As antagonism between China and the West becomes entrenched, Foxconn and Pegatron are apparently thinking of opening branches in Mexico.
The rumour comes courtesy of Reuters, which has been chatting to insiders at the Taiwanese firms. Between them they account for a lot of the manufacturing outsourced by big tech firms, including Apple, and have historically located much of their manufacturing capacity in China. For US customers especially, having Mexico as an option is looking increasingly attractive.
The main reason for this would be the restrictions the US is placing on Chinese firms getting access to American intellectual property. To draconian are these restrictions that there’s the possibility merely being physically located in China may be enough to provoke the ire of the US. On top of that China itself is becoming increasingly belligerent under Xi Jinping, so Taiwanese companies have good reason to feel nervous.
This story is consistent with some of the stuff Foxconn has been coming out with recently. In claiming China’s status as the world’s factory is coming to an end, Foxconn appeared to be making a clear statement of intent. It already has facilities in Mexico, but it looks like Foxconn and Pegatron are in discussions with the Mexican government about significantly increasing their capacity there.
For decades China was able to combine a skilled workforce with low salaries to make it very attractive for companies from other countries to outsource their manufacturing to them. As the standard of living has increased in China, so have average wages. This is combining with the uncertainty generated by all the current geopolitical aggro to make other countries seem more attractive for this kind of deflation importing.