An AI technology manufacturing shift from China to Mexico is being led by Foxconn

A hot potato: Taiwan-based corporation Foxconn is the world’s largest contract manufacturer of electronics products and one of the industry’s biggest employers. The company founded by Terry Gou has so far collected the majority of its revenues from Chinese assets, but things could be much different a few years down the line.

A new report by the Wall Street Journal (WSJ) highlights the seismic change the electronics manufacturing world is undergoing right now. Foxconn and other major Taiwanese corporations have been asked by Western (mostly US) clients to move a big part of their production outside China, and Mexico is likely to have a major role in this new geopolitical play.

Thanks to the U.S.-Mexico-Canada Agreement (USMCA) signed in 2020, billions of dollars are being invested to fuel development of new manufacturing plants in the country. According to James Huang, chairman of the Taiwan External Trade Development Council, this “nearshoring” process is accelerating because the US and Canada hope to replace product imports from Asia “as much as possible.”

Mexico will likely become the most important manufacturing hub for the USMCA countries, Huang revealed, and Foxconn is an important element in this unprecedented industrial development. The Taiwanese conglomerate invested around $690 million in Mexico over the past four years, and it has now spent an additional $27 million to purchase land in the Mexican state of Jalisco.

According to unnamed industry insiders quoted by the WSJ, the new Mexican plants being developed by Foxconn will be employed to manufacture AI servers for US-based Big Tech corporations including Amazon, Google, Microsoft, and Nvidia. No US company has confirmed its involvement in the plans, but Mexican trading organizations have hailed the new investments as a process that will dramatically change the industrial structure of the country in the next ten years.

Powerful AI servers and other AI accelerator equipment are a major focus for today’s electronics industry, and Foxconn is just one of the companies being forced to move their business from China to Mexico. The company is part of a group known as the “six brothers of electronics” of Taiwan, which also includes Pegatron, Wistron, Quanta, Compal, and Inventec.

Server manufacturer Inventec confirmed in December 2023 that one of its clients, a top American brand, first asked the company to bring manufacturing to the US. After inspecting plants located in Mexico, the unnamed client was impressed enough to choose the country instead.

The growing geopolitical tensions between the US and China are turning tech manufacturing in the Asian country into a troublesome and uncertain venture. Nvidia’s most advanced AI (GPU) accelerators cannot be exported to China, though they will remain essential for any AI-related manufacturing activity for the time being.