Should You Manufacture PCBAs in the US, Mexico, or China

Businesses everywhere are considering nearshoring and reshoring as supply chain disruptions resulting from political instability, pandemic-related issues, and weather events continue to challenge global economic growth. The benefits are particularly evident during the NPI (new product introduction) process, where staying close to customers can increase agility and speed, leading to better end results.

America once dominated chip manufacturing. It was Bell Labs in New Jersey that created the first transistor in 1947, which paved the way for integrated circuits. But the high-tech manufacturing corridors in Texas and Silicon Valley that followed their development succumbed to OEMs moving production offshore to take advantage of cheaper wages and production costs. Now, the trend is reversing.

The United States and Mexico both have benefits when it comes to electronics manufacturing, so how does a company decide which country to move its operations to? With the United States-Mexico-Canada Agreement (USMCA), Mexico is a good option for American companies. But what factors separate the USA from Mexico, how are they better than APAC, and which jobs benefit the most from production there? Here are some of the key differences.

For companies looking to relocate electronics production from the APAC region, Mexico and the United States are both excellent options. However, there are some important differences between the two countries.

Large and medium orders requiring labor-intensive production methods can benefit from Mexico’s significantly lower labor rates. The labor cost in Mexico is roughly 20% lower than in China. The cost savings are even greater when compared with wages in the USA. For units with plated through-hole (PTH) components requiring hand soldering, Mexico-based production is an ideal solution.

Meanwhile, American manufacturing locations, which have a higher level of automation, provide better results for smaller orders using surface mount technology (SMT). Automated production can also lead to shorter cycle times and higher-quality products, which can reduce rework and improve your company’s overall reputation.

Over the past few decades, manufacturing operations in APAC have extended company supply lines, providing OEMs with additional manufacturing options. But they can also create additional regulatory liabilities if paperwork is not completed correctly.

By manufacturing in Mexico instead of half a world away, manufacturing and logistical supply lines are less vulnerable to both known and unknown risks. IP risk, political instability, and severe weather events are all included in this category. Moreover, by bringing manufacturing back home, you can avoid the tariffs and other problems associated with international manufacturing.

If your manufacturing facility is located on the other side of the world, changing circumstances can leave your production stranded. And troubleshooting or understanding the problem can be difficult when you’re half a world away.

By moving production back to the USA or Mexico, many of these problems are eliminated. If problems arise, you can quickly resolve them. You can easily visit factories on short notice to understand the situation and brainstorm a possible solution with your production team.

Maintaining business operations in the U.S. and Mexico has the advantage of reducing delivery times. Additionally, products transferred across Mexico’s border into the United States are not subject to additional taxes or duties.

While slightly longer delivery times from Mexico may be a factor for rush jobs, shipping from Guadalajara to the U.S. border will typically only add two to three days to your entire production schedule, which is a viable option for many.

In an emergency, however, this might result in disappointed customers or even a line-down situation. Take advantage of both worlds by producing products in parallel in the United States and Mexico.

In addition to better communication and aligned work schedules, change notices and other processes can be completed more quickly. Your factory and you work together on the same time schedule rather than on a significant delay, as is often the case when working with the APAC region. Twelve hours seem inconsequential, but such delays can add up quickly.

Local operations are often preferred by companies seeking to reduce their carbon footprint. Relocating operations from overseas to North America can result in a more sustainable operation by decreasing the use of maritime freight. Maritime shipping may be responsible for as much as 17% of human-caused carbon emissions by 2050, according to one estimate. Businesses can reduce carbon emissions, save money, and build more sustainable business operations by keeping supply lines close to home.

Harvard Business Review research suggests that close to 95% of NPIs across industries fail. One of the biggest problems is not having a plan for ramping up quickly if the product takes off.

This is when manufacturing nearby becomes even more important. Consider how challenging it could be to implement design changes at the last minute while trying to meet deadlines as your production quantity requirements change constantly. Consider how this would work with a facility working on a 10-hour time difference, with a workforce speaking a different language.

Manufacturing your NPI in North America, whether that be in Mexico or the United States, gives you access to strong IP laws, and allows you to avoid potential problems by utilizing readily available manufacturing and logistical solutions to manage supply chain risk.

Additionally, with the help of local teams to assist you with your DFM reviews, you can ensure a fast and high-yield production that will significantly improve your bottom line.

More than ever before, people are concerned about where their products are made. Americans are interested in supporting businesses that stay in the United States because they create more jobs. Modern businesses may find it easier to compete if their products can be labeled as made in the USA.

Additionally, the U.S. government shows preference for U.S.-made products when negotiating procurement contracts.

As a preventative measure against lingering pandemic risks and future black swan events, businesses should consider reshoring or nearshoring their operations to the United States and Mexico.

Companies that have operated in China for many years are beginning to realize the advantages of returning to North America. US manufacturers should consider Mexico’s manufacturing sector for large orders that can benefit from manual labor and Mexico’s lower labor costs. For orders that can benefit from automation or need smaller quantities, the United States may be a better option.

North America’s manufacturing sector is growing, with Mexico and the U.S. showing great potential. It is critical to consider the finer details of your project before choosing a location. As the electronics manufacturing industry in North America grows, relocation is becoming increasingly appealing.