Notes from the Wild, Wild West

04 August 2008

Susan Mucha

I ended my last article on Mexico (Viva Mexico!) by pointing out that Mexico is old world culture, a skilled high technology manufacturing location, a poor agrarian society, Montezuma’s revenge and the Wild West all rolled into one country. Well, both the Wild West and skilled high technology aspects are starting to heat up in Juarez so I thought this might be a good time for an update.

The biggest piece of technology news this month is that Foxconn plans to open a huge factory in a developing area west of Juarez known as San Jeronimo which sits directly across from Santa Teresa, New Mexico. Foxconn opened its first facility in Juarez in 2005. According to published reports, the new facility will open in first quarter 2009 and employ up to 9,000. When fully built out it will cover close to 500 acres and include more than 1.2 million sq. ft. of structures. Published reports also indicate that ultimately the facility could employ 20,000-30,000.

Its major Tier One EMS competitor, Flextronics, has also been expanding in the region over the same period of time. It opened the first phase of a planned 1.9 million sq. ft facility in Juarez in November 2006.
Economic development is not coming without challenges. Juarez has traditionally had a zero percent unemployment rate and companies hiring large numbers of employees often have to aggressively recruit entry level employees migrating to the city from other regions of Mexico and train them. The announced Foxconn facility is actually to the west of Juarez in an undeveloped industrial park that is adjacent to the Santa Teresa, New Mexico U.S. port of entry and a US industrial park. Assuming the labour recruitment issues are addressed, they will be sitting minutes away from a US Customs entry point, US warehousing and suppliers. Logistically it is a brilliant move, although San Jeronimo has been waiting for a tenant the calibre of Foxconn for over a decade which underscores the fact that this location is not necessarily plug and play.

Another potential challenge is the current war with the drug cartels playing out in Juarez and other cities. According to the El Paso Times, the Juarez homicide body count for 2008 stands at about 650 as of the end of July. While the general wisdom in Juarez is that cartel violence tends to stay within those connected to the drug trade, there have been some innocent bystanders caught in the crossfire this year. This may have some impact on the willingness of engineering and management professionals on either side of the border to work in Juarez.

A positive is that at a time when US and Mexico OEMs are laying off technical and manufacturing professionals, these expansions offer good employment options. Juarez is minutes from the El Paso, TX border. While border wait times are longer than the Santa Teresa crossing because of traffic volume, it is a good option for engineers and managers who want to live in the US and have a 30-minute commute to an office in Mexico. Similarly, some of Mexico’s other manufacturing industries have felt some of the pain that is present in the US and this provides opportunities for highly qualified Mexican engineers and managers who are at risk of being laid off in existing jobs.

Most importantly, the fact that these expansions are occurring in the face of the challenges listed above signifies that there is increasing understanding of the total cost of outsourcing, particularly in regard to the issues of logistics cost and time-to-market. Flextronics and Foxconn have facilities in some of the lowest cost labour markets in the world and have significant market share in high volume, consumer products. The fact that they are investing in Mexican border locations suggests that there is strong OEM interest in seeing products built closer to end markets.

I realise this article has tended to focus more on business issues than technical issues, but it suggests some interesting trends in a changing region. One other development that UK readers may be interested in is that the Juarez-El Paso-Santa Teresa area is only a short drive away from Spaceport America whose anchor tenant is Virgin Galactic. By 2010, this part of the Wild West may also be the launch point of commercial travel into the next frontier. This is definitely a region to watch.

Susan Mucha is president of Powell-Mucha Consulting, Inc., a consulting firm focused on training, strategic planning and marketing positioning. Her new book, “Find It. Book It. Grow It. A Robust Process for Account Acquisition in Electronics Manufacturing Services,” is available through Pennwell Books, other online retailers, IPC and the SMTA.

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