Electronics Manufacturing Mexico: Growing Microchip and PCB Production Chains

The global technology industry has gone through a significant shift as businesses navigate a world grappling with a microchip shortage. The shortage, which affected 169 industries and caused multi-million-dollar losses since the pandemic, has prompted companies and governments around the globe to look for ways to create more efficient, agile, and resilient supply chains for the production of these key components used in everything from vehicles to home appliances.

Nearshoring has arisen as one of the most important strategies to achieve this, and Mexico, with its strategic location bordering one of the world’s largest consumer markets, has emerged as an increasingly competitive player. Mexico offers an attractive opportunity for businesses in a range of industries, and the high-tech and electronics sector is no exception.

In this article, we delve into the global issues causing companies to rethink their supply chains, the benefits Mexico provides to companies in the electronics and microchip industries and share how Mexico is promoting development in these sectors, including a recent business mission from the Taiwan External Trade Development Council.

Microchip Shortage and the Reorganization of Global Supply Chains

The global microchip shortage disrupted supply chains and caused lost profits in almost every industry. Companies that traditionally relied on outsourcing to distant, low-cost regions were faced with challenges in meeting their demand for microchips due to logistics issues and the closure of plants across Asia during the pandemic. As a result, many companies are considering relocating or expanding operations to bring their supply chains closer to their markets. Mexico, with its advantageous geographical proximity to the United States and Canada, has become an enticing option for businesses seeking to address the microchip shortage through nearshoring.

Benefits of Electronics in Manufacturing Mexico

Mexico offers many advantages for companies operating in the electronics and microchip industries, including its location, existing regional markets, robust supply base, and availability of skilled and affordable labor. Firstly, Mexico’s proximity to the US border means manufacturers are close to US markets, this advantage is significant in the high-tech and electronics sector, where time-to-market is of utmost importance. Secondly, Mexico has always been open to trade, allowing easy access to regional markets and integration through its excellent trade relations and numerous trade agreements with over 50 countries.

In addition, Mexico has a mature base of OEMs, suppliers, facilities, and an efficient, integrated supply chain in the electronics industry, allowing the country to export high-value-added products like those required by the microchip and PCB industry. Nine of the top ten international electronics manufacturing services (EMS) are established in Mexico, including Samsung, LG, Toshiba, Foxconn, Flextronics, and Intel. One of the country’s largest clusters of electronics manufacturers and suppliers is located in Baja California, and Guadalajara is known as Mexico’s Silicon Valley due to the large number of high-tech companies and electronics manufacturers that have established there.

Another significant benefit, especially for electronics manufacturing in Mexico, is its skilled workforce. Mexico has a strong engineering and technical talent pool that has been developed through close collaboration between the private sector and educational institutions. This abundance of expertise enables companies to leverage local talent and foster innovation within their operations.

The USMCA and Microchip Production Chains

Mexico's position as a competitive player in the global technology industry is reinforced by the joint efforts between the United States, Canada, and Mexico through the United States-Mexico-Canada Agreement (USMCA). The countries are leveraging this trilateral trade agreement to create long-term plans to develop microchip production chains in North America, with a focus on enhancing regional self-sufficiency to help prevent and prepare for future crises.

The USMCA creates a favorable environment for the growth of the electronics and microchip sectors in Mexico, setting the stage for increased investment and collaboration. Mexico and the United States have been working together to explore areas of opportunity, including talks regarding the CHIPS and Science Act passed in 2022 in the United States that will provide 39 million dollars in manufacturing incentives and 13.2 million for research and development for semiconductor development. This increased cooperation will reduce dependency on foreign suppliers and enhance the ability of North American companies to meet the rising demand for microchips.

Taiwan External Trade Development Council’s Business Mission to Mexico

In addition to collaboration across North America, Mexico also has a strong trade relationship with Taiwan, with bilateral agreements to promote trade and investment. One of the most important sectors for trade between the two countries is manufactured goods and technology.

This was highlighted in a recent mission from the Taiwan External Trade Development Council (TAITRA) to the country. As part of this, 20 companies, three associations, and a research center from the microchip and printed circuit board (PCB) sectors from Taiwan visited Mexico, including the world’s largest players in the microchip and PCB industry, Foxconn, Unimicron, Wistron, Inventec, and Pegatron. Their mission focused on establishing partnerships in the areas of microchips, semiconductors, and electronics manufacturing. The delegation visited several areas of the country, including Ciudad Juarez and Mexico State, holding meetings with government leaders, industrial chambers, and business leaders in the sector looking to invest in microchips, as well as companies from Taiwan that have been operating in Mexico for decades.

With Taiwan's expertise in the industry and Mexico's favorable manufacturing environment, this collaboration has the potential to further strengthen Mexico's position as a global player in the technology sector.

Mexico's emergence as an increasingly competitive player in the global technology industry presents exciting opportunities for businesses in the electronics and microchip sectors. The country's development of microchip and PCB production chains, combined with its proximity to key North American markets, makes it an attractive option for companies seeking to address the microchip shortage through nearshoring.

Through joint efforts like the USMCA and collaborations with countries like Taiwan, Mexico is solidifying its position as a hub for technological innovation and manufacturing. As the nearshoring trend continues to gain momentum, businesses in the high-tech and electronics sector should seriously consider Mexico as a strategic location for their operations.

In this era of microchip shortages and evolving supply chains, Mexico's rise as a global competitor in the technology industry offers a promising future for companies looking to navigate the challenges and seize the opportunities of this dynamic market.