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Story Publication logo May 15, 2024

Manufacturers Looking for Low Costs, Easy Access to U.S. Market, Turn to Mexico, Not China


The return of U.S. manufacturing is more like a trickle than a flood.

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With the U.S. border wall in the foreground, this Foxconn plant in San Jeronimo, Mexico, is about 15 miles west of El Paso, Texas. Image by Mark Hoffman/Milwaukee Journal Sentinel.

CIUDAD JUÁREZ, Chihuahua, Mexico — Technology, cultural differences and global trade converge in the Foxconn factories along the Mexican border with the United States.

The world's largest electronics manufacturer has 30,000 employees spread over seven campuses in Mexico, with major production centers in Juarez, Tijuana, Guadalajara and Chihuahua City, making desktop computers, servers, components for electric vehicles and other products.

In this part of the country, where mountains converge with desert, the company has come to epitomize "nearshoring," a global trade strategy focused on manufacturing near, but not within, a given country — in this case, the United States.

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Foxconn says worldwide it makes about four of every 10 consumer electronic devices, and although the company doesn't divulge the names of its clients, industry analysts say it builds roughly two of every three Apple iPhones. In Mexico, the company was a cornerstone of nearshoring long before it announced plans, with much fanfare, to create 13,000 jobs in Wisconsin but has since produced just 1,000 positions.

Foxconn anticipates continued growth of its Mexican operations, which have included a $500 million investment in the state of Chihuahua alone.

Engineers work at Foxconn in San Jeronimo, Mexico. The Taiwan-based manufacturer of personal computers and computer components built the plant next to the U.S. border. The facility, which employs about 10,000 people, is about 15 miles west of El Paso, Texas. Image by Mark Hoffman/Milwaukee Journal Sentinel.

Computer servers are assembled in Juarez, Mexico. Foxconn has 32 buses to transport workers to the plant that employs about 2,500 people. Image by Mark Hoffman/Milwaukee Journal Sentinel.

Parts for electric vehicle cameras as assembled at Foxconn in San Jeronimo, Mexico. Image by Mark Hoffman/Milwaukee Journal Sentinel.

“It’s important that we have more capabilities here in order to follow the nearshoring trends,” said Ulysses Lu, who was Foxconn's representative in Mexico last fall when the Milwaukee Journal Sentinel toured the 493,000-square-foot Juarez plant, which has around 2,500 employees.

Nearby, Foxconn has a 10,000-employee campus only a few hundred yards from the U.S. border. Truckloads of the company's products cross into Santa Teresa, New Mexico, at a checkpoint practically built for the company's use.

The Juarez plant has a "War Room" where managers map out production strategies and conduct video conferences with the company's leadership in Taipei, Taiwan. In deference to Taiwanese culture, there's a “God’s Room" temple with the deity Earth God on display.

A “God’s Room” is shown at Foxconn in Juarez, Mexico. Image by Mark Hoffman/Milwaukee Journal Sentinel.

Outside the plant, there’s a shrine to the Virgin of Guadalupe, which has a special place in Catholicism in Mexico and has become a cultural symbol throughout Latin America and the United States.

As plant employees begin and end their work shift, some make the sign of the cross, leave flowers and pray at the shrine. A fleet of what appears to be repurposed school buses, some with Catholic crucifixes in the passenger area, provides transportation to work for many of them.

Having been in Mexico for 20 years, Foxconn has an advantage over some Asian manufacturers that recently moved into the country and have struggled with cultural differences. Mexican workers wouldn't likely tolerate the rigid, harsh working conditions found in some Asian factories.

“We understand there are cultural differences. We put a lot of effort into understanding how to work with our Mexican employees.”

— Ulysses Lu, who was Foxconn’s representative in Mexico last fall

In China, for example, workers would be told by employers to "listen up" and follow orders. In Mexico, they're encouraged to "speak up" and have more dialogue with management, according to Lu.

“We understand there are cultural differences. We put a lot of effort into understanding how to work with our Mexican employees,” he said.

