Sources: INEGI (Mexico), Vietnam General Statistics Office, BBVA Research, Vietnam Briefing. Vietnam's 2025 milestone represents 400,000 workers who shifted from garment production to electronics assembly as industrial zones transformed around Samsung and LG anchor investments.

Mexico's Nearshoring Momentum and Its Limits

The Monterrey production manager's 14-hour delay represents Mexico's fundamental tension. The country offers a five-hour shipping advantage over Asian alternatives to the US market. A container leaving Monterrey arrives in Dallas faster than one departing Shenzhen arrives in Los Angeles. But that advantage evaporates the moment border congestion or customs discretion introduces unpredictability.

Mexico's 2024 export performance of $617 billion represents six years of systematic supply chain restructuring following the 2018 US-China tariff escalations and the 2020 USMCA implementation. The automotive sector alone generated $193.9 billion in exports, with 3.98 million vehicles produced and 3.47 million exported. This is not assembly for domestic consumption. This is export-oriented manufacturing at continental scale, with 87% of production leaving the country.

Geographic concentration tells its own story. Border states (Chihuahua, Coahuila, Nuevo León, Baja California, Tamaulipas) account for over 50% of manufacturing exports in Q1 2025. These are not random industrial clusters. These are integrated production corridors designed for just-in-time delivery to US distribution networks, where a four-hour trucking delay can shut down an entire assembly line in Michigan.

Mexico's economic growth, however, reveals limits to the nearshoring narrative. GDP expanded 1.5% in 2024, with 1.3% forecast for 2025. The IMF revised its April 2025 projection downward by 0.3 percentage points. These growth rates lag the broader Latin American average despite supposed nearshoring advantages, suggesting that proximity gains do not automatically translate to broader economic dynamism. The new investment slowdown (from $18.1 billion in 2022 to $4.8 billion in 2023) indicates that announced projects face execution barriers once due diligence teams examine actual throughput capacity.

Vietnam's Electronics Transformation in Texture

In 2013, Nguyen Thi Lan worked as a seamstress in a Ho Chi Minh City garment factory, stitching polo shirts for export to the United States. She earned $220 monthly and worked alongside 2,400 others in a facility that produced 18,000 garments daily. By 2019, the factory had closed. Nguyen Thi Lan now works as a quality control technician at a Samsung electronics assembly plant in Bac Ninh, earning $380 monthly and operating automated optical inspection systems that examine 14,000 smartphone screens per shift for pixel defects.

Her story, multiplied 400,000 times across Vietnam's industrial zones, explains the single most important manufacturing statistic of 2025: electronics overtook garments as Vietnam's largest export category to the United States. This is not mere sectoral rotation. This is structural industrial transformation compressed into seven years.

In 2013, electronics represented 13% of Vietnam's exports to the US, whilst light manufacturing (garments, footwear, furniture) represented 60%. By 2025, electronics reached $126.5 billion (33% of total exports of $405.53 billion), surpassing light industrial goods entirely. The shift required not just factory construction but wholesale transformation of workforce skills, power infrastructure, logistics networks, and supplier ecosystems.

The China relationship reveals the actual mechanism. Vietnam imports $163 billion from China in 2024, an 18% increase year over year and exceeding imports from Japan for the first time. Approximately $50 billion of these imports are electronic components: semiconductor chips, display panels, battery cells, precision connectors, camera modules. These components flow into Vietnamese assembly facilities, where value-added operations (assembly, testing, packaging) occur, then finished products export to the United States and European Union.

The calculation for a typical smartphone illustrates the structure: Chinese components cost $820 per unit, Vietnamese assembly adds $180 in labour and overhead, the finished phone exports at $999 to the US. Under the US-China tariff regime (25% on Chinese electronics), importing the phone directly from China would incur $249.75 in duties. Importing from Vietnam incurs zero tariff under most-favoured-nation treatment, saving $249.75 per unit. Multiply by 240 million units annually from Samsung's Vietnam facilities alone, and the tariff arbitrage totals $59.9 billion in annual savings.

