Japan’s Kaga Electronics to build new Mexican parts-assembly plant
Japanese component company Kaga Electronics will spend 5 billion yen (around $34 million) to build a plant in Mexico, as it aims to capture demand from companies moving to North America to sidestep tensions between the U.S. and China.
“Consumption in the North American market will continue to be strong, and Japanese manufacturers, our key clients, are expanding their presence in Mexico,” said Ryoichi Kado, Kaga Electronics’ president.
The new factory, which will make electronic devices for automobiles and air conditioners, is slated to start operations next April. Kaga Electronics bought land adjacent to an existing plant the company operates in the central state of San Luis Potosi.
Recent years have seen companies moving to reorganize their supply chains that had centered on China in response to strained relations between Washington and the Beijing. Mexico has drawn attention as an alternative to locate capacity in the North American market.
Kaga Electronics’ new plant is part of the company’s plans to expand its contract electronics manufacturing business.
The company will shut down its old plant and integrate operations into the new plant. Covering 20,000 square meters, the newly constructed factory will be around 2.4 times as big as the existing plant, and will employ 2,000 workers, around quadruple the current number.
With the expansion, Kaga Electronics aims to multiply annual revenue from Mexico by about seven times to 50 billion yen by April 2029, turning the site into its biggest overseas production facility in terms of sales.
The manufacturer opened its first plant in Mexico in 2017, where workers assembled automotive lighting components, among other products.
Kaga Electronics plans to bring in 150 billion yen in revenue from the contract manufacturing segment in the fiscal year ending March 2025, up 7% from the current fiscal year.