As efforts to reduce trade tensions between China and the U.S. move back and forth, more manufacturers see Mexico as more stable terrain over China for production work aimed for the North American market. One of the latest to officially hop on the trend is Universal Electronics Inc. (UEI), a manufacturer of universal remote controls and developer of technologies for the home entertainment industry.
UEI now plans to move all production work for North American clients from China to Mexico, the company CEO, Paul Arling, announced during the third-quarter conference call.
“We already have a manufacturing facility in Mexico, and are well into the process of shifting certain skews to that facility. Frankly, we have been preparing for this shift because the increasing labor rates in China have made those labor rates less and less favorable over time to those in other countries,” said Arling.
The company based in Santa Ana, California, opened in 2015 its subsidiary CG Mexico Remote Controls, a manufacturing plant located in Apodaca, Nuevo Leon, Northern Mexico, to build set-top boxes and controls for pay TV operators in the region.
“We think that the trade tensions with Mexico have settled somewhat, if not completely,” Arling said. “So, we feel pretty safe with that move, particularly for, again the products that are being shifted -- shipped into the United States. So, we don't really see the tariff issue getting worse, although, again we could never guarantee what would happen there.”
“We will move that which is necessary, in order to provide cost effective solution to the customer. In other words, not have them have to absorb the 25% increase,” he said referring to the 25% tariff on electronics imports from China that could come effective early next year.
The official acknowledged that the measure will involve certain costs, but he was optimistic that the strategy will bring significant long-term benefits, particularly in terms of delivery times and inventory management.
“While changing facilities will result in some near-term disruption in expense, we also anticipate long-term benefits, particularly for our business in the Americas, such as improved lead times, inventory levels, shipping costs, and potentially labor costs,” Arling said.