The USA is the largest, single contributor of GDP to the global economy. China is ranked a distant second, far ahead of Japan, Germany, and India, respectively, rounding up the top five according to figures from UN and IMF.
As manufacturing import-export tariffs trend, influenced by the ongoing US-China trade war, nations are positioning to take advantage of duties impact on various products and industries.
Some South East Asia electronics manufacturing destination winners emerging include:
India’s role in global electronics manufacturing is still playing out, with some important challenges still not resolved after many initiatives and attempts going back ten-plus years.
Mexico v China changing labor costs
Closer to the US, Mexico is playing more prominently into manufacturing supply chain decision-making, especially as capital flows continue from Europe, Asia, and emerging markets to the US dollar for safety against softening economies everywhere else, including China.
Mexico is leveraging its close-proximity to the US economic consumption base for contract electronics solutions facilities located in Mexico, plus interest from continuing struggling economies in the EU, despite 10 years of quantitative easing, and developed and emerging economies also facing challenges elsewhere.
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While Mexico’s connection to US industrial production has weakened over the years, board rooms across the US are, again, turning to Mexico for manufacturing for various reasons beyond low-cost labor and a favorable currency exchange.
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Lower logistic costs (v China freight transport costs) for a US market, plus Mexican government support and other appealing benefits depending on electronics product point of consumption.
Mexico labor productivity v manufacturing unitary costs (Index 2008 = 100, sa)
Additionally, as China’s role as the world’s manufacturing factory wanes in many market sectors, China’s cost advantage compared to Mexico in terms of wages has reversed, especially given currency depreciation.
Mexico v China manufacturing sector wages ($ per hour)
For the above, to calculate hourly wages it was assumed 2,179 average hours worked per year, as noted in the Bureau of Labor Statistics (BLS) report ‘Manufacturing Earnings & Compensation in China’. Data for 2018 is not available in National Bureau of Statistics of China (NBS) but was taken from tradingeconomics.com/china/wages-in-manufacturing, according to a report by J.P. Morgan.
The trend in China’s relative cost competitiveness to Mexico has reversed gradually as manufacturing costs, namely wages, in China increased while Mexico’s have actually declined in recent years due to currency depreciation.
But with rising costs seemingly everywhere, Mexico’s Andrés Manuel López Obrador administration has seen Mexico’s minimum wage increase on average 16%, which led to 2.8% YoY increase in manufacturing wages (in real terms), J.P. Morgan reports.
Mexico ranking on manufacturing environment
Beyond manufacturing labor wages, Mexican manufacturers have other costs that rank Mexico behind some South East Asian nations like India or Thailand on manufacturing cost competitiveness, according to Boston Consulting Group.
Mexico ranking on quality of overall infrastructure v select nations
Readers should note, World Economic Forum ranks Mexico 79th worldwide (out of 140 nations) on overall quality of its infrastructure.
Of considerable importance on infrastructure to electronics manufacturers is electronics manufacturing industry’s need for a high reliability of an uninterrupted supply of electric power. Electronics manufacturing industry consumes a great deal of electricity.
Meanwhile, Mexico has managed to improve its ranking in quality of electricity supply from 68th (2016) to 85th (2018), according to ‘WEF Competitiveness Report’, below.
| Mexico Infrastructure: Category | Rank 2016 | Rank 2017 | Rank 2018 |
| Quality of roads | 58 | 52 | 47 |
| Efficiency of transportation services | 59 | 65 | 74 |
| Efficiency of of seaport services | 57 | 62 | 60 |
| Efficiency of air transport services | 61 | 67 | 70 |
| Quality of electricity supply | 68 | 72 | 85 |
| Fixed telephone lines per 100 population | 65 | 67 | 64 |
| Mobile telephone substations per 100 population | 114 | 108 | 109 |
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