. The effort is changing how trade rules are conceived, written, and enforced. Ideas and intellectual property available over the internet could become as tightly watched and regulated as hard goods delivered by ship.
Foxconn is not a mainland Chinese firm, but it has extensive holdings there as well as the rest of Asia. Its leaders believe planting a foot on American soil is the best way to win over consumers in the world’s largest electronics market and to survive possible trade wars. By building the first liquid crystal display plant outside Asia in Racine County, Foxconn will gain access to American markets, know-how, and regulatory shelter.
It is why Terry Gou, the chairman of Foxconn, took the unusual step of personally guaranteeing Foxconn will perform as promised on investment and jobs. When the Bill Gates of Asia puts up $500 million of his own money, that’s a sign Foxconn is here to stay. Gou and Foxconn want to be safely inside America, not outside looking in, as trade and monetary tensions inevitably grow with competition.
The same forces appear to be driving Broadcom, a semiconductor maker that has announced plans to move its legal headquarters from Singapore to the United States. It has offered to buy another major chip-maker, QualComm, for a reported $105 billion. That would be the biggest takeover in the history of the tech industry.
Critics will continue to ask whether Wisconsin should have invested $3 billion over 15 years to lure one company. Over time, however, as the world’s fourth-largest tech company builds its mega-plant in Racine County and begins to transform the Wisconsin economy through its investments in artificial intelligence, robotics, virtual reality, and more, opinions may change.
Measured only by the terms of the contract, the state’s investment in Foxconn will take years to pay off. Against the backdrop of global trends, the strategy of luring an Asian giant to the shores of Lake Michigan will someday take on the luster of a strategic success.
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