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 reportedly has plans to produce iPhones at the new factory, according to two Reuters sources, although Apple isn’t thought to be directly involved at this time.
The plans are thought to have come in response to looming 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, allowing them to take advantage of tariff-free exports to the US under certain circumstances. The idea of encouraging firms to move manufacturing from Asia to the Americas is reportedly gaining political traction in Washington, too.
There’s precedent for this kind of relocation, 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 had started assembling flagship iPhones in India for the first time, avoiding a 20 percent import duty the country imposes on foreign-made electronics.
In August, Foxconn chairman Liu Young-way said his company was working to provide 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 are subject to change. For example, after announcing a major investment in Wisconsin in 2017, Foxconn now appears to have significantly scaled back its plans.
Although the coronavirus pandemic is said to have “tipped the scale” in favor of shorter supply chains, the virus could also cause problems for investment in Mexico. The country has reported the third-most deaths from the pandemic globally, and the Financial Times recently reported it has now exceeded the worst-case scenario for deaths predicted in June.
In a statement, Foxconn told Reuters that it is expanding its global operations and already has investments in Mexico (a country where it has five factories), but it added that it currently has no plans to increase this. Apple and Pegatron declined to comment to Reuters on its report, and Luxshare did not respond to a request for comment.