Manufacturing performance indicators demonstrate sustained execution rather than speculative momentum. The October 2025 Purchasing Managers' Index reached 54.5, up from 50.4 in September. New orders grew for the second consecutive month at an accelerating rate. Export orders rose for the first time in a year. Production reached its fastest pace since July 2024. Employment increased for the first time in over a year. Business sentiment hit a 16-month high. These are not confidence surveys. These track actual factory orders, hiring decisions, and output volumes.

Economic projections reflect industrial capacity expansion rather than commodity price fluctuations. The Asian Development Bank forecasts 6.7% growth for 2025 and 6% for 2026. UOB projects 7.7% growth for 2025, citing manufacturing and export recovery as primary drivers. Vietnam's government targets 8% growth and $5,000 GDP per capita by 2025, up from $4,164 in 2023. These growth rates significantly exceed regional averages and demonstrate that Vietnam shifted from cost-driven competitive advantage (cheap labour) to system capacity advantage (infrastructure, power reliability, logistics networks scaled to match production volume).

Kenya's Apparel Position and the Infrastructure Constraint

In Athi River, 25 kilometres southeast of Nairobi, a textile manufacturer produces polo shirts for export to the United States under the African Growth and Opportunity Act (AGOA), which provides duty-free access for qualifying products. The factory employs 1,800 workers at an average wage of $180 monthly, significantly below Vietnam's $350 and Mexico's $420. Yet the factory operates at 67% capacity, and its owner reports difficulty securing additional export contracts despite the wage advantage.

The constraint is not labour cost. The constraint is throughput reliability. Between January and October 2024, the factory experienced 14 power outages lasting a cumulative 94 hours, forcing production stoppages and scrapping 22,000 garments that were mid-process when power failed (dye baths ruined, cutting equipment misaligned, quality control systems reset). The Mombasa port, where finished containers depart for the US, averaged 8.3 days dwell time in 2024, compared to 3.2 days in Hai Phong and 2.4 days in Lázaro Cárdenas.

Kenya's $510 million in apparel exports to the United States in 2023 represents a fundamentally different model than Mexico's $617 billion total exports or Vietnam's $405.53 billion. This is not execution at continental scale. This is corridor-based niche positioning, entirely dependent on preferential trade access that requires periodic renewal and offers no certainty beyond its current authorisation period.

The Kenyan case illustrates why corridor niches cannot scale to execution hub capacity without addressing infrastructure fundamentals. The wage advantage exists. The preferential trade access exists. But manufacturing competitiveness requires all five elements simultaneously: power that stays on, ports that clear predictably, customs that process without discretionary delays, rules that are enforced consistently, and finance that works for working capital cycles. Failing any single element screens out the location from serious consideration, regardless of wage rates or trade preferences.

Comparative context sharpens the point. Bangladesh, with similar wage levels to Kenya ($195 monthly for garment workers) and comparable infrastructure challenges, nonetheless exported $47 billion in garments in 2023 versus Kenya's $510 million. The difference lies in scale and ecosystem effects: Bangladesh built integrated textile supply chains over four decades, with yarn production, fabric weaving, dyeing facilities, button and zipper manufacturers, packaging suppliers, and quality testing laboratories all co-located within industrial zones. Kenya imports most inputs, adding transport costs and time delays that compound the throughput penalties. Ethiopia, positioned as an alternative African apparel hub, struggles with similar infrastructure constraints and has failed to scale beyond $250 million in exports despite lower wages ($90 monthly) and comparable AGOA access.

What Multinationals Actually Measure Before Committing Capital

When a company evaluates manufacturing relocation, the due diligence team does not assess "business climate" through perception surveys or governance rankings. The team measures throughput: the demonstrated capacity of a country's infrastructure to move goods, power, and permissions at predictable speed and documented cost.

