Phillips Eyes Mexico as Production Hub for Truck, Trailer Products

With years of success in manufacturing and assembly in Mexico, Phillips Industries and Phillips Connect are doubling down on their presence in Mexico. Phillips officials say they’re “all in,” a claim backed up by a relocation of U.S.-based product lines and moves to pull out of China.

The commitment to Mexico is strengthened by the companies' investment in a newly expanded 500,000 square-foot manufacturing campus in Arteaga, Mexico.

On March 8, Phillips officials were joined by their customers, partners, HDT and other trucking and local media, company executives and local government officials for a ribbon-cutting ceremony to celebrate the expanded and reconfigured 380,000-square-foot facility for Phillips Industries, and a newly constructed 120,000-square-foot building that will be dedicated to Phillips Connect’s newest production lines supporting the company’s smart trailer focus.

View a photo gallery of the new facilities here.

Phillips Industries Moves California Production to Mexico

Phillips first came to Mexico for production of wiring harnesses in 2007. It moved to a larger location in Arteaga in 2015 to meet the growing demands of its Phillips Industries OEM customers, such as Daimler, Volvo, Mack, Navistar, Utility and Hyundai. The facility was recognized with numerous quality awards and has a reputation for quality and on-time delivery, according to Phillips officials.

Now, a new building in Arteaga, completed in 2022 and totaling 380,000 square feet, will house all Phillips Industries manufacturing operations, including those already in Mexico, as well as all production lines relocated from their former location in Santa Fe Springs, California. The relocation is expected to be complete this May, Phillips Industries and Phillips Connect CEO and President Rob Phillips told HDT.

Phillips’ newly expanded production campus now totals 500,000 sq. ft. It will be home to all of Phillips Industries production lines, including those previously produced in California. The Cal > Mex relocation will be complete later this year. 📸: @VesnaBrajk pic.twitter.com/hyr67DN6xb

— Heavy Duty Trucking (@HDTrucking) March 9, 2023

Rob Phillips said the decision to relocate production to the Mexico campus was based mostly on workforce challenges in California.

“We have a 24-hour lead time. We take the order today, we build it tomorrow, we ship it tomorrow night. That's what we've done for years, and we've had challenges the last three years because we can't get employees like we used to,” he explained of operating production in California. “We would order 30 temporary employees on a daily basis. We'd have to send 12 home the next day, bring five people … that's how we were able to flex and meet the order demand. But now if we lose anybody in California, we can't get anybody back. So, the workforce challenges are real. We don't have the same issues in Mexico.”

Phillips told HDT the company “looked really hard” at relocating from California to San Antonio, Texas, but decided on Mexico based on its long-term success there.

“Why build a building and start from scratch in San Antonio versus adding to an existing team?" he said. "We give them [the team in Mexico] more responsibility and more products because they know how to do it. They’ve already been proven.”

Phillips said Mexico is the “absolute best place” to manufacture Phillips and Phillips Connect products.

“The facility is the cleanest, most well-organized, and the best-managed we have anywhere in the world," he said. "Most importantly, the people are outstanding. Our current workforce and those ready to come to work for us can be relied upon to carry our success forward. We depend on that as we continue to expand here in Mexico.”

By the end of 2023, Phillips expects to employ 2,100 people in Arteaga.

Phillips' headquarters will remain in California and serve as the base for customer service, accounting, research development, and other support functions for North America, Europe, Phillips Connect, and Phillips Innovations, a recently formed collaborative business.

Campus Expansion Leaves Room For More Business

Phillips has taken advantage of this move to upgrade equipment, including three new high-speed wire and cable extruders, 36 new injection molding machines, and various other applicators to prepare the factory for increased production capacity. 

Company officials said the improvements will “significantly increase” Phillips Industries' capacity to service both the aftermarket and truck OEMs in North America. 

With the expanded space, the latest in manufacturing techniques and quality control functions, workforce availability, and proximity to its customers, Phillips Industries officials said it's prepared for additional business.

The original Arteaga building, with 120,000 square feet of floor space, has been reconfigured to manufacture, test, and ship electronic telematics products for the Phillips Connect business under the highest of standards, according to the company. 

Phillips Moves to Pull Out of China

Phillips Connect is in the process of relocating its manufacturing from China and near-shoring its product assembly to ensure lower cost, fewer supply chain constrictions, better control of quality, and quicker delivery to its North American customers, Phillips officials said.

Of the close to 190,000 smart trailer solutions and nearly 1 million sensors Phillips Connect has manufactured, all of them have come from China.

“Most of those have been airfreighted because we're selling faster than we anticipated,” Rob Phillips told customers, partners and media during a tour of a newly constructed building that will house Phillips Connect production. “We can't keep up. So, they get sent over the air. There are tariffs, there are challenges with COVID.”

Phillips Industries has also had issues with lead times and reliability out of China.

“We've got ships that might have left China two weeks ago and we're already unpacking those. We've had other ships, containers, that left … two months ago that were still floating outside of the harbor Long Beach," he said. "It's a real big issue that we're having to deal with. And so this is something that we really are looking to avoid. The best way to avoid it is to bring it in to control the process and to localize the supply chain.”

He added: “Instead of manufacturing in China — shipping on a boat or more frequently shipping on airplanes — and having all the other stuff to deal with, we're going have to full control over all of our manufacturing.”

For example, Phillips told HDT that Phillips Connect is ditching its gladhand supplier in China in favor of a supplier in the Tijuana, Mexico, area. The Mexican supplier will provide the castings Phillips Connect needs to complete the finishing work on the gladhands. Annually, Phillips Connect produces about 6 million gladhands.

“We're trying to get all of our suppliers local,” Phillips told HDT. “So everything from springs to screws, nuts and bolts and plastic injection molded parts and brass fittings. We're trying to bring all that closer.”

Newly Constructed Building to Support Phillips Connect

The new Phillips Connect facility includes an ESD SAFE room featuring 21,000 square feet of controlled ambient environment that meets the ANSI ESD 20/20 standards for electronic assembly.

 Production capabilities of the new facility include:

• in-circuit device programming
• automatic fully automated glue dispensing
• assembly using S-Y and 6-axis robots
• automated torque drivers
• leak detection systems up to IP69K
• functional testing
• customer acceptance testing

Quality and production standards are based on ISO9001 and follow IPC610c for electronic assembly, inspection, and acceptance criteria. All test stations are connected to a custom-made SCADA system that retains the most critical information for every unit ensuring control and traceability to the sub-assembly level. Purchased items are checked as they are received with follow-up assessments, such as their battery strength, as they are designated for production.