Asian Companies Consider Factories in Mexico as China Risks Grow

Asian Companies Consider Factories in Mexico as China Risks Grow

The trade war between the United States and China and the coronavirus crisis have led companies to reexamine worldwide supply chains.

Taiwan-based electronics manufacturers Foxconn and Pegatron are among companies reportedly looking into new factories in Mexico. The information comes from people with direct knowledge of the situation. They spoke with Reuters news agency on condition that their names not be used.

Such plans could bring in billions of dollars in much-needed investments over the next few years for Mexico, Latin America’s second-largest economy. The country is heading toward its worst recession since the 1930s Great Depression.

Foxconn and Pegatron are contractors for several phone manufacturers, including Apple. It was not immediately clear which companies they would work with in Mexico.

Foxconn is likely to make a final decision on a new factory later this year, and work will begin after that, the two sources said. They noted that the plan could change, however.

Pegatron is also in early discussions with lenders about an additional factory in Mexico. The factory would be used mainly to put together electronic parts including chips, the sources said. Pegatron did not comment.

Foxconn has five factories in Mexico that mainly make televisions and servers. Its possible expansion would represent a larger move of worldwide supply chains away from China.

The plans come as U.S. government support for “near-shoring” grows. Near-shoring means to move manufacturing of products closer to the country where the products are sold. The administration of U.S. President Donald Trump is exploring ways to urge companies to move factories from Asia to the United States, Latin America and the Caribbean.

Taipei-based Foxconn said in a statement that while it continued to expand worldwide operations and is an “active investor” in Mexico, it had no current plans to increase those investments.

Last month, Reuters reported Foxconn planned to invest up to $1 billion to expand a factory in India where it makes Apple iPhones.

Foxconn chairman, Liu Young-way, spoke at an investor conference in Taipei this month. He said that the world was split into two groups when tensions rose between China and the U.S. He said his company was working on “providing two sets of supply chain to service the two markets.”

“The world factory no longer exists,” he said, adding that Foxconn now makes about 30 percent of its products outside China. That percentage could increase, he said.

The Taipei Economic and Cultural Office in Mexico, which represents Taiwan’s government in the country, said it had heard Foxconn was interested in building another factory in Ciudad Juarez, in the northern border state of Chihuahua.

“Pegatron, I also understand, wants to move a production line from China to Mexico,” the office’s Director General Armando Cheng told Reuters. He said he did not have additional information about either company’s plans.

I’m Ashley Thompson.

The Reuters news agency reported this story. Ashley Thompson adapted it for VOA Learning English. Caty Weaver was the editor.

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Words in This Story

supply chain - n. a network between a company and its suppliers to produce and spread a product or service