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Industry Today 2018: Small-to-midsize electronics manufacturers are finding their competitive advantage in Mexico manufacturing

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Industry Today 2018: Small-to-midsize electronics manufacturers are finding their competitive advantage in Mexico manufacturing

As published in Industry Today.

Doug Donahue, one of Entrada’s Principals and Vice President of Business Development, shares his insights into the drivers that are compelling European suppliers to choose Mexico as their production location, and why it is paramount they have a regional partner in place who can successfully help them execute their operations.

Small-to-midsize electronics manufacturers are finding their competitive advantage in Mexico manufacturing.

By Doug Donahue, Entrada Group

Consumers today have high expectations for electronic devices. It’s not enough for our gadgets, screens and appliances to be faster and more feature-rich every year. We also expect them to be cheaper every twelve months too. That’s one of the reasons why electronics as a segment continues to grow. According to Persistence Market Research, the global consumer electronics market is expected to reach $2.9 trillion by 2020, at about a 15% annual clip.

Part of this is undoubtedly due to the “electronification of everything,” as more and more everyday products now include sophisticated interfaces and componentry. From refrigerators that know when you are out of eggs, to connected devices that can turn on the living room lights or turn off music by voice command, manufacturers are increasingly adding functionality to everyday appliances, with consumers thrilled to be able to do more at the push of a button – and also willing to pay more to do it.

At the same time the segment is expanding, electronics production is becoming increasingly global, with more competition from all corners of the world. This more-crowded landscape enables OEMs, who must deliver better and faster products than the year before, to demand tighter and tighter margins from the manufacturers all around the world that comprise the supply base. Thus, despite the expansion of electronics as a category, competition is greater than ever before.

In this ultra-competitive manufacturing world, how will small-to-midsize electronics producers in the U.S., Canada and Europe compete when the market is more global, when there is more pressure than ever before to lower production costs, and when better, faster, more affordable products are a baseline expectation?

To read a comprehensive overview of Mexico’s strengths in electronics manufacturing and to learn why small-to-midsize electronics manufacturers are establishing their own Mexico operations in order to stay ahead of the competition, download Mexico: A New Hub for Electronics Manufacturing, the latest educational white paper from Entrada Group, a firm that helps international manufacturers establish and run their own Mexico production.

Enter Mexico
China was an obvious longtime offshore production location, but costs there are creeping higher every year. Many manufacturers are also uncomfortable with the long distance and transport times China requires, as well as with the common requirement to source a foreign partner or contract manufacturer, elements which increase risk. Other Asian manufacturing destinations like Vietnam or India have challenges of their own as well, with long supply chain times, long-haul travel time for executive or investor visits, and intellectual property concerns chief among them.

Mexico, however, offers proximity to consumer markets in the US and Canada, a young and capable workforce, and greater protection of intellectual property. That’s why major electronics OEMs such as Sony, Toshiba, Samsung, LG, Phillips, Panasonic, Dell and Siemens all have a production facility in Mexico. Even in the backdrop of uncertainty surrounding NAFTA, Mexico remains the second-largest exporter of electronics to the United States and the world’s largest exporter of flat-screen TVs. Consumer electronics production in Mexico isn’t limited just to household-name companies either. Many small- and mid-sized manufacturers have also established Mexico production, giving them a competitive leg up.

Furthermore, Mexico’s superlatives aren’t limited merely to consumer electronics. Electronics components are also increasingly important in other sectors, from automotive to aerospace to heavy machinery. And international electronics producers in Mexico are experiencing strong growth in all of those industries as a result of Mexico’s strengths.

Mexico’s Advantages in Electronics
Electronics is one of Mexico’s fastest-growing segments, attracting the best and brightest from its workforce. According to Forbes, between 2002 and 2012, Mexico’s electronics exports increased by 73%, from $43.3 billion to $74.9 billion. As of 2015, the manufacturing value-added sector, which electronics is part of, accounted for 18% of Mexico’s GDP.

Affordable, young, skilled labor is one major factor explaining Mexico’s success as a producer for the electronics sector. Mexico affords companies, on average, 12% lower production costs than the U.S. offers, with the lowest component production costs anywhere globally. Even though Mexico’s labor costs are low, its workforce talent remains among the best available anywhere: educated, well-trained, motivated and youthful. For example, Mexico graduates more engineering and technology students per capita annually than the U.S. does. In addition, private/public partnerships are thriving in Mexico, which further help to prepare a workforce specially trained in electronics manufacturing.

To learn more about the specifics advantages Mexico offers global electronics manufacturers, including how small-to-midsize companies have grown thanks to their Mexico footprint, download the whitepaper: Mexico: A New Hub for Electronics Manufacturing. You’ll discover how Mexico’s shorter supply chain, logistics and free trade agreements enable international manufacturers of all size to stay a step ahead in the competitive electronics sector.

Full article on Industry Today

Download our Electronics Whitepaper