Where Is the China Business Going?

Estimated reading time: 2 minutes

We met with Milwaukee Electronics’ CEO Jered Stoehr and Vice President of Sales Paul Forker to discuss the evolving dynamics of Mexico's role in global trade, particularly in comparison to China. The recent increase in trade with Mexico, due to the impact of tariffs on business opportunities, and the shift of some companies from China to Mexico stemming from factors like cost competitiveness and geopolitical risks, have been key to Mexico’s position as the number one trade partner with the U.S. The conversation also delves into the importance of workforce skills, company culture, and decision-making autonomy in selecting a Mexico-based EMS provider.

Nolan Johnson: A recent headline read, “Is Mexico the Next China?” How true is this for Milwaukee Electronics?

Jered Stoehr: We've been in Mexico since the 1990s, longer than many other CMs. We have two domestic facilities in the U.S. and one in Mexico. Our Mexico customer base has historically been higher volume, but there wasn't a huge gap in the size of the customer with our U.S. facilities back then. More recently, when the tariffs were implemented, things changed significantly. Our Mexico facility is attracting larger customers and opportunities today. It has grown relative to our domestic facilities.

In fact, I have a publicly available report from Deloitte about Mexico. It says U.S. trade has been growing significantly with China and Mexico for a long time. From 2010 to 2019, the trade gap between China and Mexico stayed consistent even as trade increased. There’s a dip in 2020 due to COVID, but then a correction and a return growth for both. From 2022 to 2023, though, a big gap opens, with China declining and Mexico continuing to grow.

Johnson: Is this the first time you see the two countries diverge?

Stoehr: Yes. That macro-level view shows the shift. In our experience, when the tariffs were implemented, we started seeing significant increases in large-quantity opportunities for our Mexico facility. Ten or 15 years ago, a large EMS customer had either already gone to Asia or was headed there. In these past several years, a significant number of those customers have shown interest in Mexico.

Paul Forker: There clearly has been an increase in demand for our quoting opportunities with customers or prospects who have been in China. China used to be an automatic choice; now, newer companies with a product hitting its stride in production aren’t considering China like they once were.

Johnson: Paul, does this business constitute existing work coming from China, or are these new products with which they've decided to start production in Mexico?

Continue reading the rest of this interview in the June 2024 issue of SMT007 Magazine.