Pushed by hyperscalers’ demand and a global de-risking drive, Taiwan’s top contract manufacturers are shifting production lines for artificial intelligence technology from China to Mexico. The bet on a United States-Mexico-Canada Agreement (USMCA) platform is real – but so are new frictions. Steep U.S. tariffs have already hit Canada, and a 30 percent rate still looms over Mexico, with the clock ticking on a 90-day reprieve. Tariff rates now hinge on behind-the-scenes statecraft in Mexico City.
Why Taiwan’s Tech Giants Are Moving Now
Taiwan dominates the contract manufacture of servers and high-performance computing gear. That leadership was long intertwined with mainland China for scale and supplier depth, but now supply chains are being rebalanced by two forces. First, U.S. cloud giants want critical AI hardware made inside North America to cut geopolitical and logistics risk. Second, Washington and Mexico are trying to stand up a regional semiconductor and advanced-computing ecosystem linked to the U.S. push to near-shore critical technology manufacturing.
Throughout 2024-25, reporting showed U.S. hyperscalers urging Taiwanese partners to shift AI-related production from China toward Mexico. In parallel, the U.S. State Department and Mexico announced a partnership to map and develop semiconductor supply chain opportunities, providing an institutional anchor for more local assembly, testing, and integration. Mexico, for its part, began courting Taiwan earlier: a 2023 mission led by the Taiwan External Trade Development Council brought 20 electronics and microchip firms to assess near-shoring options, a precursor to today’s capacity build-up.
The strategic logic is straightforward: assemble AI servers inside the USMCA region, keep critical components compliant with export rules aimed at China, and sit near end customers with faster, lower-risk delivery. Practically, this means migrating not only final assembly but also portions of the integration workflow – racks, power and thermal systems, cable harnesses, PCB subassemblies, and burn-in/testing – so that a larger share of value is added in North America. While the most advanced chips will still be imported, placing the integration of GPUs, NICs, memory, and boards closer to U.S. data centers compresses lead times and reduces customs friction.
The timing also reflects product cycles. Nvidia’s platform transition toward Blackwell-class systems demands rapid capacity additions, predictable logistics, and regulatory certainty. Taiwanese ODMs/EMS that can stand up Mexican lines quickly, while validating U.S. “mirror” capacity for policy hedging, gain an edge with hyperscalers that are racing to deploy.
In short, demand pull from U.S. clouds and policy push from de-risking are converging on the same geography.
Three Taiwanese Bellwethers in Mexico
Taiwan’s push into Mexico is being led by three tech giants: Foxconn, Pegatron, and Quanta.
Foxconn has made its biggest Mexico move in years: building what it describes as the world’s largest facility for bundling Nvidia’s GB200 (Blackwell) superchips, with Mexico as a key node in its global AI-server footprint. Beyond the new server manufacturing facility in Guadalajara, Foxconn has been expanding server capacity in northern Mexico and, crucially, is pairing Mexican investments with redundant lines in the United States. That “dual-track” approach hedges tariff and policy risk while preserving Mexico’s cost and logistics advantages for volume. The company’s internal mix has already shifted materially toward servers, cloud, and data-center equipment – evidence that the server business is no longer an adjunct to consumer electronics but a pillar in its own right.
Pegatron, Taiwan’s No. 2 contract electronics maker, says mass production of AI servers in Mexico will begin in the third quarter of 2025 – a milestone planned since last year. The company’s management has cast Mexico as a hub calibrated for automation to offset local talent bottlenecks, while evaluating a complementary U.S. site. For hyperscaler customers standing up Blackwell-class infrastructure, Pegatron’s Mexico ramp offers regional supply at scale, shorter lead times, and fewer export-control headaches. The company’s sequencing – automation first, workforce scaling in parallel – illustrates a broader Taiwanese pattern: use robotics and standardized test regimes to stabilize yields early in a new site’s life, then deepen local hiring and supplier development as the campus matures.
Quanta, already a heavyweight in servers and a top supplier for AI data centers, has committed $1 billion in Nuevo León (on top of earlier investments and thousands of jobs). Nuevo León’s proximity to Texas and its established industrial base make it an obvious anchor for serving U.S. cloud demand. While Quanta does not publicly break out product mixes by site, its revenue is increasingly concentrated in AI-ready servers, aligning the Mexico footprint with the firm’s core growth engine. Quanta’s role is especially important in the multi-ODM world of hyperscalers: its ability to scale standardized designs rapidly, while custom-tuning thermal and power envelopes, gives it a privileged place in rollouts of new GPU clusters.
All these investments reduce reliance on China for sensitive, high-value compute systems. Mexico supplies scale manufacturing under USMCA, while “mirror” capacity in the U.S. (and, in some cases, other countries in Asia) adds resilience as policy winds shift. If tariff and origin rules become more predictable, Mexican lines will carry the bulk of volume; if they tighten, twin-planting in the U.S. will grow.
New Friction: U.S. Tariffs
Now, however, these plans face new friction in the form of the Trump administration’s tariffs, even on partners, like Mexico, that have free trade agreements with the United States.
In July and August, Washington turned up the heat. The White House raised Canada’s tariff rate to 35 percent, effective August 1. It also threatened 30 percent tariffs across a wide swath of imports from Mexico (and the EU). Mexico, however, secured a 90-day reprieve on July 31 after a leaders’ call, buying time to negotiate a framework that could temper the blow or tailor rules for sensitive sectors like advanced computing.
For Taiwan’s ODM/EMS players, the macro math changes depending on how the tariff talks play out.
