Foxconn To Sell $8.8 Billion China Factory Amid Intensifying Trade War

Apple supplier Foxconn’s highly publicized China investment for a liquid crystal display (LCD) unit has taken a new turn with the company reportedly scouting for a buyer to sell the $8.8 billion plant.

According to an exclusive report by Reuters, the pitch follows the aggravation of adverse business conditions stemming from the U.S. trade war and falling demand for its products.

The Taiwanese based company, Foxconn is known as Hon Hai Precision Industry has reportedly urged banks to find a buyer for the Guangzhou –based LCD factory specialized in large screens.

However, reports on the Foxconn news also said the sale is not a sure thing as Foxconn’s discussions are at an early stage and it has not quoted a final price for the Gen-10.5 facility.

“It’s not an easy sell and it could take a while,” said one of the sources, citing tepid global demand for large-screen LCDs.

Foxconn calls reports speculative

However, Foxconn’s statement to Reuters said: “we will not respond to market rumors or speculation.”

Plunging demand for large-screen televisions and monitors had been pressuring Foxconn’s business along with rising disruptions in the global supply chains from the Sino-US trade war.

This forced the management to look for a buyer for its LCD plant, according to the Reuters' sources.

Foxconn decided on Guangzhou plant in 2016 as an answer to the rising demand for large-screen TVs and monitors in Asia.

It also wanted to challenge competitor BOE Technology Group in China.

The operations were expected to start in 2019.

Another source told Reuters that the China factory would not start production before October.

That has made the pitch less appealing to buyers as they are afraid additional risks will burden them unlike buying an already operating plant.

Dithering on US investment

Meanwhile, Foxconn is also showing signs of dithering on its commitment to build a display plant and tech research facilities in Wisconsin, USA. There is skepticism that the $10 billion projects might be shelved.

President Trump had cited Foxconn’s Wisconsin investment as proof of his efforts in reviving American manufacturing.

Foxconn has to meet the job-creation targets in Wisconsin. The company told Reuters in January that it may revisit the previous plans of making advanced LCD panels at Wisconsin.

Worsening market scene

The display panel industry has been battling problems of oversupply and declining revenue from the plunging sales of LED TVs and smartphones.

It also faces the specter of worsening trade dispute forcing hike in product prices and dampening of consumer demand.

Meanwhile, reflecting the hardening market conditions, another LCD panel player LG Display posted a huge operating loss in the second quarter.

LG Display incurred an operating loss of KRW 369 billion ($313.02 million) in the April-June period that exceeded the loss of KRW 228 billion ($168 million) in the same period last year, according to Refinitiv SmartEstimate.