Why this is important to Wisconsin businesses: Some jobs are expected to be replaced, but Mexico can maintain its status as a global manufacturing hub if it continues to focus on educating the engineers and high-tech workers needed for advanced manufacturing operations.
Fueled by the current manufacturing boom in Mexico, the automation and robotics industry is presently experiencing unprecedented growth. During 2015, sales of automating equipment and robotics increased to a record high of $245 million, represented by 6,320 units of robotics and automation equipment. Mexico has historically imported its production processes and systems rather than producing them domestically, at least during the first stages of the innovation—hence the growth in imports of automation and robotics equipment in recent years. These imports come disproportionately from the U.S., followed by Canada, Germany and China.
The reason this increase is that Mexico has become a manufacturing hub for high-tech and consumer goods. As of 2016, Mexico was the #1 exporter worldwide for refrigerators and flat screen televisions; the second-leading exporter for air conditioning and water heating equipment; third on the list for washing machines and stoves; fourth for personal computers, speakers and laptops; and also an important exporter of other equipment and products, such as vacuum cleaners, furnaces and fans, and even components such as microprocessors and semiconductors. Besides home appliances and consumer electronics, the sectors driving this automation and robotics growth are the aeronautics industry, and most importantly, the automotive sector.
As of 2016, Mexico is the world’s seventh-largest manufacturer of four-wheeled vehicles, with 3.6 million units--a tremendous increase for a country that produced less than half of that figure then years ago. The automotive industry is known for aggressively automating its manufacturing processes, and this trend is currently being applied across the major brands with manufacturing operations in Mexico (VW, Toyota, GE, Nissan, Ford, Honda, Volvo Trucks, Scania, Isuzu, Kenworth) but also across the tier 1 manufacturers suppling original equipment manufacturers (OEMs) such as Delphi, Johnson Controls, Clarions, Rassini and Nemak.
However, all these benefits come at a cost. According to the McKinsey Global Institute, Mexico is one of the top five countries in the world that risks suffering large job losses in the coming years due to the spread of automation and robotics, since up to 52 percent of Mexico’s jobs are liable to be impacted by this trend. Counting manufacturing jobs only, the figure increases to 64 percent of job losses. McKinsey based its research and rankings on technical feasibility and preconditions to automate specific tasks, the cost of developing automation for such tasks compared to regular labor, and the benefits beyond labor substitution.
This situation makes analysts question if Mexico will be able to keep its status as a global manufacturing hub. If cheap and inexpensive labor made the country a preferred spot for manufacturers in the first place (as with the rise of the maquila model), once automation eliminates the labor cost factor, then the question is what the incentive would be to keep manufacturing facilities in the country. The response, according to some other observers, is that automation and robotics wipe out labor only to a certain extent. Companies will still require more qualified employees, and in this area Mexico is also highly competitive, since the country graduates highly trained engineers that can be hired at a fraction of the cost compared to those of more developed nations. Furthermore, higher education institutions such as the IPN, ITESM and universities in Aguascalientes, Coahuila, Guanajuato, Hidalgo, Mexico City, Nuevo Leon and Jalisco, among others, that have created robotics and mechatronics study programs to meet the demand for high-tech specialists.