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July 27, 2017 02:00 AM

Does Foxconn plant mean rebirth of U.S. supply chain?

Steve Toloken
Assistant Managing Editor
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    Rich Williams

    Now that Taiwanese electronics manufacturing giant Foxconn has announced plans for a $10 billion investment in Wisconsin to make display panels, some are wondering if it means a return for the U.S. manufacturing supply chain in electronics.

    According to press reports, Foxconn executives say the Wisconsin factory will be the first in a series of U.S. investments. They and government officials point to the supporting industries it's expected to draw.

    I recently watched a panel discussion on "Manufacturing Under the Trump Administration," at the Brookings Institution in Washington, and the idea of rebuilding the U.S. supply chain in electronics came up, specifically.

    An executive with computer maker Lenovo basically told the audience at the July 13 event to take a deep breath.

    While not talking about Foxconn specifically, Mario Rebello, managing director of government relations for the global electronics company, said right now his company couldn't source many of the components for computers and smart phones in the United States, if it wanted to.

    "We will continue to invent in the U.S., we will continue to architect in the U.S., but the harsh reality is that the global supply chains are not structured for us to grow manufacturing here the U.S.," he said. "If we need to source materials, gather the components of either a PC, a server or a mobile phone, we're going to have to ship them into the United States.

    "We all support the concept that the Trump Administration is driving, which is drive more growth here, drive more jobs here, we'd love to, but the factors that will enable us to do so are not conducive," he said.

    It can be a different story for automobiles, medical parts, packaging or other industrial sectors. They have robust supply chains in the U.S.

    As other Brookings panelists pointed out, the U.S. manufacturing sector is getting more competitive.

    Michelle Drew Rodriguez, the manufacturing leader with the Deloitte Center for Industry Insights, said her company's latest survey of global manufacturing competitiveness showed the U.S. in a very good position.

    All three North American Free Agreement nations are in the top 15 of global competitiveness, she said, forming a competitive regional core against similar hubs in Europe and East Asia.

    That's the way the world's manufacturing supply chains are lining up, into regional hubs that compete against each other, she noted. That makes the North American Free Trade Agreement more important.

    "For the first time ever, global executives are indicating that the U.S. will move to the number 1 global manufacturing competitiveness nation, but it's strongly supported by Mexico and Canada, so we can't look at the US singularly but as a regional hub, if you will," she said.

    Manufacturing is complex, and the trade picture doesn't lend itself to simple characterization. The Trump administration in its comments on renegotiating NAFTA focuses on lost jobs, which is understandable.

    But Rebello also suggested that the Trump administration's inability to clarify its policies on trade, beyond strong protectionist language, is hurting companies like Lenovo, which has manufacturing in 40 countries.

    His take was that the uncertainty is slowing key business decisions worldwide, because other countries are waiting to see what the U.S. will do, he said.

    Foxconn may have a different view, with their announcement this week. But Lenovo seems to see more downsides, or maybe it sees more complexities, in global manufacturing supply chains.

    "The U.S. policy, or the lack of clarity what direction the U.S. is going in, other than being more protectionist, is having ripple effects across every aspect of our operation," he said. "This period of waiting for clarity is actually forcing us to slow down, not only in our industry but we're seeing this across the board where we're holding to make decisions."

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