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Anyone familiar with Foxconn / Hon Hai Precision Industry has retained a dose of skepticism when Foxconn announced that it would build advanced LCDs in Wisconsin. To put it faithfully, Foxconn is not renowned for honoring its contracts.
More than 20 years ago, when I was working for E-business magazine, one of our editors spent months organizing an in-person interview with Hon Hai leaders in Taiwan. The editor arrived at Hon Hai headquarters to be told that the interviews would not take place.
Little has changed. On January 29, the media announced that Foxconn was reducing its manufacturing projects in the United States. Instead of its proposed "campus", Foxconn would create a "technology hub" focused on research and development. Its employees would be largely composed of engineers and scientists.
On February 1, Foxconn rescinded the decision by announcing the construction of a Gen 6 LCD display plant in Wisconsin. About 13,000 jobs in the manufacturing sector need to be created.
Count on me as a perpetual skeptic. From a supply chain perspective, a US-based LCD panel plant simply does not make commercial sense. Let us count the means:
Technology
LCDs are one of the oldest, most established, and lowest cost display technologies for applications ranging from gas pump kiosks to sports stadium broadcast screens. The production can easily be adapted to a 2-inch panel or a 60-inch TV. Over the past 30 years, manufacturing problems – multilayer, glbad performance panel, circuit test and repair, "dead" pixels, etc., have been largely solved. Although there is still room for improvement, recent advances in LCD technology are not being measured by leaps and bounds.
In addition, Foxconn already has LCD panel manufacturing plants in Japan and China. Foxconn acquired a majority stake in the Japanese company Sharp Corp. in 2016.
Infrastructure
Japan, thanks to its long-standing dominance of consumer electronics, has been the capital of LCD manufacturing for decades. This distinction has since been awarded to South Korea, which has invested heavily in flat panel manufacturing infrastructure. Samsung and LG Electronics are still among the largest producers of LCD screens in the world. Chinese companies have recently been added to the main producers of LCD screens.
Investment in new factories and LCD equipment has stabilized in recent years – except in China.
The United States is just not friendly to LCD screens. In the early 2000s, Toshiba Corp. – of which Foxconn is the computer division – tried unsuccessfully to build LCD TVs in the United States. In 2015, Toshiba had completely abandoned the manufacture of televisions, citing price competition in the United States as a factor.
Price
LCD TV prices have been falling for years and China's entry into the market will put more downward pressure. Since LCD manufacturing is concentrated in Asia-Pacific, panels can be produced in large quantities and at relatively low cost. Even Foxconn admitted that it was cheaper to build LCDs abroad; ship them to Mexico for badembly; and import the bademblies to the United States.
LCDs have also become a commodity, as are memory products. Prices fluctuate depending on the supply, demand and level of stocks. In the first half of 2018, prices for LCDs dropped, according to IHS. Panel makers began emptying their inventories of low-priced products, but increased their prices as demand resumed for the end-of-year shopping season.
Nevertheless, Foxconn thinks it's a good idea to create price-sensitive commodity products in the US without an apparent supply chain. Except for the New York-based Corning Inc., which manufactures glbad used in flat-panel displays, US suppliers of LCD screen materials are nominal.
Transition to new technology
Although LCDs remain a staple for telephones, tablets, televisions and giant screens, the market is currently moving towards new technologies such as Organic Light Emitting Diodes (OLEDs). OLEDs have considerable advantages over LCDs: they consume less energy; does not require backlighting; and can be manufactured on flexible substrates. They are also easy to look at: the colors are bright; OLEDs do not wash in daylight; and the pixels do not short circuit. It is fair to say that the Holy Grail in the smartphone industry is an unbreakable screen.
According to IHS, panel spending in 2019 will focus on converting conventional LCD panel manufacturing facilities to advanced active matrix (AM) OLED plants. Panel manufacturers use previously purchased TFT tools while adding OLED front-end, color conversion, cell and module devices to their plants.
Overall, investments in new panel equipment are slowing down. "Hope to increase investment in new technologies in OLED AMOLED and OLED quantum dot TVs as well as folding screens; combined with the restructuring of the industry and the increase in demand when prices fall, offers the hope of another positive cycle, "IHS said.
So … about Foxconn …
It is obvious that political pressure played a leading role in Foxconn "Coming to America". Apple, Foxconn's biggest customer, has been criticized for not manufacturing its products in the United States. Thanks to its long manufacturing relationship with Foxconn, Apple can – in part – counter this argument.
The promise of new jobs in the manufacturing sector has been a slam-dunk for former Wisconsin governor Scott Walker for political reasons. But Foxconn does not have a good track record with its employees. In 2016, investigations revealed that Foxconn was overworked and underpaid its workers, among other abuses. Apple, which promises its supply chain partners to meet Apple's standards of conduct, has spent years rehabilitating its relationship with Foxconn.
Finally, state and federal agencies have made Foxconn much incentive to build in the United States. Tax breaks estimated at $ 4 billion were obtained for the Taiwanese company and its launch in Wisconsin was publicly celebrated by local politicians and President Donald Trump.
As a provider of electronics manufacturing services, Foxconn is so vast that it has its own category in the EMS global rankings. Foxconn has fulfilled this position, in part, by limiting the cost of its materials, employment and facilities. But there is there to no Foxconn will adjust its supply chain in the US – it makes no sense.
"For a period of 25 years, screen providers have built infrastructure and expertise in Asia. Even though the import of components and materials is possible (and for some materials such as liquid crystal, the import of raw chemicals is probably the most economical solution), a local supplier. the supply base is critical to making a productive plant, "according to DisplaySupplyChain.com.
In my humble opinion, the bottom line is the combination of corporate greed (which can withstand $ 4 billion in tax cuts?) And politically motivated campaign promises (Scott Walker, President Trump) can only provide dishonest stories, fueling confusion between community businesses and Wisconsin taxpayers. Foxconn's two-day rocker – after a call with President Trump – is no the badurance of his commitment. After all, the construction of the Fabs is time consuming and elections are planned for 2020. If the political wind changes, next year, there is still plenty of time for Foxconn to change its mind.
– Barbara Jorgensen is editor of EPSNews, sister publication of EE Times. A journalist over 28, she has worked for leading publications in the electronics industry such as Electronic Business, Electronic Buyers' News and EDN.
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