What Are the Benefits of Manufacturing in Mexico vs. China? [Everything You Need to Know]

When searching for the best options for your manufacturing business, contract outsourcing can help with rapid development, prototyping, and production. But are you better off seeking a manufacturing partner in Mexico or China?

Below, we’ll look at some key differences between manufacturing in Mexico vs. China and explore how working with SCHOTT Magnetics can help you get up and running smoothly.

Why Does Mexico Have an Advantage over China for Manufacturing?

Both Mexico and China have high quality standards for the skilled manufacturing workforces and facilities used to produce various goods. However, there are multiple strategic advantages to Mexico’s manufacturing vs. China. 

World-renowned brands like the ones below are sourcing their manufacturing from Mexico:

• Coca-Cola
• Nokia
• IBM
• Hewlett-Packard
• Volkswagen
• Siemens
• Motorola
• General Motors
• Toyota

One of the primary advantages of manufacturing in Mexico is cost savings. Shipping costs from Mexico are significantly less expensive than importing from China. 

Additionally, proximity to the US is a significant factor when comparing manufacturing in Mexico vs. China. Because Mexico is America’s southern neighbor, goods manufactured in Mexico can be in the US in one to three days rather than the weeks it takes to arrive from China.

Distance is also vital because companies like to do their due diligence and see the operations of manufacturing facilities in person. When traveling from anywhere in the US, it would be easy for an individual to complete the due diligence within a day or two.

Why Is Mexico Good for Manufacturing?

When considering what makes Mexico a positive place for manufacturing, it’s helpful to understand that many facilities already exist. By partnering with a trusted manufacturer, your company can reduce the burden of building a facility from scratch. Outsourcing to another facility eliminates the headaches associated with:

• Zoning
• Location scouting
• Permits
• Architectural design
• Building costs—labor and materials

A partnership with a contract manufacturer in Mexico can happen in weeks, thanks to solid trade agreements between the two countries. Mexican manufacturers operating outsourcing facilities can also balance overhead costs, splitting them between multiple clients. This symbiotic relationship means you’ll likely have much greater flexibility in order size, low- or high-volume batches, and the combination of items you can order at once.

Why Is It Cheaper to Manufacture in Mexico?

In addition to the proximity Mexico has over China in relation to the US, other factors make it more appealing to manufacture products there. These factors include friendly trade agreements and affordable labor.

Trade

Strong trade agreements lower or eliminate tariffs that are otherwise expensive for imports from other countries.

The United States–Mexico–Canada Agreement (USMCA) went into effect on July 1, 2020, succeeding the North American Free Trade Agreement (NAFTA). 

This agreement provides several significant benefits for manufacturing in Mexico, such as:

• Guaranteeing the quality of work conditions and facilities
• Reducing tariffs (currently at zero)
• Providing access for trade via roadways, waterways, and airways
• Protecting intellectual property (IP) and patents

Affordable Labor

In 2023, Mexican manufacturing workers earned $3.90 per hour. Since 2020, estimates of the labor costs in China for manufacturing workers have been as high as $6.50 per hour. 

Mexican manufacturing workers are highly skilled and often descend from those working in similar fields who have passed on the secrets of the trades. Government officials hold high-level facility standards and working conditions to encourage excellence in output production.

What Are Some Disadvantages of Outsourcing to China?

Contract manufacturing in China shares some advantages with Mexico. However, several factors place China at a disadvantage.

Labor Costs

As mentioned, the labor costs associated with Mexico manufacturing vs. China differ by more than $2 per hour, according to estimations. Although Mexico’s costs are lower than China’s, the skills and work ethic are comparable between the two countries. When measuring both countries’ exchange rates, it’s vital to understand the importance of the labor cost and how that impacts total costs for manufacturing partners.

Energy Cost

China’s natural gas costs ($0.15/kWh) are more than four times the cost of natural gas in Mexico ($0.036/kWh). Since natural gas is often necessary to fuel manufacturing processes, the higher costs translate to higher prices on manufactured goods.

Exchange Rates

An exchange rate reflects the buying power of those in the US, comparing other national currencies to the US dollar. When rates remain steady over time, it’s easy to calculate costs from one country to the next. China has historically manipulated its economy to keep the yuan stable compared to the dollar rather than allowing it to fluctuate with the market.

On the surface, this consistency may seem like a positive for China, but it makes it challenging for the country to compete when other countries can beat its prices. Extreme internal price hikes may occur when the yuan is weak, but the government enforces maintaining its performance against the dollar. Meanwhile, the Mexican peso has become increasingly competitive in pricing year over year. 

Distance

Even if China offered far superior manufacturing quality at drastically lower prices, there’s no way for it to improve on distance. China’s physical location means it can’t compete with Mexico’s project turnaround time.

