Taiwanese AI Server Production Lines Shifting from China to Mexico

As American tech giants depart from China and relocate their production of artificial intelligence (AI) server to Mexico, according to a report from UDN, some major AI players have urged their Taiwanese manufacturing partners to enhance their investments in production in Mexico.

Reportedly, Taiwanese manufacturing giants like Foxconn and Inventec are increasingly attentive to this trend, ramping up their investments in Mexico and leveraging the advantages provided by the US-Mexico-Canada Agreement (USMCA) that came into effect in 2020.

As per a report by The Wall Street Journal, the USMCA has already attracted billions of dollars in investment in the manufacturing sector, aimed at shifting production operations from China to Mexico.

James C. F. Huang, from the Taiwan External Trade Development Council, stated that the three North American countries aim to minimize imports from Asia as much as possible. Based on this consensus, Mexico is expected to become the most significant production base within the USMCA for the production of goods.

In February, Foxconn, the world’s largest electronics manufacturing services provider, announced a USD 27 million investment in purchasing land in the western state of Jalisco, Mexico. According to the report citing sources, this move is aimed at significantly expanding the company’s production of AI servers. Foxconn stated that it has invested approximately USD 690 million in Mexico over the past four years.

Sources cited by UDN also revealed that Foxconn’s Mexican facility manufactures AI servers for American tech giants such as Amazon, Google, Microsoft, and NVIDIA. However, the US companies have declined to confirm this claim.

Last year, the chairman of Mexico’s largest private organization, Francisco Cervantes, pointed out that increased investment by Taiwanese businesses in Mexico will significantly reshape the country’s industrial structure over the next decade.

The production volume of AI server is on the rise, and American companies are hoping to avoid repeating the history of smartphones. Many core components and parts of smartphones ended up being produced in China, particularly in factories operated by companies like Foxconn, for the assembly of iPhones.

Foxconn’s Chairman Young Liu previously indicated a strong demand for AI servers, with Foxconn securing new projects continuously.

Foxconn spokesperson James Wu noted that Foxconn Group commands over 40% market share in the server industry, particularly in the mid-to-high-end products related to AI servers. Foxconn closely collaborates with customers and aims to maintain its dominance, anticipating substantial contributions once the entire supply chain stabilizes.