When China was admitted to the World Trade Organization in 2001, shock waves rippled across the Pacific to Mexico. The country’s electronics manufacturing industry in particular faced a tough new competitor. It had a choice to make: do battle on terms dictated by China or work to become a viable alternative to Asia. Industry leaders in Mexico chose the latter, more aggressive course of action.

      “The marketplace changed when China joined the World Trade Organization,” says Pedro Avalos Esparza, director of operations for Siemens Electronics in Guadalajara, Jal. “We began to understand that electronics manufacturing in Mexico might not survive unless we changed our business model.”

      It would take more than simply dreaming up a new industry slogan. Companies throughout Mexico embarked on a campaign to retool factories and retrain workers to accommodate production of more complex, higher value products. As a result, Mexico’s electronics industry is now a thriving—and respected—global competitor. Some $43 billion in sales in 2004 is proof of just that.

Mexitrónica

      Avalos Esparza also is president of the Guadalajara region of CANIETI, Mexico’s National Chamber for Electronics, Telecommunications and Information Industries.

      “CANIETI serves as the link among electronics companies, the government, universities and other economic entities. It promotes what we have in Mexico, making sure the industry moves in the right direction,” says Avalos Esparza, whose chamber represents more than 700 electronic manufacturing companies. “The chamber networks with all these groups.” It does so by sponsoring the industry’s largest networking event, the annual tradeshow Mexitrónica.

      In 1994 CANIETI joined forces with ROC Exhibitions, then working to expand its portfolio of tradeshows into the Mexican market. The fruit of this alliance is Mexitrónica, the National Electronics Manufacturing Conference and Expo in Guadalajara, Mexico’s densest concentration of major electronics companies, including Siemens, Flextronics, Motorola, Sanmina and Hewlett-Packard among others.

      “Mexitrónica is vital to our industry because it helps increase our base of suppliers and customers,” Avalos Esparza says. “CANIETI and the electronics industry couldn’t put on a show like this without ROC Exhibitions. It’s not our skill area; it’s not on our resume. But ROC knows exactly what has to be done. That makes it a perfect marriage for us.”

      The relationship between CANIETI and ROC is now into its second decade.

      “CANIETI is a well-organized, forward-thinking chamber. Together we’re producing a major business-to-business event that reflects the dynamic nature of Mexico’s electronics industry,” says Jerry Carter, ROC’s managing director of exhibitions. “ROC has the ability to deliver an international cast of players — suppliers and potential customers from the United States, Canada, the United Kingdom, Europe, Hong Kong, China, Taiwan and Japan.”

      Mexitrónica now anchors a larger, multifaceted event, International Manufacturing Technology Week, including three additional co-located tradeshows — EnsamblaMex, TecnoCaliidad and ExpoMetalMecánica.

      That Mexico is a major player in electronics manufacturing would be difficult to dispute. With a push from the North American Free Trade Agreement, signed by the United States, Canada and Mexico in 1994, the electronics industry has become a crucial component of the Mexican economy.

      “NAFTA played a large part in energizing the electronics manufacturing base in Mexico,” ROC’s Carter says. The underpinnings of that base are 298,000 direct jobs, “direct” meaning that every one of those 298,000 workers is involved in manufacturing electronics — not performing some other task, such as cleaning services. In 2004, direct jobs in Mexico’s electronic manufacturing sector grew by 6.2 percent.

      There’s yet another sign of the vigorous health of manufacturing in general throughout Mexico. According to the National Statistics Institute, investment in machinery, equipment and construction for renovating or expanding production capacity in Mexico increased by 8 percent the first five months of 2005.

      Mexico manufactures hundreds of different electronic products: cable TV set-top boxes, automotive electronics, PCs and laptops, computer servers, cell phones, telecom infrastructure products, radar systems for fishing and GPS devices, to name a few. Fifty percent of the DVD players sold in the United States and Canada are manufactured in Mexico, according to Avalos Esparza. Along with manufacturers, Jalisco is host to semiconductor designers and centers for research in micro-electronics, including one for Intel.

      “Seventy percent of all exports from the state of Jalisco come from electronics,” Avalos Esparza says.

      If NAFTA was Mexico’s shot of adrenaline, China’s signing on with the World Trade Organization was a kick in the pants.

      “Our business model used to be high-volume production of low complexity products,” Avalos Esparza says. “We had to find a different strategy if we were going to stop losing huge chunks of the market to China. We could not compete that way because China can produce the high volumes with much, much lower labor costs.”

      So Mexico looked to high-value manufacturing, products combining technical skills of design, software design, quality engineering and superior testing. “We had to use world-class tools that would make us competitive,” Avalos Esparza says. “As that changed, the products we lost to Asia were in the low-complexity market.”

      CANIETI and the companies it represents also began thinking of the customer first, for example, delivering a more robust product. Instead of personal computers being sent to a distribution center, Mexican manufacturers are sending them directly to U.S. stores like Best Buy and Wal-Mart with software pre-installed.

      The clear advantage of this was the personalized services Mexican manufacturers could deliver. For instance, they could ship an order of computer servers from the factory to a customer in Chicago in only a few days. The same order would take five or six weeks to arrive from China.

       “But just being close to our market wasn’t enough,” Avalos Esparza says. “We had to build up the skills of our employees and establish teamwork with the government. Now our government is aware of the importance of the electronics industry to the country.”

      The Mexican government, he says, offers incentives for companies conducting innovative research and development. A company can apply for a 30 percent tax break, referred to as a “fiscal credit.” Small companies such as software manufacturers also are eligible for incentives.

      There also are government incentives for training people in high-skilled labor such as semiconductor designers and in quality control. Universities — eight in Guadalajara alone — are doing their part by educating more quality engineers than ever before.

      And then there’s the work environment itself. Avalos Esparza says electronics manufacturers apply the standards of the U.S. regulatory agency OSHA (Occupational Safety and Health Administration). The result, he says, is that Mexico’s electronics facilities have become model factories.

      “People visiting our country now walk through our manufacturing facilities and say, ‘This is not possible in Mexico!’ ” Avalos Esparza says. “It’s not only possible, but it is the reality of the electronics industry throughout our country.”