A parcel shipping from Mexico could arrive in as little as one to three days. The same could take three weeks or more to import from China.

Shipping Costs

Longer distance also means higher shipping costs. A parcel that costs approximately $675 to ship from Tijuana to Los Angeles could cost upwards of $8,378 to import from China. When a company needs to turn items around quickly, paying for expedited shipping could significantly dent its budget.

Tariffs

Tariffs are more expensive on items coming from China and often play a role in product delays. Though tariffs apply to articles imported from Mexico, they’re currently lower and arranged through favorable trade agreements with the US and Canada.

Insufficient Rights Protection

While plenty of Chinese manufacturing facilities are in good standing and conduct responsible business practices, concerns exist over the lax political and legal response to copyright and intellectual property (IP) rights issues. Counterfeiting and copyright violations occur regularly in China, often resulting in little to no enforcement.

How SCHOTT Can Support Your Manufacturing Needs

SCHOTT Magnetics has the expertise to help you get up and running with rapid development, prototyping, and manufacturing of magnetics products. We design and manufacture custom electromagnetic components for the following industries.

Telecommunications

Electromagnetics revolutionized broadcasting in the 1920s, from the era of live radio to recorded programming, videotapes, and, later, computers. Audio transformers like those manufactured by SCHOTT isolate audio operating from 20Hz to 20kHz so loudspeakers can reproduce the signal.

Recording studios today use digital audio transformers for computer audio interfaces, microphones, amplifiers, digital converters, and modern telecommunications. 

SCHOTT has experience meeting critical industry specifications for the highest quality audio applications for over 70 years.

Energy and Solar

SCHOTT produces critical components for the solar energy industry with transformers that increase the power delivering energy to utility grids, transmitting it safely without overvoltage.

Energy and solar companies rely on our custom-designed transformers, inductors, coils, and integrated assemblies to manage harmonics, power loads, operational safety, and to power entire cities.

Aerospace and Defense

The electromagnetics SCHOTT manufactures for aerospace and defense are used for everything from cabin lights to fuel control, communication systems to actuators for wings, tail fins, hydraulics, and more.

Whether we design our parts for combat military vehicles on the land and in the air or for spacecraft meant to withstand the outer atmosphere, our custom designs meet the strictest standards.

Industrial and Commercial

We make our commercial inductors, transformers, and other industrial components to withstand the most challenging conditions. We can work from your blueprints and reverse-engineer all of your electromagnetic designs.

Medical

The medical industry requires the highest standard of electromagnetics, where human lives depend on reliability. Our medical-grade transformers, inductors, and other components are used in surgical devices, MRI machines, pacemakers, and numerous life-saving devices. These parts protect patients from electrical shock and isolate hospital electronics from dangerous supply lines.

Our Products and Services

We have excellent relationships with Mexican manufacturing facilities because of our high-quality, cost-based assembly options.

SCHOTT provides the following products and services:

• Chokes
• Coils
• Coil winding
• Filters
• Inductors
• Integrated assemblies
• Transformers
• Hand assembly
• IPC soldering
• Joining PCBA with custom magnetics
• Potting and encapsulation
• Automated electrical testing
• Wire terminal crimping

Our trained manufacturing technicians can wind custom magnetics to your company’s specifications by hand or with our automated capabilities. We wind for high voltage and PF inductors and can provide custom production for any high–mix, low-volume combination that serves your needs.

We assemble completely customized transformers, coils, inductors, wire harnesses, and customer-supplied molded parts. We create integrated assemblies used in everything from gaming systems to power supplies, test equipment to medical electronics, and manufacturing equipment. 

Whatever your specifications, SCHOTT Magnetics will build to your exact requirements.

When you partner with SCHOTT, your operations can begin in weeks—not months or years. Additional benefits of partnering with us for Mexico contract manufacturing include:

• The option to visit operations in person whenever desired
• Affordable and predictable costs
• Fast turnaround times
• Flexible order volume and part options

 

You can focus on your operations and grow at your own pace while sourcing the highest-quality parts, even those that require custom design and prototyping based on specific needs and specifications.

Begin Your Journey with SCHOTT Magnetics Today

SCHOTT has served companies across various industries with the highest-quality commercial magnetics for over 70 years. We’re here to provide the services and skills you need from the start of development through all stages of production. As you compare manufacturing in Mexico vs. China, you’ll soon learn why so many businesses rely on Mexican facilities.

We understand your need for controlled costs, custom batch orders, and follow-through on a tight schedule. Our Mexico-based manufacturing processes make these goals achievable. Get in touch with us to discuss your custom magnetics needs today!