The five metrics below constitute the Throughput Index. Countries that publish actual performance data on these metrics reduce uncertainty premiums and attract investment even when the metrics show mediocre performance. Countries that refuse to publish data get assigned maximum risk probabilities and are screened out regardless of claimed advantages.

The compounding effect matters as much as individual metrics. Power outages cause production delays. Production delays cause late container arrivals at ports. Late arrivals cause port congestion. Port congestion causes customs backlogs. Customs backlogs cause contract penalties. Contract penalties cause disputes. Disputes unresolved cause risk premiums on future contracts. One weak link cascades through the entire supply chain, multiplying costs at each stage.

Kenya's $259,600 hidden tax per container explains why its $180 monthly wages cannot compete with Vietnam's $350 wages. The Total Landed Cost equation includes not just labour inputs but every hour of delay, every kilowatt-hour of unreliable power, every day of uncertain clearance, and every month of unresolved commercial disputes. These costs are not abstractions. They appear on balance sheets as inventory write-offs, demurrage charges, expediting fees, and legal provisions.

Three Models Examined Side by Side

What Works When Countries Attempt to Capture Manufacturing Investment

For countries attempting to capture manufacturing relocation, the sequence of policy actions matters as much as the content of those actions. Infrastructure investment must precede FDI attraction, not follow it. Skills development must match industrial requirements, not generic education expansion. Policy stability must extend across investment horizons, not electoral cycles. Tax incentives without throughput capacity fail consistently.

Vietnam's execution provides concrete illustration of how the sequence works in practice. The government designated integrated industrial zones before Samsung committed capital, not after. They built dedicated 220kV power substations for Bac Ninh and Hai Phong zones during 2012 to 2014, anticipating electronics manufacturing power demands rather than reacting to shortages. They established fast-track customs procedures for registered manufacturers in 2013, two years before Apple suppliers began evaluating Vietnam as alternative to China. They maintained FDI legal framework through three leadership transitions (2011, 2016, 2021) without retroactive changes, allowing long-term capital commitments. The payoff: $526 billion cumulative FDI since 1987, with 85% of exports from manufacturing sector, and electronics growing from 13% to 33% of exports in seven years.

Mexico's approach demonstrates different success factors tied to geographic advantage. USMCA legal framework provided preferential access certainty that justified supplier investments in border-adjacent industrial corridors. Infrastructure investment in Puerto del Norte occurred before trade volumes required it, anticipating nearshoring demand. Automotive supply chain depth developed over decades created sticky relationships that resisted relocation even during cost pressures. Container throughput growth (9.38 million in 2024, up 12% year over year) indicated systematic capacity expansion matching demand. But the new investment slowdown (13% of FDI in 2023 versus historical 40% to 50%) shows that adjacency advantage alone does not guarantee execution without addressing border congestion and customs unpredictability.

Why Diversification Narratives Miss the Actual Supply Chain Structure

Headlines describe Vietnam and Mexico as alternatives to China. The actual supply chain structure reveals integration with China at different production stages, not exit from Chinese supply chains.

Mexico's pattern mirrors Vietnam's structure. China's share of Mexican imports reached 20.1% in 2025 and continues rising. Component sourcing from China increased even as final assembly relocated to Mexico under USMCA preferences. A typical automotive wire harness assembled in Chihuahua contains copper wire from Jiangxi, connectors from Shenzhen, protective sleeving from Guangdong, and only the cutting, crimping, and assembly labour occurs in Mexico. The value-add split: $67 in Chinese components, $23 in Mexican assembly, total $90 per harness. Multiply by 12 million harnesses annually, and Mexico adds $276 million in value whilst China supplies $804 million in components.

