Hofusan industrial park in Mexico: diversification from Asia

The Hofusan industrial park, where Chinese companies are based and which is located in Monterrey, Mexico, is a sign of Asia‘s diversification of operations, Kearney noted.

There are companies landing in the United States and Mexico and this is especially true for companies looking to save on logistics and transportation for larger, bulkier consumer products that have relatively low value density.

For example, in the furniture industry, assembly of finished products is increasingly taking place in Mexico.

In several cases, this trend has been driven by Chinese companies that have established operations in the Hofusan park and other cities near the border.

Hofusan Industrial Park

As these companies establish themselves, Kearney sees its «ecosystem» beginning to shift to Mexico as well, as Chinese parts manufacturers supplying their compatriot companies are increasingly urged to set up shop nearby.

The Hofusan park will add another 100 hectares to the 430 hectares that were made available exclusively to Chinese companies.

In recent years, most companies have had to adapt their supply chains -often dramatically- to reduce their dependence on China.

According to Kearney, the reasons for wanting to rely less on China are fairly common, including actions being taken by China that raise intellectual property issues, uncertainties about supply resilience raised by Chinese government interventions (e.g., policies around the Olympics, dual control policy, zero COVID policy, etc.), general geopolitical tensions and, of course, tariffs.

Altasia

But different companies, and even entire sectors, are responding to these challenges in very different ways.

Some companies have left China to set up shop right next door in one or more of the Altasia countries, a term that implies how to reduce dependence on China, i.e. more controllable ALTernatives in ASIA.

In the consumer electronics sector, companies such as Apple and Samsung have moved their production out of China and expanded into Vietnam and, more recently, India, to diversify their supply chains away from China.

Kearney sees this as a good example of an industry where the existing ecosystem was too well established and moving away from China is not currently a viable option. And as Altasia countries gain attention, their governments are investing in infrastructure and incentives to help replicate some of that ecosystem to make moves to their countries more attractive.