Business Leaders: Foxconn Plant Could Benefit WI Startups, Lure VC

Local startup companies could be among the beneficiaries of a 25 million-square-foot manufacturing facility that Foxconn, a Taiwanese electronics assembly giant, intends to build in southeastern Wisconsin, according to state economic development officials.

Foxconn, which is perhaps best known as a key supplier for Apple (NASDAQ: AAPL) and other device makers, in July announced plans for the electronic display factory. The company pledged to spend $10 billion over the next three years to construct the plant, which is expected to employ at least 3,000 people when it opens. The state of Wisconsin will provide Foxconn up to $3 billion in tax credits and other incentives over 15 years, provided the company hits certain investment and hiring targets. (State officials have said they expect the factory will create up to 13,000 jobs over time). Meanwhile, local government officials reportedly approved a $764 million spending package this week to support the project. That move led Moody’s Investor Service to downgrade the credit rating of Racine County—where the facility is expected to be built—by one notch, Reuters reported.

During a panel discussion Wednesday at an event organized by Wisconsin Manufacturers & Commerce, Wisconsin Department of Administration secretary Scott Neitzel said he believes the plant will encourage entrepreneurs to launch companies that link into Foxconn’s supply chain.

“Think about all the entrepreneurs across the state who will start a new business to supply something” to Foxconn, or become “suppliers of suppliers,” Neitzel said. “That’s going to attract a lot of venture capital into the state.”

That’s just hopeful speculation at this point, but leaders in Wisconsin’s innovation community would likely welcome such a change. According to Seattle-based PitchBook and the National Venture Capital Association, investors poured $240.6 million into startups based in the Badger State last year. Wisconsin’s total represented less than 1 percent of the $69.1 billion venture firms invested in U.S. companies in 2016.

Louis Woo, a special assistant to Foxconn founder and chairman Terry Gou, said he expects an “8K-plus-5G ecosystem” to form around the company’s display plant, which could open as soon as 2020. 8K refers to the image quality of the screens Foxconn would manufacture in Wisconsin; these devices would have four times as many pixels as 4K, the standard of many of today’s top-selling televisions and computer monitors. And 5G refers to the next generation of wireless network systems.

“I think the most exciting part [of the project] is to work with Wisconsin companies—startups … and large ones—to build vertical solutions,” said Woo, another speaker on the panel.

Woo said some of the screens Foxconn plans to produce at its Wisconsin factory would be aimed at both consumers and professionals, including those who work in healthcare. The company’s latest display technology could “enable doctors to do remote consultations or joint consultations,” or perform cutting-edge medical procedures that take advantage of advancements in nanotechnology, Woo said.

Mark Hogan, CEO of the Wisconsin Economic Development Corp. (WEDC), said his organization plans to create a position focused exclusively on connecting Wisconsin businesses with suppliers that are also based in the state. (WEDC, a state-affiliated agency focused on job creation, negotiated the terms of Foxconn’s contract with the state.) Part of the goal is to ensure that the economic effects of Foxconn’s proposed plant—which would be funded in part by taxpayers across Wisconsin—extend beyond the state’s southeastern corner, Hogan said during the panel discussion.

One point the panelists emphasized is that while the project has created a lot of buzz in recent months, it’s still in its early stages.

Neitzel said that if one compares the process of building and staffing the Foxconn facility to a football game, “at this point, it’s kind of like the end of the first quarter.” Woo later commented that he’s “not as optimistic as secretary Neitzel.”

I would envision that the first quarter is definitely not [completed],” Woo said. “I think we have just finished singing the national anthem. There’s a lot we need to prepare. I just have two words I would like to ask you: be patient.”

Jeff Buchanan is the editor of Xconomy Wisconsin. Email: jbuchanan@xconomy.com Follow @_jeffbuchanan

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