Buying stuff from China isn't such a bargain anymore. One consequence of that: Companies that move freight from Mexico are getting busier.

China has long been the destination for companies looking to cut costs. A huge population of untapped workers, along with a leadership keen to build out the country's manufacturing infrastructure, made it the world's best place to make things cheaply. But nothing lasts forever.

The pool of Chinese workers is getting shallower. China's one-child policy and cultural preference for boys have led to a shrinking population of young people, particularly the women who work the floors of the apparel and electronics firms. The United Nations projects the number of women aged 15 to 24 in China will fall from 106 million in 2010 to 92 million in 2015. Add rising affluence, and labor costs are going up faster than productivity increases at Chinese firms can offset them.

Moreover, commercial land prices have shot up, while government-controlled prices for energy are moving closer to market rates. The yuan has risen 30% in trade-weighted terms over the past five years and will continue to creep up. It is no wonder that the price of imports from China, flat for many years, has been rising since late 2010. Supply-chain problems have also led companies to rethink outsourcing. When demand fell sharply following the 2008 financial crisis, many were stuck with inventory on slow boats from China. Volatile energy prices have made transportation costs more uncertain. Last year's tsunami in Japan and Thai floods underscored the fragility of long supply chains.

The changing cost dynamics have boosted hopeful talk that U.S. manufacturers will turn to "in-sourcing," and it is true that some companies are moving operations back home. On its earnings conference call Thursday, Carlisle Cos. said it was stepping up its tire-making operations in Tennessee because, according to CEO David Roberts, "we can actually manufacture as cheaply or cheaper here in the U.S. than we can in China."

But for many companies, a better step is to beef up production in Mexico. Despite security concerns, wages are substantially lower than in the U.S. A look at recent trade statistics suggests companies are already on the move. The number of loaded shipping containers entering the ports of Los Angeles and Long Beach, Calif.—the major entry points for Asian imports—edged down 0.2% last year. But trains and trucks carried 8.7% more freight, by weight, from Mexico to the U.S. in the first 11 months of last year than they did a year earlier.

A handful of transportation companies have the most to gain. Kansas City Southern Railway's Mexican subsidiary controls a rail system that stretches deep into Mexico. It also controls a railroad bridge that spans the Rio Grande at key border crossing Laredo, Texas. Union Pacific has a 26% stake in Mexican railway Ferromex and serves six major border crossings. Shares of both companies have risen sharply over the past year, but earnings have more than kept up. Kansas City Southern trades at 23 times trailing earnings, compared with 34 a year ago; Union Pacific's P/E ratio has fallen to 17 from 19. The third major railway serving Mexico is Berkshire Hathaway's BNSF. Several trucking firms operate in Mexico; the one with the most exposure is tiny Celadon Group, which focuses much of its business on border crossings between the U.S. and Mexico. Its shares, which swooned and then surged in 2011, trade at 19 times earnings, down from 32 times a year ago.

The biggest beneficiary is Mexico. The country and its companies were hurt badly over the past decade by a loss of exports to China. The trade shift could be a salve to the economic and social woes that have made some investors skittish of putting money there.

SAN JOSE, Calif., Aug. 5, 2011 /PRNewswire/ — SunPower Corp. (NASDAQ: SPWRA, SPWRB), a manufacturer of high-efficiency solar cells, solar panels and solar systems, today announced plans to own and operate a solar panel manufacturing facility in Mexicali, Mexico to meet the demand of a growing North American solar market.

SunPower plans to lease an existing building, which has up to 320,000 square feet of capacity. Today's announcement is consistent with SunPower's strategy to expand its upstream vertical integration for local panel manufacturing. SunPower will manufacture its high-efficiency E18 series, E19 series and world record setting E20 series solar panels for residential, commercial and power plant projects, and will also produce its SunPower® T5 Solar Roof Tile system.  

SunPower worked closely with the Industrial Development Commission of Mexicali in locating its facility.

"Mexicali is rapidly becoming an industrial hub for high tech companies, offering an educated workforce and a growing manufacturing area," said Mexicali Mayor Francisco Perez Tejada Padilla.  "We welcome SunPower to our city and are pleased that they have chosen Mexicali to establish its solar panel manufacturing facility."

"Establishing our own manufacturing facility in Mexicali means we will be positioned to quickly deliver our high-efficiency, high-reliability solar products to a growing North American solar market," said Marty Neese, SunPower's chief operating officer.  "Over the past year, we have successfully ramped up manufacturing at Fab 3 in Malaysia where we set records for output and yield efficiency.  SunPower also launched manufacturing in California, with a facility in Silicon Valley, and expanded our panel manufacturing in Europe."

About SunPower

SunPower Corp. (NASDAQ: SPWRA, SPWRB) designs, manufactures and delivers the highest efficiency, highest reliability solar panels and systems available today. Residential, business, government and utility customers rely on the company's quarter century of experience and guaranteed performance to provide maximum return on investment throughout the life of the solar system. Headquartered in San Jose, Calif., SunPower has offices in North America, Europe, Australia and Asia. For more information, visit www.sunpowercorp.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements are statements that do not represent historical facts and may be based on underlying assumptions. The company uses words and phrases such as "growing," "plans," "will" and similar expressions to identify forward-looking statements in this press release, including forward-looking statements regarding (a) the growth of the North American market for solar, and (b) SunPower's planned expansion of its manufacturing.  Such forward-looking statements are based on information available to the company as of the date of this release and involve a number of risks and uncertainties, some beyond the company's control, that could cause actual results to differ materially from those anticipated by these forward-looking statements, including risks and uncertainties such as:  (i) the continuation of governmental and related economic incentives promoting the use of solar power; (ii) general business and economic conditions; (iii) manufacturing difficulties; (iv) the company's ability to obtain and maintain an adequate supply of raw materials; and (v) other risks described in the company's Annual Report on Form 10-K for the year ended January 2, 2011, Quarterly Report on Form 10-Q for the quarter ended April 3, 2011 and other filings with the Securities and Exchange Commission.  These forward-looking statements should not be relied upon as representing the company's views as of any subsequent date, and the company is under no obligation to, and expressly disclaims any responsibility to, update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

SunPower is a registered trademark of SunPower Corp. All other trademarks are the property of their respective owners.

