Issue link: https://iconnect007.uberflip.com/i/1521713
18 SMT007 MAGAZINE I JUNE 2024 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. ere's a dip in 2020 due to COVID, but then a correc- tion and a return growth for both. From 2022 to 2023, though, a big gap opens, with China declining and Mexico continuing to grow. Is this the first time you see the two countries diverge? Stoehr: Yes. at macro-level view shows the shi. In our experience, when the tariffs were implemented, we started seeing signifi- cant 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: ere 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 hit- ting its stride in production aren't considering China like they once were. 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? Forker: We're exposed to many companies developing new products that have evolved from startup to domestic production. ose folks are looking for cost reduction. at's one scenario. e other scenario is when folks come right out and say, "We want all our busi- ness out of China." What's their thought process? Forker: I think it's because of the unknowns and the instability. e tariffs are always loom- ing in their minds. Before that, there were con- cerns about communication and control of their intellectual property. Stoehr: ere's increasing interest. Geopo- litically, OEMs are developing supply bases outside China. at's becoming increasingly common, and in the last few years, the supply chain has gained a more powerful voice within organizations. e supply chain is one of the biggest risk factors that companies identify: What if there was some kind of conflict? How would we survive as a business? An increasing number of companies are looking to region- alize to manage cost, but also to manage that risk. Can you be cost-competitive with China? Forker: Folks are willing to pay more, about 10–15%. Stoehr: is could lead to a discussion about total cost of ownership where some compa- nies are better at it than others. I would agree that 10–15% more on those unit costs seems typical. Customers are seeing value for that extra 10–15%. In their opinion, what are they getting in value for the extra expense? What's important to them? Jered Stoehr