Power play: A look at how the household electronics industry is shaping up in a changing market

According to the Ministry of Sustainable Development, Querétaro’s electronics sector made up 4.6% of the state’s economy in 2013. Focused on household electronics and, to a lesser extent, consumer electronics, the sector is dominated by three players: Mabe, Dongbu Daewoo Electronics and Samsung.

Mexican firm Mabe designs and manufactures refrigerators in the state. Daewoo produces refrigerators, washing machines and microwave ovens at its facilities in Querétaro, from which it also distributes all the products it sells in Mexico. Samsung makes refrigerators at its two Querétaro plants, one of which opened in 2003 and the other in 2010, as well as washing machines at a plant it opened in 2011.

MARKET VOLATILITY: Mabe exports 70% of its production to markets in the US and Latin America, including Guatemala, Costa Rica, El Salvador, Colombia, Brazil and Argentina. However, despite its reach, Mabe has scaled back its operations in Querétaro in recent years due to a softening of demand in the export market. Between November 2012 and February 2013, the firm laid off 278 workers in Querétaro, and in December 2013 the company laid off another 250 workers, retaining a workforce of 900. Volatility in global demand for household electronics in recent years has affected Mabe, which also manufactures washing machines, stoves and other large household appliances.

According to a study by BBVA Research, between 2010 and 2011 Mexican exports of washers with a dry clothing capacity of 10 kg or less (a category that includes household washers) decreased by 36.4%. Between 2011 and 2012, this figure contracted another 14.9%. To take another example, in the case of compression refrigerators, Mexican exports increased by 4.9% between 2010 and 2011, but then contracted by 11.8% between 2011 and 2012.

However, Samsung has seen steady growth and in 2013 it expanded its workforce in Querétaro. The firm also reported good performance in the domestic market for the high-end household electronics it produces in Querétaro. These products can be very expensive – the list price for some high-end refrigerators is MXN100,000 ($7700) – but they are energy-efficient. Jehová Rodríguez, the senior director at Samsung Mé xico told OBG, “Our customers’ income is not growing, but they’re starting to spend their money differently. They are willing to pay for more efficient appliances to avoid the higher massive consumption electricity rate.”

Daewoo first arrived in Querétaro in 1996 and opened a refrigerator and washing machine plant. Ten years later, attracted by Querétaro’s central location in Mexico, it opened a distribution facility in the state for all of its sales to the Mexican market. Today the refrigerators and washing machines produced in Querétaro, as well as microwave ovens and televisions imported from Asia, pass through the Querétaro distribution centre on their way to retailers throughout Mexico.

WORKFORCE: Samsung’s workforce expansion of 350 people in 2013 brought its total number of employees in Querétaro to over 4000, which has contributed to the company’s demand for labour outstripping the state’s supply. Venancio Pérez Gómez, vice-president at Samsung in Querétaro, told El Economista that around 30% of Samsung’s workforce in the state comes from other parts of Mexico to make up the shortfall. Samsung has even partnered with a public university, the Universidad Tecnológica de Querétaro (UTEQ) to train new workers. This model of close collaboration between industry and public universities has proliferated in Querétaro. UTEQ runs a programme, which Samsung has helped to design, to produce skilled workers who can immediately enter the local workforce.

The state government of Querétaro has facilitated these types of programmes with funding and by facilitating contact between universities and local firms as such initiatives put workers on the fast track to employment. The operations of companies in Querétaro are significant pieces of Mexico’s electronics manufacturing so watching how they fare may provide useful clues about the country’s electronics sector as a whole.

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The Report: Mexico 2014

Querétaro chapter from The Report: Mexico 2014

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