"Mexico is one of the ideal countries for companies considering adjusting their supply chain," Cheng said.
Electronic Manufacturing companies in Mexico Taiwanese electronics makers Foxconn and Pegatron have begun eyeing new factories in Mexico. It is due to several factors, including the trade war between the US and China and the coronavirus pandemic. All of this is prompting firms to rethink their global supply chains.
These plans could bring billions of dollars in much-needed new investment to Latin America's
second-largest economy over the next few years. It is essential for Mexico, experiencing its worst recession since the Great Depression of the 1930s.
Foxconn and Pegatron are contractors for several phone manufacturers, including Apple. It is not yet clear which companies they will work with in Mexico.
However, some insiders report that Foxconn plans to use the factory to produce the Apple iPhone. However, there are no signs of Apple's direct involvement in these plans.
Foxconn will likely make a final decision on the new plant at the end of this year, and work will only begin after that. However, it is not yet certain that the company will put these plans into practice.
Pegatron is also in preliminary discussions with lenders for a subsidiary facility in Mexico to assemble chips and other electronic components.
Foxconn has five factories in Mexico, mainly manufacturing TVs and servers. The expansion may highlight a broader reshaping of global supply chains and a move away from China, which is especially important amid the Sino-US trade war and the coronavirus crisis.
The plans come as the idea of "near-shoring" -- the geographic proximity of a manufacturer -- gains momentum in Washington. The Trump administration is exploring financial incentives to encourage firms to move manufacturing capacity out of Asia to the US, Latin America, and the Caribbean.
Mexico's advantages include geographic location, low wages, and proximity to time zones, offering a new free trade agreement with the world's largest consumer market. Despite a global recession and worries about the business climate under President Andres Manuel Lopez Obrador, government data suggests continued foreign investment in the country.
"The company has indeed contacted the (Mexican) government," the sources said, stressing that negotiations are still at an early stage and the rise in the number of coronavirus cases in Mexico raises serious concerns about possible investments.
Foxconn, headquartered in Taipei and officially known as Hon Hai Precision Industry Co Ltd, said that while it continues to expand its global operations and is an "active investor" in Mexico, it has no plans to increase those investments.
Reuters reported in July that Foxconn plans to invest up to $1 billion to expand a factory in India that assembles Apple iPhones.
Foxconn CEO Liu Young-way said at an investor conference in Taipei on Aug. 12 that today the world was divided into "G2" -- or two groups -- due to tensions between China and the US. In
addition, he stressed that his firm is working on "creating two sets of supply chains to serve these two markets."
"The global factory no longer exists," he said, adding that about 30% of the company's products are now made outside of China, and that ratio could increase.
Foxconn's Sharp division ramps up television production in Mexico. Last year, Sharp said it would open a plant in Vietnam to move some of its production out of China.
China-based Luxshare Precision Industry Co is also considering building a plant in Mexico this year to offset a tariff war between the world's two largest economies.
It is not yet known what projects Luxshare, which according to media reports, is the leading manufacturer of Apple Airpods, wants to move to Mexico.
The Taipei Economic and Cultural Authority in Mexico, which represents the Taiwanese government in the country, said it had heard that Foxconn was interested in building another factory in Ciudad Juarez, on the northern border of the state of Chihuahua.
"I also understand that Pegatron wants to move the production line from China to Mexico," said office general manager Armando Cheng.
He said he did not know the details of either company's plans.
"Mexico is one of the ideal countries for companies considering adjusting their supply chain," Cheng said.
The scale of investment by Asian contract electronics manufacturers and the jobs they could create in Mexico is unclear.
However, the promised investment in new production facilities did not always materialize.
In 2017, US President Donald Trump announced that Foxconn would build a $10 billion factory employing 13,000 LCD panel workers in Wisconsin. These plans have changed dramatically. In April, Foxconn said it would manufacture ventilators at the plant in partnership with Medtronic.
The coronavirus has brought supply chains across the Pacific to a halt. China's automobiles, electronics, and pharmaceutical components have suffered from these global changes.
In addition, a recent US-Mexico-Canada trade deal requires more local resources for duty-free exports to the United States.
Economy Minister Graciela Marquez told Reuters in July that Mexico had held talks with a host of foreign companies to attract business from Asia to capitalize on the trade deal. The country is also preparing to talk with Apple about moving production.
She said she did not speak directly to Foxconn, Pegatron, and Luxshare. A senior government official said these companies, among others, are interested in investing in Mexico.
Despite the potential and solid investment performance, many investors believe Mexican President López Obrador is missing out on a historic opportunity.
"It could have been a tidal wave," said Eduardo Ramos-Gomez, partner at Duane Morris & Selvam. This law firm works with Taiwanese and Chinese companies exploring Mexico.
Critics cite that Mexico is not coping well with the pandemic - this country ranks third in the world in the number of deaths.
Another concern is López Obrador's meddling in private investment decisions, such as US firm Constellation Brands closing a $1 billion brewery, winding down a major airport project, and putting pressure on energy companies.
The government denies that such decisions are contrary to business. However, Mexico attracts some businesses.
Samuel Campos, executive managing director of real estate brokerage Newmark Knight Frank, said his company is helping two Chinese companies, one in the Automotive Quality Engineering sector and one in manufacturing, relocate to an industrial cluster in Mexico.
Campos said electronics, medical and automotive companies in Asia are likely to help attract investment to Mexico in the fourth quarter of this year.