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US Tech Giants Move AI Hardware Manufacturing From China To Mexico

By Nagasunder in Business News, posted April 1, 2024

US tech giants are turning to Mexico to produce artificial intelligence hardware, to reduce their dependency on China.

Companies have asked their Taiwanese partners, including Foxconn—the world's foremost contract electronics producer—to expand AI hardware manufacturing efforts in Mexico.

This move capitalizes on the US-Mexico-Canada Agreement (USMCA), which promotes trade within North America and encourages manufacturers to consider nearshoring to Mexico from China.

Foxconn's investment in Mexico, including a $27 million purchase of land in Jalisco for AI server production, shows the growing trend.

The company and others like Inventec are responding to US demands to manufacture AI servers and related equipment outside of China.

They cite the USMCA's benefits and aim to avoid the challenges associated with smartphone manufacturing, which has become heavily concentrated in China.

The relocation is especially driven by US restrictions on exporting advanced AI chips to China.

Dell, Hewlett Packard Enterprise, and other major server producers are diversifying their production locations.

Mexico and Southeast Asia are becoming increasingly attractive alternatives.

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Despite its appeal, Mexico's rise as a tech manufacturing hub isn't without challenges such as crime, resource shortages, and labor issues.

Taiwanese companies adapting to this environment find that they often need to invest in increased security measures and also navigate the expectations of the unionized Mexican workforce.

Mexico's growing role in advanced manufacturing against the backdrop of US-China relations is significant, with the country now hosting around 300 Taiwanese firms.

These developments use Mexico’s extensive network of free-trade agreements and its strategic location to attract investments from the automotive industry.

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