Last week international electronics mega-manufacturer Foxconn announced plans to invest $30 million in a new robotics plant in Harrisburg, PA. Foxconn, the notorious Chinese low-wage manufacturer of Apple’s iPhone, has become the poster child of U.S. outsourcing in the face of ruinous global labor cost competition. The calculus of manufacturing supremacy is seemingly simple: Low labor costs and taxes, proximity to a large consumer base, and manageable corruption levels equal a sure strategy to attract global firms.
So what’s going on in Harrisburg? Foxconn is beginning to realize what a number of global manufacturers have come to realize: Production sites that can leverage university, government, and private R&D, a market-ready STEM workforce, and a vibrant cluster of global manufacturing supply chains trump cheap labor and tax breaks. In this regard the Harrisburg region is a big win for Pennsylvania as well as Foxconn—a company trying to move away from a legacy of poor working conditions to one of high-value, high-skilled production.
Harrisburg and the larger Rust Belt Pittsburgh-Youngstown region to the west are hotbeds of advanced manufacturing. Youngstown is home to the National Additive Manufacturing Innovation Institute—an internationally recognized hub for so-called “3D printing” that draws together public- and private-sector resources. Pittsburgh—with the University of Pittsburgh, Carnegie Mellon University, and firms like Google—has redefined itself from a gilded-era steel town to a modern technology leader in software and robotics. Indeed, Foxconn is investing $10 million in Carnegie Mellon’s world class advanced robotics R&D. Finally, also in the Rust Belt and including Harrisburg, Akron and Cleveland, cheap natural gas has helped push manufacturing job and firm growth in a region that was hit extremely hard by the recession.
While Foxconn may be one of the highest profile foreign firm to relocate to the United States it is certainly not, as we’ve discussed, the first. Again and again, global firms interested in high-end manufacturing are putting a renewed premium on geographic clusters of intensive innovation. To be sure, countries with low labor costs still maintain solid advantages in a number manufacturing industries that will help their economies grow—this is the benefit and reality of a global economy. But when it comes to advanced manufacturing, U.S. metro areas and regions that foster synergies between research, skills, and production will likely continue to be highly sought after from firms looking to move up the global value chain.
"There needs to be substantial follow along investment from the supply chain. This is a significant gamble. For [Wisconsin's state investment in Foxconn] to pay off, you need to build not just one company … you need to build a number of smaller and medium-sized companies."