Mexican Manufacturing Gaining a Competitive Edge on China
With the rising cost of wages in China, manufacturers are increasingly considering Mexico an attractive location to 'reshore' production. Low wages have never been the sole determining factor for companies to decide in which country to site manufacturing facilities; otherwise countries such as Haiti or Bangladesh would be the manufacturing capitals of the world. Where Mexico has a clear advantage over China is in its geographic proximity to one of the largest consumer markets in the world, economic and political stability, ability to provide just-in-time sourcing and a relatively transparent regulatory framework in which to do business. While it is true that it depends enormously on the strength of the U.S. economy because of NAFTA and our huge bilateral trade and investment relationship, it is equally true that Mexico, together with Canada, will always be the first to benefit from an economic recovery of its neighbor.
Amazon's Kindle e-reader cannot be manufactured in the U.S. and that's a cause for concern. Even though the Kindle's key innovation — its electronic ink — was invented and is being made, at least for now, in the U.S., Asian manufacturers are capturing the vast majority of the value added by manufacturing the e-reader itself. Even more worrisome, the U.S. is almost certain to lose control of the e-paper display technology and the future innovations that spring from it. Amazon designed the Kindle in California and one of its key components, its "ink" (the tiny microcapsule beads used in its electrophoretic display), were designed and are being manufactured by E Ink, a company based in Cambridge, Massachusetts. But the majority of the value added in manufacturing the rest of the unit is being captured in Asia. The market research firm iSuppli estimates that the Kindle's total manufacturing cost is $185. The most expensive single component is the $60 display, which Taiwan's Prime View International is manufacturing. The display consists of E Ink's special beads and a sheet of glass that has a patterned layer of silicon transistors on it that turn the beads black or white when a voltage is applied
The Advantages of North American Manufacturing
Instead of blindly offshoring manufacturing to Asia, companies today can take advantage of near-shore manufacturing benefits that exist in their own back yards. These benefits are most apparent when it comes to labor intensive assemblies for such varied industries such as: aerospace, automotive, medical, electronics, home furnishings and consumer products amongst others. With China’s labor costs increasing, current economic trends now point towards Mexico as the “new China” for certain manufacturing industries. This development could lead to lower costs, faster turnaround, and higher quality. It could potentially even help bring jobs back to the United States. Some of the benefits offered in Mexico include:
• Faster Turnaround: Although the allure of lower Asian labor cost may at one time have been the only consideration, many companies found that the time difference, shipping delays and increased transportation costs quickly eroded that benefit. Companies that specialize in cross-border manufacturing can eliminate many logistics hurdles and effectively shorten the cycle from plant to sale.
• Quality Product: It does a manufacturer little good to lower costs if quality is not maintained. While China is trying to train its workforce to meet U.S. standards, Mexican workers have been working with North American