People familiar with the matter said that Taiwanese electronics manufacturers such as Foxconn and Pegatron are considering opening new factories in Mexico as the Sino-US trade war and the coronavirus pandemic have prompted companies to re-examine global supply chains.

The plan may bring billions of dollars in much-needed new investment in the next few years to Latin America’s second largest economy, which has its worst recession since the Great Depression in the 1930s.

Foxconn and Pegatron are contractors for several mobile phone manufacturers, including Apple. It is not clear which companies they will work with in Mexico.

Two sources said that Foxconn plans to use the factory to produce Apple iPhones. However, a source said that there is no indication that Apple is directly involved in the plan.

Two people familiar with the matter said that Foxconn is likely to make a final decision on the new plant later this year, and work will begin after that. He added that he is not sure whether the company will stick to the plan.

Apple spokesman Josh Rosenstock (Josh Rosenstock) declined to comment.

People familiar with the matter said that Pegatron is still in early discussions with lenders to discuss building an additional facility in Mexico that is mainly used to assemble chips and other electronic components. The source, who spoke on condition of anonymity because the negotiations are confidential. Heshuo declined to comment.

Foxconn has five factories in Mexico, mainly producing TVs and servers. During the Sino-US trade war and the coronavirus crisis, its possible expansion will highlight the gradual shift of global supply chains from China.

These plans came with the prevalence of “near shore” ideas in Washington. The Trump administration is exploring economic incentives to encourage companies to move production facilities from Asia to the United States, Latin America and the Caribbean.

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Mexico has a favorable geographical location, low wages and time zone through a new agreement on free trade with the world’s largest consumer market. Despite the global economic recession and concerns about the business environment during President Andres Manuel Lopez Obrador’s tenure, government data shows that so far this year, Basically, foreign investment has not wavered.

A third source from Foxconn said: “The company has indeed contacted the (Mexico) government.” He added that negotiations are still in the early stages and the increase in Mexico’s coronavirus cases is the main focus of possible investment.

Taipei-based Foxconn (formally known as Hon Hai Precision Industry) said in a statement that although Foxconn continues to expand its global business and is an “active investor” in Mexico, it currently has no plans to increase these investments.

Reuters reported in July that Foxconn plans to invest up to US$1 billion (approximately Rs 7,409 crore) to expand its plant to assemble Apple iPhones in India.

Foxconn Chairman Liu Yongwei said at an investor meeting held in Taipei on August 12 that due to the tension between China and the United States, the world was divided into “G2” or two groups, saying that Foxconn is committed to “providing two sets of supply chain services.” In China”. Two markets. “

He said: “The world’s factories no longer exist.” He added that about 30% of the company’s products are currently produced outside of China, and this proportion may increase.

Foxconn subsidiary Sharp (Sharp) said it is stepping up TV production in Mexico. Sharp said last year that it would build a factory in Vietnam to transfer some of its production in China. It said it had no further information to provide.

Two sources said that China’s Luxshare Precision Industry is also considering setting up a factory in Mexico this year to offset the tariff war between the world’s two largest economies.

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It is not clear which product line Luxshare is considering, according to media reports, this product line is the leading manufacturer of Apple Airpods. Luxshare did not respond to a request for comment.

The Mexican Taipei Economic and Cultural Office on behalf of the Taiwan government in Taiwan said that Foxconn has heard that Foxconn is interested in establishing another factory in Ciudad Juarez, Chihuahua, on the northern border.

The director of the office, Armando Cheng, told Reuters: “Pegatron also hopes to transfer the production line from China to Mexico.” He said he did not know the details of any company’s plan.

Cheng said: “Mexico is one of the ideal countries for companies considering realigning their supplier chains.”

The scale of investment by Asian electronic contract manufacturers and the jobs they create in Mexico are unclear.

The promised investment in new manufacturing capabilities is not always realized.

In 2017, U.S. President Donald Trump stated that Foxconn will build a US$10 billion (approximately Rs. 74,090 crore) factory in Wisconsin and employ 13,000 people who make LCD panels.

These plans have changed dramatically. In 2019, the company reduced the size of the planned plant. Foxconn said in April that it would cooperate with Medtronic to produce ventilators at the plant.

Extended supply chain

The coronavirus has turned the trans-Pacific supply chain into stagnant cars, electronics and pharmaceutical accessories in China, and has exacerbated concerns about companies moving their production bases away from American consumers.

In addition, the newly implemented US-Mexico-Canada trade agreement requires more locally sourced inputs to be exported to the United States without tariffs.

Economy Minister Graciela Marquez told Reuters in July that Mexico has communicated with many foreign companies to attract Asian companies to take advantage of trade agreements and is preparing to discuss manufacturing transfers with Apple. Have a conversation.

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She said that she did not directly talk to Foxconn, Pegatron and Luxshare. A senior government official said that these companies are other companies interested in investing in Mexico.

The government did not respond to requests for further comment before the release.

Despite the potential and reliable investment data, many investors saw Lopez Obrador (Lopez Obrador) wasting historic opportunities.

Eduardo Ramos-Gomez, a partner at the law firm Duane Morris & Selvam, said: “This may be rough.”

Critics cited Mexico’s poor handling of the pandemic, ranking third in the world’s death toll, and Lopez Obrador’s intervention in private investment decisions, such as the cancellation of the American company Constellation Brands. ) A $1 billion (approximately Rs 7409 crore) brewery, a large airport project, and pressure on energy companies.

The government denied that such a decision was anti-commercial.

In any case, the attractiveness of Mexico has attracted some people.

Samuel Campos, executive managing director of the real estate brokerage firm Newmark Knight Frank, said his company is currently helping two Chinese companies (one in the automotive sector and the other One in the manufacturing industry) moved to an industrial cluster in Mexico.

Campos said Asian electronics, medical and automotive companies are expected to help promote investment in Mexico in the fourth quarter of this year.

For Alan Russell, CEO and chairman of the Mexican plant management company Tecma Group, Chinese manufacturers who want to maintain market share in North America have no choice.

He said: “They will shorten the supply chain and expand the scope of the region.” “It seems that the virus has been scaled down.”

© Thomson Reuters 2020

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