Foxconn and Pegatron reportedly planning to expand to Mexico to avoid the trade war
Asian manufactures are jumping on the "near-shoring" trainBy Adrian Potoroaca
In brief: Several Asian manufacturers looking to diversify supply chains have partially shifted production lines to India, Vietnam, and Taiwan. This trend started as a result of the US-China trade war and only accelerated during the coronavirus pandemic, with Mexico as the next hot property.
The trade war between China and the US over the last two years has spurred tech giants like Apple, Google, Amazon, Microsoft, Sony, Lenovo, Dell, and HP to look for alternative manufacturing locations. Tariffs on electronics made in China are hurting their bottom lines, and OEMs also want to be prepared for any future economy-busting pandemics like Covid-19.
Most companies favor shifting production to other Asian countries like Vietnam, Indonesia, Taiwan, Thailand, and India. Others like Nintendo, Apple, and Amazon have already started making accessories and lower-end products outside of China. At the same time, India is poised to become a manufacturing hub for higher-end products thanks to increased efforts to build the necessary infrastructure.
According to a Reuters report corroborated by El Economista, at least two Asian manufacturing companies are planning to expand to a different location closer to the US. Foxconn and Pegatron, who are among Apple's largest supply chain partners, plan to build new iPhone factories in Mexico. Both manufacturers are negotiating with lenders. They are expected to make their decisions by the end of the year. Foxconn already operates five factories in Mexico producing things like TVs, set-top boxes, servers, and medical equipment.
Overall, the plans are part of a trend dubbed "near-shoring," where manufacturing giants are scrambling to move production closer to the end market. The US government has been looking into ways to encourage this behavior by offering incentives for firms that move production to the US, Latin America, or the Caribbean. These efforts have produced little effects so far, with Foxconn looking to start small at its Wisconsin factory by building robotic coffee houses and ventilators.
Image credit: Reuters