LG is expanding its TV manufacturing operation in Reynosa as U.S. demand accelerates.

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rrow Electronics, seeking improved manufacturing efficiencies and lower costs, chose to move its electronic connector assembly operation from Lenexa, Kan., to the Mexican border city of Nogales, Sonora. Arrow, headquartered in Melville, N.Y., will manufacture customized electronic connectors for military and commercial customers at its new Mexico operation. That business may eventually expand into supplying the computer industry.
   Bob Brenner, Arrow's director of value- added services for North America, says the company did a multi- city search in Mexico around the border and in the interior before selecting Nogales. Arrow began ramping up the plant in September 2006 and expects to be fully operational in 2007.
   "We did a fair amount of research before we pulled the trigger," Brenner says. "There's no room for guessing. In general, the State of Sonora has done a lot in recent years to improve its technical labor pool. The government is pushing technical degrees and we have no shortage of applicants when we look for qualified candidates. The technical schools continue to pump out graduates.    "Basically, we wanted to leverage proximity to the local suppliers since the bulk of our suppliers such as ITT Cannon and Amphenol are in the Nogales area," Brenner says. "Nogales is known for its electronics manufacturing, and its labor pool is conducive for electronics. We're very pleased with that. I believe the operation has exceeded everyone's expectations thus far."
   The proximity factor doesn't stop with Arrow's suppliers. Nogales is just a three- hour drive from Phoenix, where Arrow also has a value- added manufacturing plant that can provide support.
   "Nogales is well within the shipping lanes we are used to accommodating," Brenner says. "Also, Nogales is not a huge town and we can have a greater presence there than in other cities. We can have a lot of local impact within the city. It's the big fish, small pond kind of scenario."
   Arrow fitted out a 65,000- sq.- ft. (6,000- sq.- m.) new building for its operation. Arrow took the entire building, originally designed for multiple tenants, with expansion in mind. The operation will eventually employ about 155.
   Brenner believes Mexico will continue to be a big draw for electronics companies. Where a company locates depends on a variety of factors, including its customer and supplier base. He says being located near the border saves Arrow a day in shipments. However, he notes that in general the labor force tends to be more stable and affordable in the interior of the country.
   Further east along the border, in Reynosa, LG Electronics recently completed a US$45- million expansion to install a production line for plasma screen modules. LG spokesman John Phillips says the facility is likely the only one in the Western Hemisphere making these products. The plant also produces plasma HDTV sets, the fully assembled products that use these modules, in 42-, 50- and 60- inch versions. Also coming off the production lines, at least for now, are conventional TVs using an old- fashioned picture tube. The facility, which employs about 2,500, was opened as one of the early maquiladoras in 1978 by Zenith and was acquired by LG in 1999.
   "The flat screen TV market is growing exponentially in the U.S., and it makes perfect sense for us to have production in the same time zone as our customers, shipping across the border in McAllen [Texas]," Phillips says. "We can offer improved customer service and shortened supply lines, and there is a very strong supply of skilled and semi- skilled labor. We have a very strong management team, including many Mexican nationals."
   LG also has operations in Mexicali and Monterrey. The Mexicali factory builds LCD TVs and monitors for computers. The Monterrey facility, which employs about 2,000, assembles refrigerators for sale throughout the Americas.