Foxconn's Mexican factories are a blend of advanced automation and manual-labor assembly work. The Juarez plant has three work shifts, and through voluntary overtime, weekends are used when additional production is needed.

Foxconn says it complies with Mexico’s minimum wage requirement, which in Juarez is currently about $22 (U.S.) per day. The company offers productivity and attendance bonuses, low-cost meals, and a commissary where employees can purchase household items. Hiring is an ongoing challenge in an area with hundreds of manufacturing plants, and where the worker attrition rate varies between 5% and 8% at the 10,000-employee Foxconn campus.

Personal computers are assembled in Juarez, Mexico. Foxconn has 32 buses to transport workers to the plant that employs about 2,500 people. The Taiwan-based manufacturer of personal computers and computer components employs about 30,000 people in Mexico. Image by Mark Hoffman/Milwaukee Journal Sentinel.

There are classes available for employees, including those with little formal education, and the company works with local high schools, technical schools, and the state government on a dual education program. The Juarez plant has a medical department and social work, psychology, nutrition and physical therapy services.

In 2023, there were at least four major Taiwanese companies in expansion mode in Juarez, bringing some of their manufacturing from Asia, said Jerry Pacheco, president and CEO of the Border Industrial Association in Santa Teresa.

As long as the U.S. and China are engaged in a trade war, and tensions remain high between China and Taiwan, companies will “do the math” and see Mexico as a viable alternative for expanding their operations, even if they never pull out of China or Taiwan, according to Pacheco.

American and Chinese companies expand in Mexico

Nearshoring in Mexico has been pursued by multinational companies seeking to reduce their Asian supply-chain risks and be near U.S. consumers without the expense of American manufacturing. It is the sibling of reshoring, which is the relocation of manufacturing from overseas to the country where it originated, or the final consumer, often the United States.

In Mexico, the benefits of nearshoring include tariff-free trade zones and labor costs even lower than in China.

The strategy has worked well. U.S. Commerce Department figures released in February showed that for the first time in more than 20 years the value of goods imported from Mexico exceeded that of China.

The value from Mexico rose around 5% to more than $475 billion in 2023, while the value from China fell 20% to $427 billion, according to the Commerce Department. Much of the overall growth in Mexico has come from foreign-owned companies utilizing the U.S.-Mexico-Canada Agreement, which grants duty-free trade for many products across North America.

"If U.S. manufacturing is to be less dependent on China, we think the path will be via Mexico," Morgan Stanley analyst Nikolaj Lippmann said in a research note.

U.S. Customs and Border Protection Chief Cecilia Esparza walks past the border wall while Mexican truck drivers await entry from San Jeronimo, Mexico (right) to Santa Teresa, New Mexico. About 700 trucks from Mexico use this port of entry daily. Foxconn, the Taiwan-based manufacturer of personal computers and computer components, built the plant in San Jeronimo. Image by Mark Hoffman/Milwaukee Journal Sentinel.

Mexico's nearshoring doesn’t show any signs of slowing, although Morgan Stanley points out the trend faces challenges with environmental issues, access to skilled labor and quality of public infrastructure.

“Nearshoring will happen over time, not overnight,” Fernando Sedano, Morgan Stanley’s Latin American economist, said in a June 2023 report.

China, by far, is still the factory of the world. But many of the biggest brands in electronics, home appliances, medical devices and vehicles have been manufactured in Mexico for decades.

In Juarez alone, there are around 300,000 people employed in manufacturing.

“If U.S. manufacturing is to be less dependent on China, we think the path will be via Mexico.”

— Nikolaj Lippmann, Morgan Stanley analyst

Seeking access to the U.S. marketplace without tariffs and duties, even China has realized the opportunities in Mexico. There are now more than 1,300 Chinese manufacturers in the country, according to the Mexican government, and China is the fastest-growing source of foreign investment.

China is now second only to the United States as the largest investor in Monterrey, a northern Mexico city of 6 million people. Monterrey has about 140 industrial parks and a manufacturing history that, like Milwaukee, began with the brewing industry more than a century ago. Now, it is centered on high-tech manufacturing.

