Nvidia and Amazon AI supplier Foxconn is investing in Mexico

For many, hearing the name Foxconn immediately brings to mind iPhone production. It’s true, the Taiwanese company is a major producer of Apple’s smartphones and other products. But it also makes something companies like Nvidia, Amazon, and more are in high demand of: AI-related hardware. And Big Tech companies in the U.S. would like that hardware to come from Mexico and not China, thank you very much.

Foxconn has listened to those demands, and has made major AI investments in Mexico. The world’s largest contract electronics maker has funneled $690 million into the country in the past four years, according to the Wall Street Journal. Just this February, Foxconn picked up a slice of land in the western state of Jalisco for $27 million to facilitate a major expansion of its AI server production, people familiar with the plan told the Journal.

Why Mexico?

In the race to build the latest and greatest AI technology, the biggest tech companies in the U.S. — Nvidia, Amazon, Google, and Microsoft — are using Foxconn’s facilities in Mexico to help meet their AI server needs, according to the report. It’s part of a larger trend called “friendshoring” or “nearshoring.” That’s a geopolitical buzzword that describes the practice of running supply chains only through countries that are close political partners.

In this specific case, Big Tech companies are trying to make sure less of their supply chains rely on China, a growing political frenemy of the U.S. The shift is also a consequence of the 2020 free trade agreement between the U.S., Mexico, and Canada, that has persuaded manufacturers to invest in those countries instead of China.

Mexico has emerged as the lucrative investment for these operations, and it’s already shuffling up global trade. Data released last month showed that for the first time in two decades, U.S. imports from Mexico surpassed those from China, according to data from the U.S. Census Bureau.