Industries in Mexico such as aerospace, automotive, electronics and medical devices all face different challenges and opportunities. Predictions are that the country will rank seventh in manufacturing competitiveness by 2020.
Industries in Mexico are expected to grow significantly over the next several years because the country belongs to a steadily expanding North American manufacturing cluster that is led by the United States. This growth will also be positively impacted by the ten free trade agreements that Mexico has signed with forty-six nations since its ratification of the North American Free Trade Agreement in 1994.
In addition to its proximity to and relationship with the United States, as well as its network of free trade agreements, Mexico also offers an advantageously priced workforce for companies that are seeking to achieve a competitive edge in their respective markets. This article will provide an overview of the four industries in Mexico that are leading the way.
The aerospace industry in Mexico
Mexico is a world leader in the aerospace sector. Over the past decade, the sector has 17.2% on an annual basis and has risen from 10th to 6th place among the countries that most export to the U.S. aviation industry.
Since the year 2000, aerospace has become one of the most dynamic manufacturing industries in Mexico. Currently, there are more than 300 companies in the sector. Of these, 80% are involved in the manufacturing of aircraft parts, while 20% offer design and engineering services, as well as maintenance, repair, and operations (MRO).
The largest number of aerospace manufacturers in Mexico is concentrated in the northern region. In this area, the sector’s development strategy is based upon the generation of new technologies and the promotion of the formation of clusters composed of companies, universities, and research centers. These regional clusters have made aerospace one of the principal industries in Mexico.
In the north of Mexico, one of the regional clusters that leads the way in the country’s aerospace industry is in the state of Baja California. Production has been taking place there in this sector for the past 40 years. Currently, there is a group of more than 75 companies operating in the entity whose main focus is on the production of fuselage and power systems.
The state of Sonora, for its part, has more than fifty companies that are mainly dedicated to the manufacture of turbine blades and parts for jet engines. The companies in the entities represent some of the most technologically advanced industries in Mexico. Activities that take place there include die casting, lost wax and sand mold, as well as heat and surface treatments. Additionally, one of the main strengths of the state’s aerospace industry is focused on research and development activities. The Institute of Advanced Manufacturing and Aerospace (IMAAS), as well as private sector companies participate.
The state of Chihuahua has 29 manufacturing companies, 37 suppliers certified under aerospace industry standards and five original equipment assemblers. These companies together form a cluster that specializes in five areas. These include certification, design and engineering, supply, manufacturing and repair and maintenance. Manufacturing in the Chihuahua aerospace cluster is comprised of the manufacture and assembly of fuselages, aerostructures, motors, electrical wiring systems, high precision machining, interiors, and seating.
Another major aerospace industry cluster in Mexico is located in the state of Queretaro, which is in the central region of the country. This entity stands out as the largest recipient of foreign direct investment in the sector in the nation over the course of the last decade.
The Queretaro Aerocluster is comprised of 85 companies and organizations. It includes 24 Tier 1, Tier 2, and Tier 3 suppliers; eight special processes companies; four OEMs (Original Equipment Manufacturer); five MROs (Maintenance, Repair, and Operations); twelve research and design centers; 19 special service companies; six raw materials suppliers: and seven academic institutions.
The aforementioned companies and organizations are responsible for the generation of 8,500 jobs in one of the most dynamic industries in Mexico.
The automotive industry in Mexico
The automotive sector is one of the most successful industries in Mexico because of the developed network of suppliers that it has established in the country over the last several decades. Today, there are more than 1,900 manufacturers of auto parts in Mexico. Combined, they account for 41% of the Gross Domestic Product (GDP) of the sector.
There are three major automotive industrial corridors that have been formed in the country. Each has its own distinctive characteristics and level of development. The northern border region stands out as the most area for the industry. The border accounts for 47.7% of the industry’s GDP, 68.6% of its employment, and 42% of all automotive industry companies with a presence in the country. It is especially known for its production of trucks. This is due to the presence of firms such as Kenworth, International, and Scania.
The automotive clusters that stand out in the border region include those found in the state of Chihuahua and the city of Saltillo, Coahuila. The adjacent states of Sonora and Baja California also have a significant presence of auto industry manufacturers. The origin of these clusters dates back to the 1960s when the government enacted a series of incentives to attract US capital.
The Bajio region of Mexico is also a prominent pole of automotive industry development. The area is home to six auto assemblers and 550 auto parts manufacturing firms. These companies have generated 59,000 jobs. Additionally, the Bajio region of Mexico has received approximately 4.6% of the total industry foreign direct investment (FDI). Silao, Guanajuato, where GM has long established operations, stand out in particular.
The third prominent automotive industry cluster in Mexico is located in the state of Puebla, whose capital is located approximately 81 miles southeast of Mexico City. The most prominent automotive industry manufacturer in Puebla is Volkswagen. VW merits special mention because it is the country’s leading automaker. It is responsible for 33.6% of sectoral GDP and generates 26.4% of the industry’s jobs in the country.
The electronics industry in Mexico
Electronics is one of the most prominent industries in Mexico. In the six-year period between 2010-2016, the sector was the recipient of foreign direct investment (FDI) that totaled US $6.7 billion.
The Mexican electronics sector is focused mainly on the manufacture of appliances and components that process some kind of information. The industry is divided into five major subsectors: audio and video, computing and office, semiconductors, communications and precision, measurement, control, and optical instruments.
Mexico is particularly competitive in the consumer electronics subsector, ranking among the major global exporters in some product classes. The largest cluster of electronics manufacturers in the country is located in the state of Jalisco and its capital, the city of Guadalajara.
The medical device industry in Mexico
In Mexico, the medical device industry has grown steadily in recent years. This has been driven by global technological advances, the digitization, and incorporation of new technologies, and by increased demand for medical devices due to changes in societal demographics.
Mexico is the leading exporter of medical devices in Latin America. Its most important market is the United States, which receives 91% of Mexican made medical devices that are shipped overseas. According to data provided by the Mexican Association of Innovative Medical Device Industries, the value of production of medical devices in the country now exceeds more than US $15 billion. The industry also has generated more than 130,00 jobs. In addition to accounting for .3% of national GDP, the medical device industry in Mexico accounts for 1.5% of the manufacturing industry’s Gross Domestic Product.
Currently, Mexico is the eighth largest medical device exporter to the world. As of 2018, the country exported more than US $8.2 billion worth of this class of product. In addition to the United States, other top importers of medical devices that are made in Mexico include Italy, Germany, and France. The main items that were exported to these markets were medical instruments for surgery, dentistry, and veterinary use; articles and orthopedics for fractures; mechanotherapy devices, oxygen therapy, and aerosol therapy equipment, as well as x-ray devices.
Finally, in terms of foreign direct investment, there was a cumulative investment of just over US $2 billion in 2017. This capital flow came mainly from the United States, Germany, Singapore, Japan, and Canada.