Electronics Assembly Knowledge, Vision & Wisdom
Cheaper Electronics Manufacturing: Mexico or Israel?
Cheaper Electronics Manufacturing: Mexico or Israel?
After comparing total costs between a Mexican facility and an Israeli contract manufacturer, a company moved their production. What were the key factors?
Supply Chain

Authored By:
Pamela J. Gordon
Founder and President
Technology Forecasters, Inc.

Technology Forecasters, Inc.
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Last week TFI held a Think Tank on Supply Chain event near Tel Aviv, followed by a Design for Environment (DfE) training - hosted by ILTAM. One of the key topics was Regional Manufacturing, a strategy to reduce time, risk, and landed costs.

At lunch, one of the attendees relayed how his company was using a USA contract manufacturer's Mexico facility to build their products. After comparing total costs between the Mexican facility and an Israeli contract manufacturer, the customer company moved production to Israel.

You see, though the hourly rate of the less-skilled Mexican assembly workers was lower than that for the higher-skill Israeli workers, the labor costs were actually more in Mexico because there they employed far more workers per line than in Israel.

Plus, quality issues at the Mexican facility required manual-intensive rework and added time to the manufacturing process. The greater automation, advanced soldering technology, and higher skill level of the workers in Israel delivered lower overall costs, higher yields, and faster turnaround.

Add in the additional expense and time for transporting finished goods, and the comparison was very clear: it was cheaper to manufacture the products in Israel.

"The numbers said it all," said the seminar participant.

Of course, for another company, Mexico can be an ideal manufacturing solution - if Mexico lines up with the products' size, complexity, quality, price point, and customer proximity.

TFI's advice to the industry? Don't assume that because labor rates are less in a particular region that the overall cost of manufacturing is less. Question everything. Look far but also look near.

The winner will be your competitiveness, customer prices, and in some cases environmental and worker responsibility.

What surprising comparisons have you made recently?

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