Electronics maker bids for Toshiba chip unit, advances China plant; it says U.S. losing out
By Eva Dou
GUANGZHOU, China — The world's largest electronics manufacturer is still talking about building a flat-panel plant in the U.S. But in China, Foxconn Technology Group is moving ahead with an $8.8 billion factory that underscores how big a gap remains.
Foxconn Chairman Terry Gou spotlighted the contrast as he and Guangdong Province officials flung ceremonial shovels of earth Wednesday for a new flat-panel screen factory. Officials said it took just 50 days to negotiate a deal with Foxconn, a Taiwanese company formally known as Hon Hai Precision Industry Co.
In a question-answer session with reporters afterward, Mr. Gou said that Foxconn was bidding to acquire Toshiba Corp.'s flash memory chip unit. Analysts expect Toshiba's computer-chip unit could fetch $20 billion or more.
A Toshiba spokeswoman declined to comment. The company has previously said it wants to complete the sale of the flash-memory business as soon as possible in its next fiscal year, which begins April 1.
In the U.S., talks for a flat-panel factory similar to the Guangzhou one have stretched for years with no deal, people familiar with the matter said. Mr. Gou said in January he still hoped to build a $7 billion plant in the U.S. and welcomed pitches from state governments.
On Wednesday, he said he had just been to Washington, but declined to elaborate on the progress of the talks.
Both the Guangzhou plant and the Toshiba bid are part of Foxconn's efforts to become more like Samsung Electronics Co., a consumer brand that makes key components for itself and others. Traditionally a contract manufacturer, it acquired Sharp last year, its first major consumer brand. The new flat-panel plant in Guangdong also fits into that model.
"We are seeing Guangdong's efficiency," Mr. Gou said in his speech. "We are seeing Guangdong officials' charisma and drive."
To compete for such plants, Mr. Gou said, the U.S. must offer tax breaks and develop worker-training programs — and also study how things are done in China.
"We feel that if any state governments in the U.S. want to attract Foxconn, they should come here to learn and study," he said. "To see how in such a short span of time…we can get so many things done here."
Flat-panel manufacturing is a prized target for the U.S. because it is highly automated and creates better-paying jobs than the iPhone factories that employ hundreds of thousands of entry-level workers.
Foxconn expects to use the high-definition flat-panels from the Guangzhou plant primarily for large-screen TVs for the Sharp brand it acquired last year, vice chairman Jacob Chen said at the groundbreaking. China is Sharp's largest TV market, and sales have grown several-fold after Foxconn began a marketing push last November on China's annual sales holiday.
It is Foxconn's first effort to become a brand company, not just a supplier. Since acquiring Sharp, the company has struck deals to make smart TVs with two of China's largest video-streaming providers, Youku Tudou and iQiyi, and is working on a third deal with Tencent Holdings Ltd., Mr. Chen said.
He expects sales of Sharp's latest smart TV model, launched two months ago, to reach one million by the end of March. Foxconn is building "hundreds" of stores in China this year, he said.
Still, some analysts question if the team's products alone can produce enough panel demand to meet the factory's large production capacity.
Although China is Foxconn's main manufacturing base, Mr. Gou said he would move production out if he finds more cost-effective sites. One example was a Vietnam plant Foxconn acquired last year to make phones for Nokia, he said.
"A colleague asked me whether we should move it to China," he said. "My first question was, which side is cheaper?"
Vietnam was the answer, he said, so production stayed there.
Takashi Mochizuki contributed to this article.
Write to Eva Dou at firstname.lastname@example.org
(END) Dow Jones Newswires
March 02, 2017 02:47 ET (07:47 GMT)
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