Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Here's a challenge to President-elect Donald Trump's plan to be bring jobs back to America before his inauguration Jan. 20.

In an announcement made just before the new year, Foxconn's flagship Hon Hai Precision Industry Co. said it will spend $8.8 billion to build a massive display-panel factory for its joint venture with Sharp Corp. Crucially, the location chosen by Foxconn Chairman Terry Gou is China, not the U.S.

The obvious setback is that this is 8.8 billion greenbacks that won't be pumped into Trump's America. But the loss is deeper. Of all the areas where Apple Inc. and its partners might have found job opportunities for American manufacturing, display panels looked among the most promising. 

Growth Hunt
Hon Hai, Foxconn's listed flagship, needs to find new sources of revenue as quarterly sales slow
Source: Bloomberg

Let me digress to explain the various stages of iPhone manufacturing. Some areas require expensive equipment and materials, including semiconductors and electronic screens; others lean more on labor, such as final assembly. It's Foxconn's army of assembly workers that gets all the press, but in the multi-step process of iPhone manufacturing far more value is added by workers elsewhere in the supply chain.

These are the people who set up the multibillion-dollar semiconductor equipment that builds Apple's A-series processors, work the metal-carving machines and shuttle pieces through each step to make an iPhone's gleaming shell, or shepherd sheets of glass through the cocktail of chemicals that make a razor-thin, crystal-clear Retina display.

These aren't wage-sensitive jobs, but the kinds of high-quality manufacturing positions that the president-elect pledged to create.

If any parts of the iPhone-manufacturing process are to be shifted to the U.S. to create valuable jobs, then the best candidates are in capital-intensive areas such as chips and displays, or automated processes like metal carving and plastic molding.

In displays, where oversupply has forced the industry to wear billions of dollars in losses over the past decade, building a factory in China immediately cuts the chances for a plant in the U.S. and with it the prospects for new jobs that could have numbered in the thousands.

Job Hunt
Flat panel makers employ thousands of workers at factories around Asia
Source: Companies, Bloomberg
Note: Doesn't include Samsung or Sharp, which make products other than flat panels.

And it's not just displays. Every time any manufacturer chooses to invest in China, they're deciding not to build in America -- in most cases the U.S. isn't even considered. To his credit, what Donald Trump has done is to force executives to entertain the idea of opening factories in the U.S. Yet as I outlined in my parody letter from Terry Gou to Donald Trump last month, entertaining an idea isn't the same as acting on it, even if an executive comes to Trump Towers for a photo op.

This decision by Foxconn shows that simply putting the U.S. back on the table won't make America great again.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The Foxconn-Sharp venture, Sakai Display, says it will focus on large displays for TVs.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net