Medical device manufacturing is expected to grow as an industry, especially in Mexico. According to Mexico's Ministry of Economy, the country produced $10.59 billion in medical devices in 2012. Additionally, the "Medical Device Contract Manufacturing Market Forecast 2015-2025," compiled by Visiongain, found emerging economies, especially South and Central America, will continue to achieve high revenue growth to 2025. Various global economic, geographical and regulatory factors will influence this growth.
Medical manufacturing companies often consider offshoring as a cost-savings solution, particularly because of the U.S. medical device excise tax put into effect in January 2013. As a result, medical manufacturers can avoid extra taxes by moving their operations offshore. Compared to other manufacturing markets, Mexico features three key advantages to this industry in particular:
1. Education and high-skilled labor
Perhaps one of the most important qualities of Mexico is the government's efforts to foster a highly-skilled workforce. As Area Development reported, Mexico already produces more engineers annually than either Germany or Canada. Additionally, Mexico is taking steps to sustain its educational levels and give its populace valuable skill from an early age.
As The World Bank reported, Mexico increased educational attainment from 6.8 years in 1993 to 8.4 years in 2006 by providing universal education to pre-school students. Education is a top infrastructural priority for the Mexican government. This is extremely valuable to medical device manufacturers, since this particular sector demands a higher level of skill and precision. To make matters even better, high-skilled labor needed for the medical device industry comes at a much lower cost than it would in the U.S., China or Canada.
2. North American Free Trade Agreement
The opportunity for medical manufacturers to export devices tariff free has been a major draw for businesses to move to Mexico. Additionally, under NAFTA, medical manufacturers are able to operate under a shelter company.
3. Proximity to high-demand markets
Mexico's proximity to the U.S. is an advantage to any company manufacturing in Mexico. However, medical device manufacturers are especially dependent on this advantage since 92 percent of the country's medical device exports are shipped to the U.S. Combined with the country's participation in NAFTA, medical device manufacturers are able to export goods cheaply while taking advantage of shorter supply chains than what they'd experience in other locations like China or Costa Rica.