The policy implication cuts against the diversification narrative. Countries attracting "China plus one" investment are not reducing dependence on Chinese supply chains. They are increasing integration with Chinese supply chains at the assembly stage, creating structural vulnerability to any disruption in component flows from China. A semiconductor shortage in Shenzhen shuts down smartphone assembly in Bac Ninh. A connector factory closure in Dongguan halts wire harness production in Chihuahua. The diversification is geographic (final assembly location), not economic (supply chain participation).

When Does the Throughput Thesis Fail?

The throughput framework predicts that infrastructure reliability determines manufacturing competitiveness more than wage rates or tax incentives. But three categories of cases challenge this thesis and deserve examination.

Natural resource processing where infrastructure matters less. Zambian copper smelting occurs despite unreliable power (218 hours of outages annually in Copperbelt Province) because ore deposits create location-specific advantage that cannot be relocated. The copper is extracted where geology placed it, and smelting occurs nearby to avoid transport costs on heavy raw ore. Total Landed Cost calculations matter less when the input (copper ore) cannot move. Similarly, Indonesian nickel processing expanded despite infrastructure gaps because nickel laterite deposits are geographically fixed. These cases suggest that when natural resources create immobile advantages, manufacturers tolerate infrastructure deficits that would be disqualifying for footloose manufacturing.

Rapid fashion and time-sensitive production where proximity beats infrastructure. Certain apparel segments (fast fashion with two-week design-to-retail cycles) prioritise speed over cost, creating niches where proximity to consumer markets outweighs infrastructure efficiency. Morocco supplies Zara with garments despite higher labour costs than Bangladesh ($280 monthly versus $195) because Morocco's 14-day ship time to Spain beats Bangladesh's 35-day ship time to Europe. The infrastructure gap (Morocco's Casablanca port averages 5.2 days dwell versus Rotterdam's 1.8 days) matters less than the 21-day shipping advantage. This suggests that for time-critical segments, geographic proximity can overcome infrastructure deficits if the time savings exceed the throughput penalty.

Massive domestic markets where export infrastructure is irrelevant. India's automotive sector produces 5.5 million vehicles annually despite infrastructure challenges (power outages, port congestion, customs delays) because 80% of production serves domestic demand. Infrastructure failures that would destroy export competitiveness matter less when the buyer is local and transportation is domestic trucking rather than container shipping. China's early industrialisation followed similar pattern: unreliable infrastructure during the 1990s did not prevent manufacturing growth because domestic market absorbed production. This suggests that for inward-focused manufacturing, throughput efficiency matters less than for export-oriented production.

These counterexamples indicate boundary conditions for the throughput thesis rather than fundamental refutation. The framework applies most strongly to footloose, export-oriented manufacturing where inputs and outputs both cross borders and time delays compound costs. The framework applies weakly to resource processing tied to geology, time-critical production where proximity dominates, and domestic market-oriented manufacturing where export infrastructure is irrelevant.

For the 85% of global manufacturing that is export-oriented and not tied to immobile natural resources, the throughput thesis holds: infrastructure reliability determines competitiveness, and wage advantages cannot overcome throughput penalties beyond certain thresholds. Kenya's $180 wages lose to Vietnam's $350 wages because $259,600 in hidden taxes per container exceed the labour cost savings. But Moroccan proximity beats Bangladeshi infrastructure for Zara's fast fashion, and Indian domestic market scale tolerates infrastructure gaps that would destroy pure export plays.

Execution Over Narrative

At 6:47 AM on that Tuesday in Monterrey, the production manager's problem was not geopolitical strategy or democratic values. The problem was 240 workers waiting idle, 1,200 door assemblies unproduced, and $12,000 in daily contract penalties accruing because a container sat at a border crossing for 14 hours. By 4:23 PM, the container cleared and production resumed, but the shift's target was missed and the penalty charged.

