Guadalajara, Mexico, has a lot to offer the electronics industry in terms of a well established electronics manufacturing support base, highly skilled workers, cooperative business environment, and competitive labor rates.
I expect that the value of Guadalajara as a destination for outsourced electronics manufacturing will continue to improve in the future. The city is relatively safe, culturally interesting -- and the reigning Miss Universe, Jimena Navarrete, hails from Guadalajara.
I recently had the pleasure of speaking in Guadalajara at Provelec, the annual conference for the electronics cluster in Guadalajara that is represented by CADELEC, Mexico's electronics supply chain organization. It had been about five years since I last visited the industry in Guadalajara, and I was very impressed with what I saw.
The first issue that you must confront when traveling to Mexico these days is the security concern caused by the drug wars that have been raging since 2006. The US State Department has a travel warning for Mexico that is generally applied to the whole country, but I found that security is not an issue in Guadalajara. I traveled about very easily, without experiencing any unsafe situations. I was told by many locals that Guadalajara has managed to avoid most of the drug problems that have plagued other states in the country.
The Provelec conference is always a good barometer for the electronics industry in the state of Jalisco, and more specifically for the city of Guadalajara. The conference attendees included representatives of the state and local governments, OEMs, EMS, and various supply chain companies. The general mood was very positive about the situation in Guadalajara and the prospects for its future.
Here are some of the facts about this important region based on data presented during the conference and in discussions I had with many industry people there:
- Employment in the electronics industry is at its highest level ever.
- Through August, electronic exports for the year were at 62 percent of the 2008 level and 75 percent of the 2009 level.
- Other electronic companies are looking to transfer their operations from the more volatile border regions to Guadalajara.
- The local supply base is good for sheet metal, plastics, painting, and cable and harnesses.
- While there are no longer any IC fabs in Mexico, the electronics industry in Guadalajara has made arrangement for two direct flights per week from China to bring in electronic components, which normally clear customs within one day. The flights then return to China loaded with agricultural products.
- Government incentives and grants are still available for companies wanting to establish operations in Jalisco.
Guadalajara is still a unique spot in the electronics manufacturing market because of the local people's desire to see the industry succeed. This results in greater collaboration among the various companies for the common good of their industry, state, and ultimately the country.
The industry data that we gather at Charlie Barnhart & Associates LLC and apply in analyses using our proprietary methodologies is supportive of Mexico, and in particular Guadalajara, as a manufacturing solution for products sold into the US. We have been advocating this to our clients for a few years now.
Reported quality concerns by some OEMs related to Mexico still may need to be addressed, although these are usually associated with manufacturing done in the border zones. Since this issue was first raised years ago, we have been trying without success to track down a credible case where quality in Mexico was a significant long-term problem. However, that perception still exists.
When calculating the true cost of global electronics outsourcing, you must consider, not just the price paid to an EMS/ODM partner, but also the OEM’s internal expenses in support of the outsourcing initiative as well as the geographic risk inherent in the solution selected. When simply looking at the price paid to an EMS/ODM partner, an OEM may incorrectly assume that a low-cost country such as China, India, or Poland offers the best value. However, once the OEM’s internal spend and geographic risk are added into the analysis, the results often change, and it is in such an analysis that Mexico often emerges as the best value.
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