Mid-Year Update on Mexico EMS Industry: Ivan Romo, SMarTsol Technologies

Ivan Romo is the General Manager for SMarTsol Technologies, representing the industry’s major electronics assembly equipment companies, including ASM, Nordson, BTU, AIM, and more. With 22 years of engineering, operations and sales and management experience in the industry in Mexico, Ivan has a unique perspective from the front lines in the region. We caught up with him to give us his view of current business conditions there.

EMSNOW: Please give us a general overview of the electronics industry in Mexico.

The electronics assembly industry in Mexico has been showing continuous growth year over year. According to IVEMSA, in 2016, Mexico was the sixth-largest producer of electronics worldwide and third-largest producer of computers. Worldwide machinery exports, including components and accessories, totaled $145 billion, according to the Observatory of Economic Complexity.  Since there has been steady growth in the region in high tech manufacturing since 2002, the maturity of the industry allows it to launch products fast and to exceed quality expectations is a short period of time. There are several international and internal constraints for industry development in 2019. The leaders from USA, China and Mexico are having a more active influence in investment decisions. Regardless of political factors, Mexico’s electronics industry will continue to grow by double digits.

EMSNOW: What are you seeing in the market this year; what are the positive trends?

This is the right time to improve quality, to reduce cost and also get focused on products for electrical or hybrid cars. Modules for Infotainment are top markets in Mexico despite the fact of a pullback in automotive in 2019. Also most of the electronics manufacturers are preparing for the high demand in production of 5G infrastructure and devices.  We are seeing a huge increase of production for domotics devices (home automation) from most customers.

EMSNOW: What are the challenges in the region this year?

Electronics for the automotive industry has been the sector with highest growth over the past five years; however in 2019 there was a reduction in cars sales of an average of 8% in USA and 6.5% in Mexico compared to 2018. Recently the Mexican government announced 64 regulatory changes which have an impact on some critical components for the industry like motors, display, and others.

To export, assemblers can apply their IMMEX license to waivers for these NOMs, but local producers and integrators are facing delays and big obstacles to use these parts, so this has become a challenge for T2, T3 and their supply chains.

EMSNOW: What has been the impact of the change in the government on your business? On the overall industry?

There are several ways to read the impacts caused by the new government. We were accustomed to keeping track of government laws, tax rules and incentive programs that effect our businesses. But now we are learning to read the messages behind the speeches of every conference.  Most of the paid taxes are no longer used to incentivize industry development, however we still expect to keep the same investment trend as we had over the past 12 years. That’s a problem. Eventually markets will understand this new way to do politics in Mexico and the final result should be good.

EMSNOW: What is the impact of the U.S. tariffs on China on your business?

Definitely this U.S Government action is bringing benefits to Mexico. OEMs with tight margins fighting for market leadership must work hard to keep or improve prices for final users, so Mexico has become the best option to keep the balance between OEM profits and consumer price. We expect an increase of 5% in sales due to manufacturing relocation from China to Mexico as a result of the tariffs.

EMSNOW: What are the unique opportunities for growth in Mexico?

The level of maturity of the electronic assembly industry in Mexico allows customers to launch products in a short time with the highest quality levels. The USMCA keeps the flexibility to produce sub-assemblies in Mexico for their final integration in US. Also, doing complex and final assemblies is something that companies established in Mexico do well. Sea ports, airports and roads help to move raw material and products easily between countries and regions, and are capable of transforming components and delivering finished goods to retail in just a few days. These are huge competitive advantages and will continue to drive growth in Mexico.