Located in central western Mexico’s state of Jalisco, the cosmopolitan city of Guadalajara plays a major role in the country’s economic expansion. It is also the financial backbone for the country’s most productive and developed industrial area—the nearby Bajio region. The dynamism of its metropolitan area results from its well-established ecosystems in traditional industries like clothing and apparel, footwear, petrochemistry, tequila, furniture, sugar, food, and forestry that complement more recently established sectors like electronics, IT, and medical devices manufacturing in Mexico.

Guadalajara is Mexico’s leading producer of software and digital components, and nearly a quarter of all the country’s exports in electronics are manufactured in the city. There are also 51 industrial parks established across the state, including American Industries Group’s San Jorge Industrial Park. The area’s expansion is rooted in a decades-long social transformation driven by education and collaboration between government, academia, and industry in consolidating and supporting its traditional, creative, and tech sectors.

Mexico manufacturing

The seeds for the city’s thriving digital and creative industries today were planted in the 1960s when several international companies set up operations in Jalisco in search of lower labor costs. These included Kodak, Motorola, IBM, Hewlett-Packard, and Siemens that produced semiconductors, printers, and photo equipment, among other components. Over time, these companies began to collaborate with local universities to expand tech-related course offerings, resulting in the generation of a large pool of young local talent that allowed Guadalajara to gradually move up the value chain.

In 2001, with China’s entry into the World Trade Organization, Guadalajara’s tech industry came to a screeching halt. Many companies relocated their offshore manufacturing in Mexico to Asia to pursue lower wages and tariffs. At this point, the industry could have disappeared altogether. Instead, the city leveraged its human talent built over the previous two decades to reinvent itself as a major center for software and applications research and development, consulting services, and other highly-skilled positions.

Today, Oracle, Intel, HP, and IBM all have research and development facilities in the city. Amazon also recently set up a research and development facility there, and Continental, a German company, produces around 20 patents a year at its facilities in Guadalajara. Though these companies are still drawn to the area due to the cost savings of Mexico manufacturing and assembly labor, it has become a magnet for international IT companies mainly because of its constantly-expanding pool of engineering talent and innovative spirit.

Offshore manufacturing in Mexico

The region’s technical and higher education institutions now have decades of experience forming professionals in STEM areas with a focus on dual technical education. This means that there are many highly-qualified operators in electronics careers such as welding, semiconductor assembly, mechanical integration, and embedded systems. These skills are valuable in various industries, such as consumer goods, home appliances, entertainment systems, and automation and control devices.

State and city governments have also contributed to the favorable conditions for the development of tech startups by investing in tech poles, data centers, and smart city solutions, placing the city on the cutting edge of tech in the country. Another critical factor is the city’s geographic location near the ports of Manzanillo and Lazaro Cardenas. This provides a logistical advantage to international companies in Mexico with supply chains based in Asia looking to take advantage of the new USMCA by manufacturing in Mexico. In addition to sea connectivity, a new daily direct flight between Guadalajara and Shanghai has also been recently established, further facilitating trade with Asia. On the other hand, a new $25 billion deal has also been recently signed to create the first freight-rail network linking Mexico, the US, and Canada, providing even more logistical advantages.

With its privileged location, highly-trained labor force, dynamic cultural offering, and logistics advantages, among others, companies in a wide range of industries looking to expand or start up business in Mexico should not overlook the state of Jalisco and its capital city, Guadalajara.

By Santiago Campos | Guadalajara Business Development | American Industries Group®

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