"Monterrey has been the leading destination for nearshoring investments," said Invest Monterrey Executive Director Hector Tijerina. "We have been attracting a lot of multinationals from all around the world for the past decade. But the growth that we've been having these past two or three years has been double what we're used to."

Mexico has taken U.S. jobs but it's created them as well

Over decades, a torrent of U.S. manufacturing jobs have been lost to Mexico as companies sought the advantages of low-cost labor and trade deals.

In the summer of 2021, Hufcor Inc., a century-old Wisconsin manufacturer of accordion-style wall partitions used to subdivide offices, convention centers and school gymnasiums, announced it was closing its factory in Janesville and moving the work to Monterrey.

It was devastating to the plant’s 166 workers, who had built partitions used around the world. Hufcor provided little explanation, but through its owner, Los Angeles-based OpenGate Capital, became embroiled in a bankruptcy that left workers in hardship.

In a Sept. 19, 2022, letter to OpenGate CEO Andrew Nikou, U.S. Sen. Tammy Baldwin (D-Wis.) weighed in on the matter.

“As a result of your mismanagement, dozens of former Hufcor workers – some of whom have life-threatening illnesses – are without health coverage. Others never received the retention bonuses they were promised in exchange for continuing to work for the company after you announced the Janesville facility would be closing,” Baldwin wrote.

In another example, six workers at a Sturtevant orthodontics plant lost their jobs in 2017 after spending a year training their colleagues in Mexico, in-person and via Skype, to improve quality standards.

“Once a minimum standard was met, the USA workers were let go,” according to a Trade Adjustment Assistance petition filed with the U.S. Department of Labor by the company on behalf of the workers.

The job losses, large or small, are personal to those individuals and their communities.

However, some say losing work to Mexico isn't as bad for the United States as losing it to China. Trade between the U.S. and Mexico supports work on both sides of the border. Politically, economically and culturally we're more aligned with Mexico than China.

"I know there are some ... that view Mexico as a foe. But it is a strategic and economic ally of the United States, and we need to start treating them as such.”

— Jon Barela, CEO of The Borderplex Alliance

"I know there are some in the heartland of America, and people outside the border region, that view Mexico as a foe. But it is a strategic and economic ally of the United States, and we need to start treating them as such," said Jon Barela, CEO of the Borderplex Alliance, a business group based in El Paso, Texas.

Wisconsin imported $6 billion in products from Mexico last year, up 122% from three years earlier. Medical devices, electrical equipment and motor vehicle parts were among the categories. Wisconsin exported $4.3 billion in products to Mexico in 2023, up more than 65% from three years earlier. Agriculture, food and engines were some of the categories, supporting more than 86,000 jobs in the state, according to government figures.

Some have speculated Mexico could provide jobs that would ease the number of migrants coming into the United States from Central and South America. But that's not happened, said Joell Molina, Americas regional program director with the Solidarity Center, a workers’ rights group based in Washington, D.C.

“Right now there's no incentive whatsoever for any of these migrants to stop and settle down in Mexico, because the conditions are not that different from where they're leaving," Molina said.

Maquiladoras are pursuing nearshoring

Mexico has around 5,000 maquiladoras, which are factories that take raw materials and parts and assemble them into finished products for foreign-owned companies — most of them in the U.S.

In Matamoros, Mexico, manufacturer NovaLink is the Swiss Army Knife of nearshoring.

Matamoros is a city of 600,000 people on the southern bank of the Rio Grande River across from Brownsville, Texas. It’s a historical site for the Mexican War of Independence, the Mexican American War, the American Civil War, and other battles. Historians have given it the unofficial title of "Undefeated, Loyal, and Heroic.”

NovaLink's manufacturing capabilities and products vary widely, from clothing and sporting goods to aircraft seating and fire extinguishers. Toyota, Patagonia and Turtle Fur are three of its many clients.

