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Foxconn Display Fab Announcement Surprising for Its Lack of Details, Says IHS

Foxconn’s memorandum of understanding to build an LCD display fab on a 20-million-square-foot “campus” in Kenosha, Wisconsin, (see 1707270017) was “just an announcement of an intent to build something,” rather than a statement of “concrete plans,” Paul Gagnon, IHS Markit director-TV sets research, told us Thursday. Gagnon viewed the announcement as “pretty vague to pin anything on,” he said.

Gagnon found it surprising that Foxconn “didn’t even mention anything about what’s the technology at the plant,” or “what types of facilities” will be based at the campus, he said. That Foxconn’s investment in a U.S. display fab “has been in the rumor mill for over six months” makes it all the more surprising that the announcement was so devoid of specifics, he said. The July 27 MOU said it will take six years to complete the LCD display fab in two phases. Foxconn and Wisconsin officials hope to convert the MOU into a definitive agreement by Sept. 20, the document said.

Locating the campus in southeast Wisconsin “obviously was a political play to reward Paul Ryan,” Gagnon said of the Republican House speaker, whose congressional district will host the Foxconn facility. But the “location is interesting” for other reasons, he said. “To me, unless they have intentions to build TV assembly facilities right away, or at the same time as they build and launch the display fab, then logistically it’s just an awkward place to locate it,” he said. “Let’s say that the first stage is the display fab where the LCD panels are being produced. Well, then they’re going to have to send those down to Mexico to get assembled as finished TV sets. Wisconsin is not next door to Mexico, so logistically, it’s a little awkward. So I would expect that that means they plan to -- in pretty short order, if not at the same time -- build the TVs in the same location.” Foxconn representatives didn’t comment.

With a site that Wisconsin Gov. Scott Walker (R) described as being triple the size of the Pentagon, Foxconn easily “would have the space” to build a TV assembly plant on the same campus as the LCD display fab, Gagnon said. Since Foxconn also is such an important OEM, “they’ve got the knowhow to do it, too,” he said. “I would wonder about the timing, whether they could do both at the same time. I would expect that the display fab would have to get done first, and then the assembly factory later.”

Industry speculation is rife that Foxconn will build a 10.5-gen fab in Kenosha that’s optimized for 65- and 75-inch TV panels, said Gagnon. Of Walker’s remarks at the White House that the fab will supply LCD panels for “everything” from automotive to medical to home entertainment uses, Gagnon said: “I don’t know how you make a gen-10.5 fab that can produce all of those applications. So that just tells you that they don’t yet know the technologies that they’re talking about.”

Foxconn CEO Terry Gou's repetitive mentions at the White House of plans to produce 8K product in Kenosha ties in with "something that the panel industry itself has been really pushing,” said Gagnon. “I mean, let’s face it, 4K is largely commoditized already, so if you’re just going to pump out 4K panels, well, there’s a lot of oversupply for that.” But for Gou to talk so prominently about 8K was also surprising because “there’s no ecosystem for it” and there likely won’t be until “way beyond” 2020, he said. “Certainly, 8K has a lot of applications in medical or specialty display-type applications, but not in the consumer entertainment space.”

Notwithstanding the lack of 8K ecosystems, Gagnon stands by his CES remarks that 4K’s commoditization will soon mean the market introduction of 8K TVs at retail (see 1701090053): “I think you’ll probably see the first 8K sets in China this year,” he said. IHS forecasts that 2019 will be when the first “official” 8K products are launched in the U.S., he said. But Gagnon won't speculate which brands will lead that charge, he said.

Gagnon’s “initial impression was that there is an expectation underlying” the Kenosha announcement that majority owner Foxconn will have the Sharp TV brand “back in their stables by 2020, for sure,” he said. The 2016 agreement under which the pre-Foxconn Sharp licensed its TV brand to Hisense for the U.S. market (see 1608240031) runs out in 2019, Gagnon said. There’s “a lot of heavy pressure being put on Hisense to try to get them to release the brand back to Sharp before then, so at least the Foxconn Sharp can begin building the groundwork themselves prior to the fab going online” in Kenosha, he said. That would include “getting some retail placements, starting to build the brand awareness, that sort of stuff,” he said. "So this investment seems to tie pretty closely to the expectation that they’ll be using it sell a lot of Sharp TVs by 2020,” he said of Foxconn. Hisense representatives didn’t comment.