Moving Away From China

Major technology companies from the United States are shifting their focus towards Mexico for the production of chips, moving away from their previous reliance on China. This trend has prompted Taiwanese manufacturers to ramp up their operations in Mexico.

  • This strategic shift is being facilitated by the U.S.-Mexico-Canada Agreement (USMCA), and has since attracted a significant influx of manufacturing investments aimed at transitioning operations from China to Mexico.
  • Industry leaders and analysts note that the objective behind this movement is to minimize imports from Asia, with Mexico emerging as a crucial manufacturing hub for the USMCA region.

Despite the advantages, Mexico's role as a manufacturing hub is not without challenges, such as crime, resource shortages, and labor issues, including the competition for skilled workers and the necessity to adhere to USMCA labor standards.

Attracting Large Taiwanese Companies

Taiwanese company Inventec, known for manufacturing servers and other equipment for major tech firms, is also expanding its operations in Mexico. Arch Chen, Inventec’s regional manager, highlighted a shift in preference among clients towards manufacturing in Mexico, impressed by the technological capabilities observed there. The shift away from China is also propelled by U.S. restrictions on exporting advanced chips for AI, affecting the production of cutting-edge equipment in China.

  • Major manufacturers like Dell and Hewlett Packard Enterprise are diversifying their production to regions like Southeast Asia and Mexico to strengthen and diversify their supply chains.
  • Mexico's growing role in advanced manufacturing amid rising U.S.-China tensions is bolstered by its extensive network of free-trade agreements, attracting automotive manufacturers and potentially electric vehicle producers, including Tesla.
  • Taiwan estimates around 300 of its firms operate in Mexico, employing 70,000 people and contributing to a bilateral trade that exceeded $15 billion last year.

Taiwanese firms, particularly those in the electronics sector, have focused their Mexican operations near Texas, benefiting from proximity to the U.S. These companies, collectively known as the "six brothers of electronics," are instrumental in global server motherboard production, a critical component in AI and computing infrastructure.

Disclaimer

Please note that Benchmark does not produce investment advice in any form. Our articles are not research reports and are not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Jorge Aguilar / Unsplash.