The analysis of the Machinery subsector was performed following the old Mexican manufacturing classification which groups the manufacturing production activities into 9 clusters, but as explained in Chapter 3 Mexico followed the ISIC classification and the whole Mexican manufacturing industry was re-grouped into 21 sub-sectors. The research attempted to reclassify the old classification into the new classification without success.
The fact that the analysis locates the Machinery industry in a forgetting stage and given the importance of the industry for the Mexican long term manufacturing development, a deep analysis is performed for the industries (under the new classification) that fall into the old industry classification.
A further analysis was carried out in the five industries that the research grouped (in the previous chapters) into the Machinery subsector as shown in Table 18: Railroad and Transport Equipment; Electrical Machinery and Apparatus; Fabricated Metal Products;
Machinery and Equipment; and Computing Machinery, Communications Equipment, Medical, Precision and Optical. Information for new ISIC classification is only available from 2003, therefore this additional analysis only comprises data from 2003 to 2008 (six years period). This section considers an analysis of the five mentioned industries in terms of the observed performance of the total Machinery subsector; and percentages and ranks are based on the whole Machinery subsector itself and given figures do not represent information related to the Mexican Manufacturing industry as a total.
This further analysis reveals that three industries are in a forgetting level and two in a learning level as depicted in Figure 15, 16, 17, and 19.
Table 18 Subsectors under ISIC that fall into the Old Machinery Classification
INDUSTRY SHORT DESCRIPTION SUBSECTORS UNDER ISIC
Fabricated metal products, Machinery and equipment, Medical, precision and optical instruments.
Machinery 332: Fabricated Metal Products 333: Machinery and Equipment 334: Computing Machinery,
Communications Equipment, Medical, Precision and Optical
335: Electrical Machinery and Apparatus 336: Railroad and Transport Equipment
Source: INEGI
44 The Machinery and Equipment subsector classified as Medium-High Tech according to its technological intensity, shows Progress Ratio values below 1 in 2004, 2005 and 2006, but its competitiveness has deteriorated in the last years. The industry reached a detriment level of 2.43 progress ratio in 2008; however its production contribution value to the whole Machinery industry has increased during the period under analysis from 5.12 percent in 2003 to 7.05 percent in 2008 as shown in Figure 20.
Fig. 15. Progress Ratio Values for the Machinery and Equipment Industry (Medium-High Tech).
The Computing Machinery, Communications Equipment, Medical, Precision and Optical Industry trend depicted in Figure 16 indicates that the industry shows a chronic issue in its learning level or knowledge accumulation reaching an unwanted level of 2.46 in 2008.
Mexico faced a massive withdrawal of FDI in the IT industry from 2003 to 2005, and this particular situation is contributing to the detriment learning levels of the whole industry. This subsector has decreased its contribution to the Machinery industry from 6.59 percent in 2003 to 2.73 percent in 2008.
Fig. 16. Progress Ratio Values for the Computing Machinery, Communications Equipment, Medical, Precision and Optical Industry (Medium-High Tech).
The Electrical Machinery and Apparatus industry had a good performance from 2008 to 2006, but its progress ratio moved from 0.96 in 2007 to 1.06 in 2008. These data indicates that the industry is facing productivity issues. In 2008 unit production cost increased 6 percent when doubling production. The Electrical Machinery and Apparatus contribution to the total
0.40 0.90 1.40 1.90 2.40
2003 2004 2005 2006 2007 2008
Learning Level
0.80 1.30 1.80 2.30
Learning Level
45 manufacturing activity in the whole Machinery industry shows and increase between 2003 to 2008, moving from 9.25 percent to 11.70 percent respectively.
Fig. 17. Progress Ratio Values for the Electrical Machinery and Apparatus Industry (Medium-High Tech).
The Fabricated Metal Products industry is in a learning level, showing a progress ratio of 0.9411 in 2003 and 0.9455 in 2008. The industry has been able to keep its productivity level at almost the same level during the 6 years under analysis. Overall, the industry has been able to manage unit production cost reductions, achieving around 6 percent cost decreases when production doubles. The industry contribution to the total Machinery industry has slightly increased from 10.4 percent in 2003 to 11.3 in 2008, only 0.9 percent during six years.
Fig. 18. Progress Ratio Values for the Fabricated Metal Products Industry (Medium-Low Tech).
The most remarkable finding in this special analysis for the Machinery industry is that the Railroad and Transport Equipment industry had an outstanding performance from 2005 to 2008. It is important to highlight that this subsector comprises the Automotive industry which plays a very important role in the total Mexican manufacturing industry.
The Railroad and Transport Equipment industry achieved a progress ratio of 0.81 in 2006, 0.55 in 2007 and 0.37 in 2008, indicating that the industry was able to reach unit production cost reductions of 19 percent in 2006, 45 percent in 2007 and 63 percent in 2008 when doubling production. The contribution of the industry to the total Machinery subsector has
0.80 0.90 1.00 1.10
2003 2004 2005 2006 2007 2008
Learning Level
0.94 0.94 0.95
2003 2004 2005 2006 2007 2008
Learning Level
46 remained almost the same, 68.6 percent in 2003 and 67.3 percent in 2008 as shown in Figure 20. The Railroad and Transport Equipment industry shows a very high learning potential.
This industry alone contributed to 17.23 percent and 19.2 percent in 2003 and 2008 respectively to the total Mexican manufacturing production.
The Railroad and Transport Equipment represents a key industry to the Mexican manufacturing industry given its high contribution to the national manufacturing production.
The fact that this industry is in a learning stage with increasing productivity levels makes this particular industry a national priority.
Fig. 19. Progress Ratio Values for the Railroad and Transport Equipment Industry (Medium-High Tech).
This further analysis of the Machinery industry reveals that the bad performance in the Computing Machinery, Communications Equipment, Medical, Precision and Optical;
Machinery and Equipment; and Electrical Machinery and Apparatus subsectors are driving the whole industry’s performance to a forgetting stage although their contributions to the total Machinery production value only accounts for around 21 percent.
Fig. 20. Manufacturing Production Contribution of Industries grouped into the Machinery Industry.
Source: INEGI
0.35 0.55 0.75 0.95 1.15
2003 2004 2005 2006 2007 2008
Learning Level
0 10 20 30 40 50 60 70 80 90 100
2003 2004 2005 2006 2007 2008
Percentage
Computing Machinery, Communications Equipment, Medical, Precision and Optical Machinery and Equipment Fabricated Metal Products Electrical Machinery and Apparatus
Railroad and Transport Equipment
47