Broad tariffs on Mexico would increase total landed cost for AI servers, especially those with non-regional inputs, potentially slowing green-lit expansions or forcing re-sourcing. Even a modest tariff narrows Mexico’s labor and logistics advantage, particularly for high-value assemblies with large imported content. That will push firms to optimize bills of materials toward regional suppliers where feasible (power distribution, sheet metal, cable assemblies) and to reconfigure routing to avoid double-tariff exposure.
Taiwanese firms are expected to continue “twin-planting”: setting up plants in Mexico for volume and proximity while also establishing selective U.S. lines for tariff or political cover. Several Taiwanese firms have already flagged U.S. expansions or pilot lines in states with data-center ecosystems and strong logistics. In practice, that produces a laddered playbook: pilot or sensitive SKUs in the U.S.; ramp and cost-optimized SKUs in Mexico.
If the reprieve yields a focused agreement – one that tightens anti-transshipment measures but clarifies sectoral treatment – Mexico could preserve much of the nearshoring advantage for AI gear manufactured to USMCA content thresholds. Clearer rules would also de-risk customers’ procurement decisions, allowing multiyear contracts to assume a stable tariff baseline rather than expensive contingency clauses.
The tariff uncertainty is not just an abstract risk premium; it shapes factory sequencing. Firms that expected to bring up two lines in 2025 might now start with one high-automation line, watch the policy outcome in October, and only then commit to a second or third bay. That staged approach preserves strategic options without stranding capital.
Mexico’s “Quiet Diplomacy”
Mexico’s response has emphasized technical channels and low-profile engagement in Washington over public confrontation. The 90-day pause suggests that approach is delivering time for a negotiated landing zone. Parallel to trade talks, Mexico has carried out high-volume transfers and extraditions of cartel suspects at U.S. request – moves officials insist are tied to security cooperation, not tariff bargaining. Whatever the causal linkage, the combined effect has been to lower the political temperature just as tariff clocks started ticking.
For Taiwan’s manufacturers and their U.S. customers, that diplomatic breathing room matters. Pegatron’s Mexico ramp can proceed as planned. Foxconn’s and Quanta’s deployment plans face less near-term disruption. And supply chain teams can model origin content and routing under a still-evolving policy horizon, rather than freezing new POs. If the pause yields an understanding that codifies rules of origin and verification for complex electronics, with clear guardrails against transshipment, then the region can lock in a credible path for AI-server manufacturing at scale.
Mexico’s emphasis on discretion is also a recognition of its dual track with Asia. While it seeks Taiwanese investment as part of U.S.-aligned de-risking, Mexico remains open to Chinese capital in sectors like EVs and renewable components. A quiet approach avoids forcing binary choices while North American rules settle. For Taiwan, that nuance is helpful: it keeps Beijing’s public ire focused elsewhere while factories quietly come online.
Real World Bottlenecks Still Apply
Even if diplomacy holds and Taiwanese investment continues to increase, Mexico must keep closing practical gaps that will hold back its tech industry.
Heat waves in 2024 forced rolling power outages across much of the country, underscoring the need for dependable capacity in industrial corridors. AI server integration is power-hungry, not only for testing but for the ancillary infrastructure that supports high-density racks. Firms will demand substation upgrades, predictable interconnect timelines, and access to cleaner power as ESG pledges tighten.
Despite heavy summer rains, Mexico remains in a water deficit, with northern states among the hardest hit. New campuses that rely on clean power and adequate water for advanced manufacturing will test local infrastructure and municipal planning. Industrial parks courting server makers are layering water recycling and on-site treatment into their pitches, but large-scale deployments will still hinge on basin management.
Analysts have warned that nearshoring’s promised macro “boom” is neither automatic nor uniform. Energy permitting, industrial park build-out and workforce pipelines – especially in automation, test engineering, and data roles – will determine how fast AI-server capacity can scale. On-the-ground frictions matter: customs staffing, last-mile logistics to border crossings, and permitting for hazardous materials used in electronics manufacturing can all slow ramps if not streamlined.
Taiwan’s manufacturers are global leaders in process discipline, but they still need a steady stream of technicians and engineers to sustain yields. That is why automation is not a luxury; it is a bridge. As Mexican campuses mature, expect joint programs with technical universities, targeted upskilling in mechatronics and test, and selective relocation of experienced Taiwanese line leaders to seed best practices.
Mexico and the United States. have started putting institutional scaffolding in place – semiconductor cooperation using a State Department fund and focused economic dialogues on the subject – but access to electricity, water, and talent will decide whether Taiwan’s current wave of investment in Mexico becomes a durable cluster.
The Next 90 Days – and Beyond
There are three signals to watch moving forward.
First, look for signs of a Mexico-U.S. understanding. Will tariffs on Mexico be deferred, narrowed, or carved around specific high-tech categories? Clearer rules of origin and verification could stabilize investment plans, reduce contingency pricing in supplier contracts, and green-light second-wave lines for 2026.
Second, watch for further “mirror” capacity announcements. Additional U.S. lines from Taiwanese server makers would validate the hedging strategy while keeping Mexico as the main volume base. Watch for announcements tied to state-level incentives in logistics-rich corridors and for OEM partnerships that bundle servers with integrated power/cooling modules.
Finally, Mexico will need to shore up domestic enablers. Concrete steps to improve power reliability, clean-energy sourcing, and water management in Jalisco, Chihuahua, and Nuevo León will determine how quickly new server lines can scale up without creating bottlenecks. A visible pipeline of grid projects and industrial-water solutions would do as much for investment confidence as any tariff carve-out.