Mexico: a Nearshoring Hub for Electronics Manufacturing

Mexico continues to solidify its position as a premier destination for electronics manufacturing and investment, surpassing competitors like China in trade volume with the U.S. The Electronics Manufacturing Services (EMS) sector is rapidly expanding, driven by nearshoring trends, favorable trade agreements like the USMCA, and Mexico's cost-effective and skilled labor force.

Electronics Industry in Mexico: Key Facts

Export Growth projected over $100 billion

Mexico's electronics sector (HTS Code 85) exports billions of dollars of goods annually, with the U.S. receiving the bulk of these exports. The country is now second only to China in electronics exports to the U.S.

• Mexico exported $103 billion dollars of electronic equipment in 2023 with 86% of it destined for the United States.
• Mexico is the world's largest exporter of flat screen televisions and the third largest exporter of computers
• A third of electronics manufactured in Mexico is for the Information Technology industry (computers, CPU’s and memory chips, network switches, routers, etc.) and another third is consumer electronics, including televisions and other audio/visual goods
  
  

The sector has consolidated Strategic Hubs

Cities like Guadalajara, often called Mexico's Silicon Valley, are critical to this growth, contributing significantly to the country’s electronics output. But two border states, Baja California (mainly city of Tijuana) and Chihuahua primary city Ciudad Juarez) dominate electronics export, with nearly $40 billion dollars of exports between the two. Other important hubs include Monterrey and Reynosa.

• These important hubs represented over 75% of the total electronics equipment exports in 2023.
• Some of the major players in the industry are Foxconn, Flextronics, TE Connectivity, Siemens and Jabil, which are located mainly in the northern and central regions of Mexico.
  

A Competitive Edge over other countries

Labor is a large component of electronics manufacturing costs, and Mexico's hourly labor wage is lower than that of China. Additionally lead times and logistics cost favor Mexico due to its close proximity, shared time zones and established trade programs. Being a part of the USMCA, Mexico is aligned with the US on labor rights, intellectual property protections, and environmental standards.

• Factory wages for Mexican production workers in the manufacturing-for-export sector average $4.69 dollars per hour (July 2024), with electrical equipment, appliances and components averaging $4.58 dollars per hour compared to about $5.05 dollar per hour in China (average production worker, 2023). 
• The labor wage for IMMEX companies (manufacturing-for-export) in Mexico has experienced an annual growth of 7% over the past decade, which is notably lower than the 9% annual growth seen among manufacturing companies in China.

Boasting a Skilled Workforce in the sector

Manufacturing is integral to Mexico's economy, contributing 20% of total GDP from the industry and about 25% of Mexico's total workforce is employed in manufacturing. The electronics sector stands out in importance due to its integrated nature with other high-value sectors like automotive and appliances. While Mexico may not yet be producing the most advanced chips, their contribution to the North American semiconductor industry is worth noting. 

• According to Mexico's Economy Secretary over 83,000 engineers graduated with a focus on electronics, industrial, mechanical, construction, and chemical processes in 2022.
• Estimates show about 400,000 employees working in the electronics sector, with high integration into other sectors like automotive and appliances.

Electronics Nearshoring Drivers

The geopolitical landscape and recent global disruptions have exposed vulnerabilities in the electronics industry’s heavily China-centric supply chain. While many companies ask their suppliers and contractors to move or build operations in the U.S., in many cases labor costs and other logistic challenges make it difficult.

Nearshoring Drivers:

The global electronics manufacturing industry is witnessing a significant shift from China to Mexico, driven by several key factors.

• First, economic conditions in China, including rising labor costs, have made the country less cost-effective for electronics production, prompting companies to look for alternatives like Mexico, which offers lower labor costs and a skilled workforce.
• Second, trade agreements such as the USMCA provide manufacturers in Mexico with duty-free access to the U.S. market, making it more attractive in light of ongoing U.S.-China trade tensions and tariffs.
• Supply chain resilience is another critical driver, as the COVID-19 pandemic exposed the risks of over-reliance on a single country for manufacturing. Diversifying operations to Mexico helps companies mitigate these risks.
• Finally, government policies in Mexico, including tax incentives and infrastructure development, have further encouraged foreign investment, making it an increasingly attractive location for electronics manufacturing.

These combined factors are expected to drive more manufacturers to move operations from China to Mexico in the coming years. Nearshoring will continue, but the extent of its growth depends on major decisions surrounding the USMCA review in 2026. 

Another variable is future talent needs. The electronics manufacturing industry needs to achieve continuous technological advancement. This industry is characterized by rapid technological change, and manufacturers must constantly innovate to stay competitive. One such advantage of Mexico's electronic industry is the proximity to R&D operations both in the US as well as throughout Mexico.

Explore more about the role of the R&D sector in Mexico.