Pay TV remote technology vendor Universal Electronics Inc. (UEI) is moving all manufacturing for its North American clients from China to Mexico, a process it hopes to complete by the fourth quarter of next year.
“We already have a manufacturing facility in Mexico, and are well into the process of shifting certain skews to that facility. Frankly, we have been preparing for this shift because the increasing labor rates in China have made those labor rates less and less favorable over time to those in other countries,” said Paul Arling, chairman and CEO of UEI, speaking to investors during the company’s third-quarter earnings call last month.
With the Trump Administration ramping up a trade dispute with China that could entail 25% tariffs on electronics imports, Santa Ana, Calif.-based UEI said it has begun to reduce staff at its Hong Kong facility, shifting headcount to factories in Mainland China.
“That’s step one,” said Bryan Hackworth, chief financial officer for UEI, speaking alongside Arling.
UEI has relationships with most top pay TV operators in the U.S. This includes a warrants agreement with Comcast, for which UEI manufactures the X1 Voice Remote and various home automation electronics, just to name a few pieces of technology.
UEI said it isn’t shifting all of its manufacturing out of China, only the portion affected by the volatility of the ongoing trade dispute.
As for the decision to shift operations to Mexico, the company noted that it has had a factory located in the region already for several years. And it sees Mexico as more stable terrain, at least as far as the Trump Administration is concerned.
“We think that the trade tensions with Mexico have settled somewhat, if not completely,” Arling said. “So we feel pretty safe with that move, particularly for, again the products that are being shifted -- shipped into the United States. So we don't really see the tariff issue getting worse, although, again we could never guarantee what would happen there.”
Arling added that the tariffs could impact nearly half of UEI’s business.
“We will move that which is necessary, in order to provide cost effective solution to the customer. In other words not have them have to absorb the 25 % increase,” he said.
UEI is but one U.S. company serving the telecom sector with strong manufacturing ties to Asia.
Arris noted several months ago, for example, that the tariffs could add $200 million to the cost of manufacturing broadband equipment for all vendors.