2 Sides to the Border

Writing in Circuits Assembly this month, our longtime columnist Sue Mucha explains the forces that set the wheels in motion for Foxconn’s much-discussed deal to put a new campus in southeastern Wisconsin.

Some of the impetus starts, oddly enough, in Mexico, where a 2014 change in the status of flat-panel displays made them subject to that nation’s 16% value-added tax. The TV assembly industry crashed. Writes Sue: “In short, tax policy in Mexico appears to have contributed to a changed investment strategy in the TV assembly market. That didn’t just impact TV manufacturers; it also impacted the EMS companies they outsourced to.”

The gate swings both ways, according to a  Reuters report today. The wire service says Amazon, Facebook and Oracle, among others are leading the way south, expanding operations and hiring engineers in Mexico, where the cost of living is lower, access to talent is rising, and US immigration laws (and attitudes) aren’t in play.

Could this be the tip of a coming iceberg?


Why a Tight Supply Chain Is Actually Less Restrictive

This is a great first-hand account of why a tech OEM found manufacturing in Mexcio to be far superior to China. The shorter supply chain, lower inventory, access to plentiful skilled engineering and machine talent (and accountants versed in manufacturing operations) — all of these have played roles in the decision-making and success of 3D Robotics.

Mexico’s ‘Other’ City

While Guadalajara and Juarez get most of the press, the city of Saltillo, Mexico, has a lot going for it in terms of manufacturing capacity and infrastructure.

To that end, this podcast with Powerbrace Corp. hosted by The Offshore Group on the subject of establishing a manufacturing supplier base is worth a listen.

Although many manufacturers from the U.S. and other nations have production facilities in Saltillo, sometimes referred to as “Little Detroit,” not all of them take full advantage of the local Mexican supplier network that has grown in the city and the region over the last several decades.

Saltillo is apparently known for its technical expertise, with precision machine shops, foundries, steel mills, heat treating facilities and powder coating operations, plastic injection molding and other services. Saltillo also is home to 19 technical and 14 vocational schools.

Mexico’s Other Victims

Mexico’s recovery in electronics manufacturing is being tested by widespread violence among warring drug cartels.

Electrolux, for one, has opted to locate a $190 million appliance factory in Memphis, TN, after being turned off by the shootings and other skirmishes taking place daily in many Mexican states, the Wall Street Journal reports today.

Electrolux, which has a large campus in Juarez, must have been influenced by the rapidly climbing death tolls: some 11,000 citizens have been murdered as part of the drug wars this year alone. Many more have been beaten up or kidnapped.

On the surface, the insanity hasn’t appeared to suppress investment from the EMS side: Victron and Federal Electronics, among others, have opened plants south of the border this year. But overall US investment, while up over 2008 levels, is down versus 2006-08.

As OEMs take a conservative route and opt for safer environs, will their supply chains follow? If so, the recent gains Mexico has made against China might be lost — this time for good.

Unrest in Mexico

Did you know the vast majority of workers at some major Mexico-based EMS companies are, in fact, contractors?

Reporting by Corporate Watch says the bulk of workers at plants owned by Foxconn, Flextronics, Jabil and others are, in fact, temps.

Here’s a quote regarding one (fairly recent) study:

A 2007 Cereal study found that approximately 60 percent of the 400,000 workers in Mexico’s electronics industry work for temporary agencies, with some companies employing as much as 90 percent of their workforce through sub-contractors.

The reason I bring this up is because most of these companies also are members of the EICC, a group of leading electronics companies that, among other things, have signed on to a “Code of Conduct” governing how they would treat workers, including temps. Yet that hasn’t stopped street demonstrations in Guadalajara, where a small group of workers has argued in favor of better employment conditions and severance payments.

I’m not willing to blow this out of proportion. But as a nation that aspires to be the benchmark for the world, we must take care to ensure our standards are consistent in all lands in which we work, not just our own.

Santa Anna, Redux

That was quick. Electronic News today raised the same point as my post from last week.

To quote: Opinion: In comparison to China, Mexico has emerged as a “best cost country” for products destined for the United States and global markets. Daniel J Hill, CEO of Silicon Border, argues that the reasons for this trend are relatively straight-forward.

You can read the article here.

Santa Anna’s Revenge

We continue to see greater emphasis on Mexico as a preferred sourcing spot by North American OEMs, and thus a preferred locale for volume production by major EMS companies.

The latest proof: According to a recent article, Jabil expects to boost employment at its factory in Zapopan to more than 9,000, up 136% from October 2008.  According to an industry source, Jabil has moved all but six SMT lines from its St. Petersburg, FL, headquarters to Mexico as it ramps its capacity south of the border.

And Sanmina-SCI projects 10 to 20% growth in sales over last year, prompting plans to invest $7 million to  $10 million in new machinery.

Call it Santa Anna’s revenge.