Consumer Electronics Manufacturing in Mexico
January 20, 2021
Experts forecast that the global consumer electronics manufacturing industry will grow at a CAGR of more than 7% between 2020 and 2026, and there's every indication that much of that growth will come out of Mexico. Mexico may be well known for its automotive manufacturing, but the manufacture of consumer electronics is a close second in terms of Mexico's exports.
The country produces a wide range of consumer electronics, including computers, smartphones, tablets, televisions, major household appliances, and the smaller components necessary for their operation, such as circuit boards, semiconductors, and microchips. The vast majority of these goods are shipped to the United States, Mexico's largest importer of consumer electronics.
In 2018, Mexico exported $29.7 billion worth of computers, its third-largest export, more than $16 billion in telephones, and $10 billion in video displays. When added up, this makes Mexico the 8th largest producer of electronics worldwide.
Now, with demand for consumer electronics sky high, and new trade deals incentivizing production in North America, many consumer electronics manufacturing companies are wondering if an operation in Mexico could be right for them.
Consumer electronics demand is high
Mexico has become an attractive location for consumer electronics manufacturing in part due to its synergy with other manufacturing activities focused here. While it has a robust industry of consumer electronics, much of this expertise has arisen out of a long history in manufacturing complex components for the aerospace, automotive, and medical device industries.
In many cases, there's valuable overlap between these industries. As automobiles evolve, they're driving demand for new component types and new players in the supply chain. Kristin Dziczek, vice president of industry, labor, and economics for the Center for Automotive Research, points out that the semiconductors at the heart of computers and smartphones are becoming increasingly critical components of new car's touchscreens, infotainment modules, window controls, and even engines. This overlap means the skillsets and materials being used in the automotive industry are also building up skillsets and supply chains in support of the electronics manufacturing industry.
High demand for computers is also pushing computer and semiconductor production sky high. The dramatic uptick in remote work and home or virtual schooling in 2020 has strained the existing computer production supply chain, pointing to a significant need for increased manufacturing of semiconductors and other electronic components.
There are several reasons that Mexico may become the ideal location for the production of these critical electronic components.
For starters, the 2020 ratification of the USMCA has cemented many incentives for manufacturing innovative technologies in Mexico. John Neuffer, president and CEO of the Semiconductor Industry Association (SIA), notes that the ratification of the USMCA agreement may help to strengthen the digital economy and the global semiconductor supply chain by ensuring that more electronics goods are made in North America. He cites new rules that prevent parties from restricting trade of commercial encryption products, more robust protections for trade secrets and other types of intellectual property, and commitments to protect the free and open flow of data across borders, as encouragement for greater design and manufacturing of tech products in Mexico.
In addition, disruptions to traditional global supply chains have encouraged more consumer electronics manufacturers to consider opening operations in Mexico in the future. Many of these products have been made in China in the past, but many companies have found themselves looking for an alternative low-cost manufacturing country.
For example, a number of Taiwanese consumer electronics manufacturers have reportedly considered moving manufacturing to Mexico in order to avoid being impacted by U.S. tariffs on Chinese goods. The Taiwan-based Apple iPhones assemblers Foxconn Technology and Pegatron, as well as computer manufacturer Inventec and Japanese electronics manufacturer Panasonic are among the consumer electronics manufacturers eyeing expansions into Mexico.
For many companies, moving consumer electronics production to Mexico also reduces the time goods spend in transit to consumers in the United States. This regionalized approach to manufacturing is becoming increasingly popular as global companies balance cost-saving measures with resiliency in the event of supply chain upheaval.
Consumer electronics manufacturing clusters in Mexico
One of the chief benefits of manufacturing in Mexico is the already established manufacturing expertise and infrastructure. After all, this activity makes up approximately 17% of the country's GDP. As a result, the country is home to a strong manufacturing workforce and technical training to meet manufacturing needs.
This workforce and supporting infrastructure varies across the country, with economic clusters sharing synergy in states or cities.
Baja California is home to more than 200 electronic companies. Tijuana is a top producer of televisions for brands including Panasonic and Vizio, among a wide range of electronics components.
Mexico's Bajio region, stretching across Aguascalientes, Jalisco, Guanajuato, and Querétaro is also home to many global electronics manufacturers. Manufacturers including Samsung, Industronic and MD Elektronik have made this among the fastest-growing manufacturing regions in Mexico. Between 2013 and 2018, the manufacturing sector here grew 47.2%.
The city of Guadalajara in Jalisco has become known as a hotspot for software and electronics manufacturing, earning it the nickname the "Mexican Silicon Valley." It boasts a population of over 5 million inhabitants, increasing at a steady rate of 1.5% annually, making it the third most populated city in Mexico. Manufacturers in Guadalajara include companies like Haier Electronics, the world's leader in appliance manufacturing; sensor manufacturer Flex; APS, a manufacturer of ATM and payment systems; and circuit board designers and producers Sanmina, IKOR, and Grupo Gollet, among others.
There is also a strong concentration of electronics manufacturing companies throughout the State of Coahuila and Sonora, specifically in Guaymas and Hermosillo.
Ready to set up an electronics manufacturing factory in Mexico?
With consumer electronics demand high, there's no better time to build upon this fast-growing industry. And, with the possibility of launching a cost-effective operation in Mexico within as little as 90 days, there may be no better place to make your next move.
If you're ready to learn more about building your consumer electronics manufacturing presence in Mexico, contact Tetakawi today.