This is how manufacturing competitiveness actually works. Not in announcements or policy speeches, but in clearance times and outage hours and dispute resolution speed. Mexico's $617 billion in exports proves the adjacency model works when border throughput matches volume, but the 14-hour delay proves the model breaks when congestion or discretion introduces unpredictability. Vietnam's $126.5 billion in electronics exports proves the execution model works when industrial discipline sustains despite component dependency, but the $163 billion in Chinese imports proves the model is integration with China, not diversification from China. Kenya's $510 million in apparel exports proves the corridor niche exists, but the $259,600 hidden tax per container proves the niche cannot scale without addressing power reliability and port throughput.

The wage paradox resolves through Total Landed Cost arithmetic. Vietnamese workers earning $350 monthly beat Kenyan workers earning $180 monthly because the $170 wage savings evaporate when containers sit in Mombasa for 8.3 days versus 3.2 days in Hai Phong, costing $76,327 in additional inventory carrying charges, demurrage fees, spoilage risk, and contract penalties per shipment. Multiply by 180 containers annually, and the throughput penalty ($13.739 million) exceeds the wage advantage ($3.672 million) by $10.067 million. Lower wages do not compensate for unreliable throughput beyond this threshold.

The China integration reality contradicts diversification narratives. Manufacturing did not exit Chinese supply chains. It added final assembly steps in Vietnam and Mexico to capture tariff arbitrage ($250 per smartphone, $60 billion annually for Samsung alone) whilst retaining Chinese component sourcing ($820 per unit). Vietnam imports $163 billion from China. Mexico imports from China at 20.1% share and rising. The geographic diversification (assembly locations) masks economic integration (supply chain participation). A component shortage in Shenzhen shuts down assembly in Bac Ninh and Chihuahua simultaneously.

The policy lesson is sequential precision, not ideological positioning. Infrastructure investment must precede FDI attraction. Vietnam built power substations and dedicated customs facilities during 2012 to 2014, then attracted Samsung anchor investment in 2014 to 2017, then supplier ecosystem followed during 2017 to 2024. Mexico expanded port capacity before trade volumes required it, creating throughput headroom that justified nearshoring commitments. Countries that wait for investment to justify infrastructure never attract investment because due diligence teams screen out locations without demonstrated throughput capacity.

The throughput framework provides objective assessment methodology that replaces perception-based rankings. Power outage time (hours annually), port dwell time (days from vessel arrival to cargo release), customs clearance (hours from documentation to release), dispute resolution (months from filing to judgment), and logistics cost (percentage of export value) constitute measurable performance indicators that multinational due diligence teams actually examine. Publishing actual data reduces uncertainty premiums even when performance is mediocre. Refusing to publish data triggers maximum risk assignment and automatic screening.

The countries that win manufacturing relocation over the next decade will be those that made infrastructure decisions five years ago: power substations built in 2020 enable electronics assembly in 2025, port expansions completed in 2019 handle container volumes in 2024, customs reforms implemented in 2018 reduce clearance times that attract FDI in 2023. The lag between infrastructure investment and manufacturing payoff ranges from three to seven years, which exceeds typical political cycles and requires institutional commitment beyond electoral incentives.

For policymakers attempting to capture manufacturing investment: start with auditable corridor data, not tax incentive announcements. Fix bottlenecks systematically (power, then ports, then customs, then permits) rather than spreading resources across all constraints simultaneously. Build skills matching production requirements (quality control technicians, not generic university graduates). Maintain policy stability across 10 to 15 year investment horizons (predictable rules matter more than favourable rules). Accept that infrastructure investment precedes payoff by five years and political credit accrues to successors, not initiators.

Manufacturing goes where it can execute at documented cost and predictable schedule, not where it receives best incentives or warmest welcomes. Execution requires infrastructure that works, rules that are stable, and systems that scale. Everything else is performance. The $617 billion and $405.53 billion export figures from Mexico and Vietnam represent not speeches or strategies, but containers that clear, power that stays on, and disputes that resolve. The boring stuff compounds into competitive advantage. The exciting stuff mostly just compounds into press releases.