SOURCE SunPower Corp.
http://www.dailymarkets.com/stock/2011/08/05/sunpower-announces-new-solar-panel-manufacturing-facility/

BY JASON LANGE, REUTERSJANUARY 26, 2011

MEXICO CITY - The Mexican economy is getting a helping hand from unlikely allies: Chinese workers whose rising wages are leading more companies to build factories in Mexico.

Meco Corporation, a U.S. maker of folding chairs and barbecue grills, is shifting production from China to Mexico after wages at its Chinese operations more than doubled since 2007.

"We ran the numbers and made the decision to move our equipment down to Mexico, with the decision really based on trying to give our customers more stable pricing," said Meco President Harrell Ward.

Premium leather goods maker Coach Inc also ran the numbers this week and decided to sharply cut production in China, citing rising labour costs.

Meco, a family-owned manufacturer from Greeneville, Tennessee, does its sums in millions rather than billions. But its plans to invest US$10-million in a plant in northern Mexico is a positive sign for a country which has been in China's shadow for the last seven years in terms of U.S. import share and is also battling to control drug-related violence.

For the first time since China entered the World Trade Organization in 2001 and became an exporting superpower, Mexico posted a bigger gain in U.S. market share than its Asian rival during the first 11 months of 2010.

Mexico probably ended 2010 with just over 12% of the U.S. import market, its largest share ever.

Mexican factory wages are now about 14% higher than those in China, the Mexican finance ministry estimates. In 2002, officials calculate they were 240% higher, canceling out Mexico's natural advantage of proximity.

This advantage has also been highlighted by a rise in shipping fuels to two-year highs, making shipping goods across the Pacific a less attractive option.

The closing wage gap means Mexico will likely win even more U.S. market share in coming years, said Sergio Luna, an economist at Citigroup's Mexican subsidiary.

This is good news for Mexico as it limps back from a deep recession. Manufacturing accounts for a fifth of the economy, and about 80% of its exports go to the United States. It also shows how labor markets might be helping to correct part of the problem of the so-called global imbalances.

In 2010, Mexico's manufacturing exports soared 29.5% to US$246-billion. A major chunk of that was Mexico's auto exports, which rose 53% to US$65-billion, mainly going to the U.S. market.

Even so, Mexico is among many countries which complain that China has kept its yuan currency artificially weak in order to support its export industry. Economists say China's focus on exports, coupled with America's dependency on imports, has thrown the global economy out of whack and raised risks of future financial instability.

But China is starting to run short at the margin of the young workers prized by factories, fueling higher wages.

Rising food prices in China at the start of 2011 are expected to drive inflation up this year after a dip in December, which will pressure wages further.

After years of getting clobbered by Chinese competitors — Mexico's share of the U.S. import pie fell to 10% in 2005 — higher Chinese wages are now making it easier for Mexican factories to compete.

"Sooner or later the flood was going to have to subside," said Salomon Pressburger, who heads Mexico's Confederation of Industrial Chambers and runs a jacket factory near Mexico City.

PAYOFF FOR U.S.

Foreign direct investment in Mexico is growing — along with countries like Malaysia and Vietnam — and Mexico's government estimates FDI could be up to US$19-billion this year.

Setting up shop in Mexico can be good for U.S. business because Mexican factories tend to buy more U.S.-made components than Chinese ones. Overall, Mexico buys nearly twice as many U.S. exports as does China, and anything that creates more demand for U.S. goods eases global imbalances.

"If a firm needs to offshore, it is in the U.S.'s strategic interest they locate to Mexico or Canada, our biggest customers," said Barry Lawrence, who studies industry and trade at Texas A&M University.

Over the last two years, Jabil Circuit has hired about 7,000 workers in the Mexican city of Guadalajara, where it produces electronics including BlackBerry smartphones for Canada's Research in Motion, said Cesar Castro, a Jabil manager. "In labour costs, we are practically tied with China," Mr. Castro said.

Collectron, a U.S. factory service provider, recently shepherded investments into Mexico for making medical devices that a few years ago would have gone to China, said the company's president Maria Elena Rigoli.

Nonetheless, the tables have not quite turned. China remains a juggernaut with 19% of the U.S. market. Most of companies that left Mexico probably aren't coming back soon and the security situation is a concern for some investors.

AlixPartners ranks Mexico as the most competitive country to make several factory goods but the consultancy had one client recently cancel a plan to move into Mexico because of the security situation, said managing director Stephen Maurer.

More than 34,000 people have died since Mexican President Felipe Calderon declared war on the drug cartels four years ago, although some regions have been hit harder than others.

Meco's new factory is opening in Saltillo, a city of 725,000 which has so far not been hit badly by the drug war. Official statistics show 45 drug war deaths since late 2006, compared to 260 deaths in the similarly-sized Morelia.

Ward is dealing with the risk by not allowing employees visiting Mexico to travel by night. Indeed, he's considering buying a second factory in Saltillo that would work in tandem with assembly lines in the United States.

© Thomson Reuters 2011

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