Though electronic components manufactured in Mexico can cost slightly more than their Chinese counterparts, many original equipment manufacturers (OEMs) prefer keeping business ties and production closer to the United States.
This is what Sonny Newman, president and CEO of Electronics Evolution Technologies, has learned.
Founded in 2000 by Newman, EET is a small-to mid-sized electronics manufacturing services (EMS) supplier producing printed circuit boards and electromechanical assemblies. In October of 2005, the Reno, Nevada-based business opened a second manufacturing location in Guaymas Sonora, Mexico. Business is good: The Mexico facility that began with 20 workers in a 17,000-square-foot building expanded in late 2010 to a 38,000-square-foot plant now housing more than 110 employees.
Newman is glad he pursued a local expansion solution utilizing The Offshore Group’s Mexico Shelter Plan.
“Five to 10 years ago, customers would refer to the ‘China Price,’ (whereas) now they refer to the ‘landed China price,’” he notes. “Today they take into consideration the logistics, the cost of the freight and the duties that are paid in and out of China. I’m getting feedback from my customers that we are within three to five percent, typically, on a finished assembly. So, when you’re talking about a hundred-dollar EMS assembly, and it’s $100 from China and $103 from Mexico, that works for a lot of my customers.
“Now, you know, when you’re buying iPods, stereos and things of that nature, three percent is a lot,” Newman adds. “This is not the case in the markets in which we operate … and (clients) save a few weeks’ (shipping time) on top of it.”
That three-percent margin could disappear, as a 2011 report published by the U.S. Bureau of Labor Statistics reveals hourly wages in China’s manufacturing sector continue to snowball. From 2002 to 2008, China’s hourly labor costs in the manufacturing sector doubled, while North America’s rose only 19 percent. This stems not only from rising literacy and educational attainment in China, but also the country’s labor-contract laws enacted in 2008. And a dwindling Chinese workforce – largely attributable to the country’s single-child family planning policies – also figures into heightened compensation costs. Perhaps these factors explain, in part, why the Mexican electronics industry grew 20 percent between 2010 and last year.
Newman has found other benefits of manufacturing in Mexico besides navigable time zones, protected intellectual-property rights, reduced tariffs and a workforce full of “enthusiasm and commitment.” Surprisingly, EET’s presence in Guaymas has reinforced business in Reno as well.
“By adding the Mexico EMS operation, we actually created jobs in our Reno facility,” he admits. “Originally we had our employees here in the Reno facility thinking that we were going to transfer all the jobs down to Mexico. In reality, establishing Mexican operations has created jobs here in Reno, at a professional level. We do all of our buying, all of our planning, our finance, our customer service, through our Reno facility. And we do most of our warehousing here as well. We buy the materials and ship in and out of our Reno facility. It’s actually saved the company to a degree.
“I would imagine, had we not done this – because of the way the world has changed over the last three years – that Reno would be a very, very small operation without our presence in Mexico,” the CEO concludes.