Taiwan-based electronics manufacturers Foxconn and Pegatron are among companies eyeing new factories in Mexico, as the U.S.-China trade war
and COVID-19 pandemic have prompted companies around the world to reexamine the global supply chains.
reports that Foxconn and Pegatron are known as contractors for several phone manufacturers including Apple.
According to two sources close to the matter, Foxconn has plans to use the factory to make Apple iPhones. However, one of the sources explained that there’s been no sign of Apple’s direct involvement in the plan yet.
Electronic manufacturing company Pegatron is also reportedly in early discussions with lenders about an additional facility in Mexico to assemble chips and other electronic components.
The two sources noted that Foxconn will likely make a final decision on the location of a new factory later this year, and work would commence after that, although there is “no certainty” the company would stick to the plan (Fox Business
Foxconn has five factories in Mexico, which primarily manufacture televisions and servers. The potential expansion would underscore a broader and gradual shift of global supply chains away from China amid the China-U.S. trade war and coronavirus pandemic.
The plans come as the idea of “near-shoring” gains ground in the White House. The Trump Administration
is investigating possible financial incentives to encourage firms to move production facilities from Asia to the United States, Latin America and the Caribbean.
Brandishing a new deal locking in free trade with the world’s biggest consumer market, Mexico also has geography, low wages and time zones in its favor. Despite the global recession and concerns about the business climate under President Andres Manuel Lopez Obrador, government data shows foreign investment largely holding up so far this year.
“The company indeed has contacted the (Mexican) government,” a source said about Foxconn, adding the talks were at an early stage and rising cases of coronavirus in Mexico were a major concern for the possible investment.
In a statement, Taipei-headquartered Foxconn said that while the company continued to expand global operations and is an “active investor” in Mexico, it had no plans to increase those investments.
“The world factory no longer exists,” he said, adding that about 30% of the company’s products were now made outside China and the ratio could increase.
The Taipei Economic and Cultural Office in Mexico, which represents Taiwan’s government in the country, said it had heard Foxconn was interested in building another factory in Ciudad Juarez, in the northern border state of Chihuahua.
“Pegatron, I also understand, wants to move a production line from China to Mexico,” the office’s Director General Armando Cheng told Reuters. He said he did not know details of either company’s plans. “Mexico is one of the ideal countries for companies considering readjusting their chain of suppliers,” Cheng said.
Mexico has engaged in talks with various foreign companies in an effort to lure business from Asia to capitalize on the trade deal and was preparing to speak to Apple about relocating manufacturing, Economy Minister Graciela Marquez told Reuters in July.
“It could have been a tidal wave,” said Eduardo Ramos-Gomez, a partner at Duane Morris & Selvam, a law firm working with Taiwanese and Chinese companies looking at Mexico.
Samuel Campos, an executive managing director of real estate brokerage Newmark Knight Frank, said his company is currently helping two Chinese companies, one in the autos sector and the other in manufacturing, relocate to an industrial cluster in Mexico. According to Campos, electronics, medical and automotive firms in Asia are likely to help encourage investments into Mexico in the fourth quarter this year.
Alan Russell, Chief Executive and Chairman of Tecma Group- a company managing factories in Mexico- believes that manufacturers in China that hope to keep market share in North America have few choices.
“They’re going to have shorten their supply chain and be more regional,” he said. “It seems the virus has tipped the scale.”