A number of major Asian manufacturers such as Foxconn, Pegatron, and Luxshare are considering opening new factories in Mexico, Reuters reports, responding to the coronavirus pandemic and ongoing US-China trade war. Foxconn has plans to produce iPhones at the new factory, according to two Reuters sources, although Apple is not currently thought to be directly involved.
The plans are thought to come in response to heavy tariff barriers between the US and China. Reuters notes that locating factories in Mexico could allow companies to benefit from the new United States-Mexico-Canada trade agreement, which allows them to benefit from tariff-free exports to the US under certain circumstances. The idea of encouraging companies to relocate manufacturing from Asia to the Americas is also gaining political traction in Washington.
There is precedent for this type of move, with Foxconn previously investing in countries in response to tariffs. In July, Reuters reported that Foxconn had plans to invest as much as $ 1 billion in India. Later that month, TechCrunch reported that it first began assembling flagship iPhones in India, avoiding a 20 percent import tariff that the country is training for foreign-made electronics.
In August, Foxconn chairman Liu Young-way said his company was working to deliver two different sets of supply chains in response to tensions between the world’s two largest economies. “The world factory no longer exists,” he said, according to Reuters.
A final decision on Foxconn’s plans in Mexico could come later this year, Reuters notes, although the company’s plans may adjust. For example, after announcing a major investment in Wisconsin in 2017, Foxconn now appears to be significantly scaling back its plans.
Although it is said that the coronavirus pandemic ‘has the scale’ tipped in favor of shorter supply chains, the virus could also pose problems for investment in Mexico. The country has reported the third-most deaths from the pandemic worldwide, and the Financial Times recently reported that it is now the worst-case scenario has passed for deaths predicted in June.
Apple and Foxconn did not respond immediately The edgehis request for comment. In a statement, Foxconn said Reuters that it is expanding its global operations and already has investments in Mexico (a country where it has five factories), but added that it currently has no plans to increase this. Apple and Pegatron declined to comment Reuters on their report, and Luxshare did not respond to a request for comment.
