Foxconn supply chain could bring opportunities to Wisconsin businesses

The massive Foxconn factory planned for southeast Wisconsin could redefine the futures of hundreds of businesses in the region, including many that could be plugged into technologies not yet foreseen.

Once the $10 billion plant opens — it's projected to begin producing very high-definition LCD screens in 2020 — Taiwan-based Foxconn says it will make $4.26 billion in supplier purchases annually, about one-third of them within Wisconsin.

It’s an enormous amount of money that could flow through area businesses, whether they’re suppliers of advanced technologies, such as robotics and automation software, or more basic things like paper towels for factory bathrooms.

Think of Foxconn as a virtual village, with the factory as its town hall.

It's likely to spawn many new businesses, said Dan Steininger, cofounder of BizStarts, a Milwaukee organization that assists emerging companies.

“I think it’s going to have a dramatic effect on the business startup community. The existing marketplace will probably not be able to meet all of Foxconn’s needs,” Steininger said.

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Construction is still months away — an exact site for the complex hasn't been named yet, although it appears likely to be in Racine County or Kenosha County — but when construction work is in full swing it could be a windfall for area contractors while providing thousands of jobs in the building trades.

“This is going to be some big momentum for our industry. I certainly haven’t seen anything like it during my 30-year tenure in construction,” said Mike Fabishak, CEO of Associated General Contractors of Greater Milwaukee.

Contractors will need workers

Foxconn will likely hire an outside firm to oversee its interests during the construction phase of the project, with that firm acting as a conduit for building contractors.

The company will need local connections that understand the nuances of Wisconsin construction, including weather and the workforce.

Already saddled with labor shortages, contractors will need to recruit heavily for the project.

“I am not suggesting this won’t be challenging, but I think we are poised to respond to the labor needs better than other industries facing the same challenge,” Fabishak said.

The labor market in southern Wisconsin, northern Illinois and the United States overall is tight. The jobless rate is 3.3% in Kenosha County and 3.4% in adjacent Racine County.

“We will have to be more aggressive in reaching people who are underemployed as well as unemployed,” Fabishak said.

As a contract manufacturer of high-tech products, such as the Apple iPhone, at huge factories in China and elsewhere, Foxconn is already focusing on using artificial intelligence in industrial settings, where humans program computers to talk to other computers, which then grow smarter by themselves.

Other advantages of advanced manufacturing techniques include the ability to collect data on the factory floor, sync it with suppliers of parts and materials to maximize production and lower costs, and closely monitor and save energy.

On Friday, Foxconn announced that it has partnered with Milwaukee's Rockwell Automation, which calls itself the world's largest company dedicated to industrial automation and information, to develop advanced technologies for the new factory and other Foxconn sites.

“I am confident that together we will increase operational efficiencies in electronics manufacturing to new levels...” Terry Gou, Foxconn chairman and CEO, said in a statement.

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Wisconsin has hundreds of companies in the energy, power and controls sector, with $38 billion in annual sales.

Foxconn’s decision to build the factory in Wisconsin affirms the work that’s been done in the state, said Alan Perlstein, executive director of the Midwest Energy Research Consortium in Milwaukee.

“They’re smart if they collaborate with the technology developers in this region,” Perlstein said.

Large and small companies may benefit

The development has the potential to benefit not just large area companies like Rockwell and building-controls giant Johnson Controls, but also smaller firms with highly developed specialties.

An example: Scanalytics Inc. of Milwaukee says its software, which tracks the movement of people in buildings, can be used to improve efficiency in manufacturing plants.

Its founder, UW-Whitewater graduate Joe Scanlin, says the software can help create "intelligent buildings" and provide an understanding of how everyone in a given space interacts. 

Akitabox, a Madison company whose software is used to manage thousands of components in an industrial setting, also is watching the Foxconn development closely.

"Once there are more hard deadlines on the construction, and contractors are selected, that's about the time we start talking about getting involved," said Luke Perkerwicz, vice president of sales and marketing for Akitabox.

Foxconn can be expected initially to bring along some of its Asian suppliers who are familiar with the company’s operations.

"But that puts other companies in the place of being suppliers to the suppliers. I think there are going to be opportunities across the board,” said Carmel Ruffolo, associate vice president for research and innovation at Marquette University.

“It really is a whole village that is going to be impacted,” Ruffolo said.

Eventually, the Foxconn operations are likely to spawn businesses — not necessarily intentionally — as employees of the company leave to create something of their own.

“Investors will back those people because they’ve worked for a successful company. They understand the supply chain,” BizStarts' Steininger said.

Foxconn coordinated its site selection efforts with regional economic development agencies like the Milwaukee 7 and the Metropolitan Milwaukee Association of Commerce in choosing to locate in Wisconsin, and it is sure to continue that relationship as it connects with local businesses.

The resulting economic ecosystem could be huge if the Asian company follows through on its proposal to create a complex employing as many as 13,000 people.

 Many smaller companies have more than 100 businesses in their supply chain, which in turn can sustain hundreds of other businesses — suppliers to the suppliers.

“Foxconn will have a supply chain the likes of which we have never seen here,” Steininger said.