As EMS (Electronics Manufacturing Services) companies examine the total cost of doing business in other countries, an increasing number – including some companies in China – are deciding to conduct electronics manufacturing services in Mexico.
“China vs. Mexico: An Objective Comparison for Mid-Market OEMs” is a study conducted by Charlie Barnhart & Associates, a strategic consulting firm focused on electronics manufacturing services (EMS). As part of the report, CBA asked original equipment manufacturers, or OEMs, to rate their electronics-manufacturing experiences in other locales as compared to the United States or Canada.
“It’s an important piece of research,” notes CBA principal Eric Miscoll, “because there really is no information on this topic available from other sources.”
The study focuses on three areas: The trend of electronics manufacturing services regionalization; changes in labor costs across the globe; and TCO, or total cost of outsourcing.
One factor moving North American-based electronics manufacturers to favor Mexico is its proximity to the States. Another is the currency exchange issue, Miscoll notes, explaining that Mexican wages in this industry have not increased since 2002.
Meanwhile, a 2011 report published by the U.S. Bureau of Labor Statistics reveals hourly compensation rates in China’s manufacturing sector have steadily and quickly accelerated. From 2002 to 2008, China’s hourly labor costs in the manufacturing sector doubled, while North America’s rose only 19 percent. This is attributable not only to rising literacy and educational attainment in China, but also to the country’s labor-contract laws enacted in 2008. Additionally, a dwindling Chinese workforce – due in large part to its single-child family planning policies –figures into escalated compensation costs.
“As OEMs are looking at this, they are doing the ‘total cost of outsourcing analysis,’” he explains. “More and more, they are looking at doing their electronics manufacturing in Mexico.
“The piece that really underscores this reality is that Chinese companies are looking at Mexico, and are investing in Mexico for products that they are going to build that will be then shipped into the U.S. market.”
In the study, CBA discovered China and Mexico were top-rated for high-volume and continual-flow manufacturing. “China actually rated higher than Mexico in both of these categories,” Miscoll explained, “but, across all other categories – prototyping, MPI, low-volume, medium-volume, all the way through aftermarket services – Mexico electronics-manufacturing services actually rated superior to China.”
China provides a solid solution for commoditized, high-volume, continuous-flow manufacturing, while Mexico’s electronics manufacturers are a better fit “for the mid-volume that requires a lot of customization,” Miscoll says.
“(The study) is kind of a general profile,” he points out. “I would say that the major players in the EMS market would assert they can build anything anywhere. This is theoretically true. Our research, however, seems to indicate that electronics-manufacturing OEMs see different countries having defined core competencies in specific service areas.”
With all ratings gathered by the study taken into account, Miscoll summarizes that, while Mexico continues to provide good solutions to OEMS in electronics manufacturing, “it may not provide a stand-alone, fully comprehensive manufacturing solution” for a North American-based OEM. Localized and internal support from front- and back-end services might be needed, he says.
The CBA study is available at no cost to individuals in the electronics manufacturing service industry. For more information, visit the Charlie Barnhart website. The Offshore Group will be hosting Manufacturing in Guadalajara 2012. Companies that are interested in setting up electronics manufacturing and electronics assembly services in what is the electronics hub of Mexico are invited to attend.