In today’s business environment, North American companies are looking to reduce dependence on China, strengthen local supply chain networks, and make logistics processes more agile. When deciding where to establish operations, increasing numbers of international manufacturers worldwide are looking to manufacture in Mexico, not only due to the competitive labor rates in Mexico but the variety of other benefits the country offers.
Though there are many established industries in the country, some of the main ones include the industries covered in our last article—automotive, aerospace, and medical devices—and the electronics, home appliances, plastics, textiles and garments, and furniture industries. These industries take advantage of an established network of suppliers and robust process capabilities, ensuring a soft landing for international and U.S. companies manufacturing in Mexico.
In this article, we will cover the second five industries listed above:
Electronics is one of the fastest-growing industries in Mexico in terms of employment generation and is currently the second-largest supplier of electronic products to the U.S. market. There are over 730 plants in the country manufacturing audio and video, telecommunications, computer equipment, and related parts.
Major global electronics leaders have set up operations in Mexico. Nine of the top ten transnational electronics manufacturing services (EMS) have operations here, including Foxconn, Flex, Sanmina, and Benchmark, among others. These companies are taking advantage of competitive labor rates in Mexico and the industry’s lowest operating costs in the Americas.
This industry has grown so quickly that over recent decades, Guadalajara has earned the nickname of Mexico’s Silicon Valley, consolidating itself as a hub for software development and EMS operations. It is home to twelve OEMs and more than 380 specialized suppliers exporting about $150 billion in products annually from the area. Some of the companies in Guadalajara include IBM, Intel, Toshiba, Sanmina, JABIL, and Molex, among others.
Mexico has appliance manufacturers in 12 states across the country and is currently the leading supplier for the home appliance industry in the United States, Canada, and Central America, and is the sixth-most important exporter of appliances globally. This is due to the extensive network of qualified suppliers in plastic materials production, thermodynamic processes, and metal stamping, among others.
This robust ecosystem supports a variety of other industries, including the automotive and plastics industries, with a wide range of production capabilities, including metallic components and parts, circuits assembly, PCB (printed circuit boards), wire harnesses, plastic components (blow and plastic injection molding), surface treatments, and painting and coating, among others.
Another globally competitive sector is the plastics industry, which has reached export levels similar to Germany, Canada, and Asia. Mexico’s plastics companies had a commercial value of over U.S. 23 billion in 2019. The industry is expected to continue expanding as the automotive industry in Mexico aims to incorporate more plastic into the manufacture of its automobiles and with the establishment of a new petrochemical complex for the production of polyethylene in the state of Veracruz.
The industry, led by Mexico’s National Association of the Plastics Industries, A.C (ANIPAC), is also moving toward creating a circular economy. This production and consumption model aims to change the traditionally throw-away industry for one that is more environmentally-friendly by using renewable energies and eliminating waste through the innovative design of material, products, and systems.
The textiles and apparel industry in Mexico is also significant, representing 6% of its GDP and employing over 415,000 workers and exporting various products in the sector. These include clothes, cotton, synthetic yarns, and technical textiles, such as upholstery fabrics and fabrics for use in the automotive and construction industries.
Manufacturers in this industry are also drawn by the competitive labor rates in Mexico, especially U.S. companies. Several trade agreements also favor this industry, including the USMCA, the government maquila program, and the Trans-Pacific Strategic Economic Partnership Agreement.
Last but not least, Mexico’s furniture industry is also a representative part of the country’s economy, with exports to the U.S. exceeding U.S. 1 billion a year. Most of Mexico’s over 675 manufacturers are located across its northern states, including La-Z-Boy and Ikea, which has a manufacturing plant in Coahuila for mattresses and sofas to be sold in North American Ikea stores.
Another company in the furniture sector that has written its success story in Mexico by working under American Industry’s shelter program is KUKA, a Chinese upholstery manufacturer. The company made the strategic decision to set up operations. With the help of American Industries was able to overcome the cultural, language, legal, and fiscal challenges necessary to prosper in a new country.
If you are interested in learning more about how American Industries’ shelter services in Mexico can help you to set up or expand your business in these or any other industry, reach out today.