Workers sew seat covers at NovaLink in Matamoros, Mexico. NovaLink, which has about 2000 employees, produces products ranging from textiles, water meters, aircraft seats and wiring harnesses for partner companies. Most of these companies are based in the U.S. Image by Mark Hoffman/Milwaukee Journal Sentinel.

Boat covers are made at NovaLink, The boat covers are model specific and made as needed for a U.S. company. After being made, they are given a shipping label and trucked across the border to Brownsville, Texas and delivered to Fedex or UPS. Image by Mark Hoffman/Milwaukee Journal Sentinel. Mexico.

Workers sew seat covers at NovaLink. Image by Mark Hoffman/Milwaukee Journal Sentinel. Mexico.

NovaLink traces its roots to the 1980s when General Motors plant manager Bill Wolfe was assigned the task of moving a GM factory from his hometown of Anderson, Indiana, to Mexico.

It was upsetting news in Anderson, a city of about 55,000 people northeast of Indianapolis, which had ties to the automotive industry going back nearly a century.

Still, the GM plant provided much-needed jobs in Matamoros, which had a population of 279,000 in the late 1980s and had once thrived in the cotton trade and shrimp processing industries.

Large companies such as automotive parts maker Delphi established plants in Matamoros; some are in an industrial park with road names like Michigan Avenue and Ohio Street. Years ago, Delphi had a plant in Oak Creek that closed in 2007, resulting in the loss of around 200 jobs.

Through NovaLink, Wolfe and business partner René González saw an opportunity to bring Mexican manufacturing to U.S. businesses lacking the wherewithal of companies like General Motors.

“I think this company has given opportunities to many people over the years to start a career, build a life, and have a better standard of living. And that’s extremely important.”

— Jason Wolfe, president and CEO of NovaLink

NovaLink partners with companies to establish their operations inside one of its facilities. The companies can provide their own equipment, raw materials, and assist in worker training. NovaLink provides manufacturing space and the local workforce, and manages the day-to-day operations and shipping of finished goods.

Bill's son, Jason Wolfe, is now the president and CEO of NovaLink, which operates 400,000 square feet of manufacturing space in Mexico and has a distribution center in Brownsville.

"We have everything in place for a company to relocate their operation, whether it's from China, the U.S., or anywhere else," Jason Wolfe said.

There will always be a need for low-cost manufacturing of inexpensive consumer goods, like a $10 toaster, whether it's in Mexico or Asia. Time to market, freight considerations and available labor are advantages for Mexico.

Jason Wolfe, president and CEO of NovaLink, holds a wiring harness made by his company. Image by Mark Hoffman/Milwaukee Journal Sentinel.

"The Mexican maquiladora program plays a role in some of these products, but the focus has shifted to products that require more than just lower-cost labor," Wolfe said.

One of NovaLink's U.S. clients sells custom boat covers. When a customer places an online order, it drops directly into the factory in Matamoros where the cover is cut, sewn, packaged and shipped.

"We're able to make these products on a real-time basis, which minimizes time to market," Wolfe said.

The company has grown to more than 2,000 employees and has landed work previously done overseas. One advantage of being in Mexico is that U.S. clients can travel to Matamoros in a day, meet with NovaLink management, and be home the next day.

Wolfe was only 13 years old when his family moved from Anderson to Brownsville. He imagined it would be like something out of a Western movie with horses and cattle ranches.

Workers head off for a break at NovaLink in Matamoros, Mexico. NovaLink, which has about 2,000 employees, produces a wide variety of products for partner companies. Image by Mark Hoffman/Milwaukee Journal Sentinel.

What he discovered was a Mexico that was as fascinating to him as it was foreign.

"I knew nothing about Mexico or the culture before I came down here, but I fell in love with it," he said.

After graduating from the University of Texas-Austin with a bachelor's degree in business, Jason joined his brother, Brad, and their father, Bill, in NovaLink.

"My father is a mentor of mine and other employees at NovaLink. I don't ever expect to fill his shoes, but I would like to be able to leave here with the same respect that he generated with his employees," Jason said.

He added: "I think this company has given opportunities to many people over the years to start a career, build a life, and have a better standard of living. And that's extremely important."


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