Fender: 25 Years at the Ensenada Factory

We sometimes like to take pleasure in kicking the big guys when they are down. GM, Goldman Sachs, Microsoft…the Yankees. Seeing the seemingly invincible struggle sometimes makes us little guys feel better. In the world of guitars, certainly the two electric heavyweights Fender and Gibson have had their share of troubles. Fender has been in headlines for their struggling profitability and the much publicized IPO that never happened (probably because the Private Equity people realized that the stock value just wasn’t there). Gibson of course hit the papers with their government raid and fines related to the improper importation of restricted hardwoods. I still maintain that if everyone else in the industry can manage to buy fingerboards legally, then Gibson most likely was doing something not kosher. Also there’s just something about a $3500 guitar with lacquer drips, but that’s for another day.

Fender however recently hit a real milestone with the 25th anniversary of their manufacturing facility in Ensenada, Mexico. What is so great you say about celebrating a factory that makes guitars in Mexico rather than in the USA? The importance of the Fender Ensenada factory is that over two decades ago Fender realized that as global competition would continue to drive manufacturing to low cost countries, that is was better to control their destiny rather than subcontract it. The Fender factory in Mexico now employs over 1000 people and occupies over a quarter million square feet, turning out electric guitars, acoustics, and amplifiers.

It would be nice to think that this manufacturing could have stayed in the US, but by nature guitar making is labor intensive. And with 80% of the worlds guitar market being under $600, nearly all this market is going to be fulfilled by suppliers in low cost countries. In a recent Music Trades article about the Fender plant, it was pointed out that in 1990 China produced 0% of the world’s guitars. Now China produces over 70% of the world’s guitars, but only 45% of the total market value. In other words, they make a boatload of inexpensive guitars. And most of these China factories don’t have names that we would recognize. They are contract manufacturers that produce guitars and then brand them with names that we do recognize. This is how much of the consumer product world works, but it’s hardly the image we like to have of guitar making as a craft.

Fender deserves a lot of credit for investing to maintain control over their intellectual property, their manufacturing processes, designs, materials and product quality. Building a factory is a huge undertaking, and it would have been much less expensive for Fender to just find a factory to build their designs. However, when we stop manufacturing, we also lose touch with the skills and technology to actually create the product. Product designers who know how their designs are made invariably design better products. Take a guitar pickup for example: Here is a product where several companies can take the same wire, magnets and bobbins but all get different results. It’s the process of making the pickup as much as it is the actual design. When manufacturers and designers work together, products and quality naturally improve at a faster rate. The pace of product development increases too, and it takes less time to bring a new product to market. Although the factory is in Mexico, it’s a day trip from the Fender HQ in Arizona. They are in the same time zone and the same continent, and it makes a difference.

As a lot of people already know and appreciate, a “MIM” (Made in Mexico) Fender is a good quality product. It’s not a cheap guitar; it’s a guitar that delivers top value for the price point. As the factory continues to increase its capabilities, the price point and value of the MIM products  will continue to rise. From the standpoint of brand equity, the Fender MIM products are largely embraced by the guitar playing public, and while some would rather be playing a true USA Fender, nobody is being done a disservice by playing an Ensenada product.

Whether it is Foxconn producing the iPad or whoever actually makes Nike footwear, there is increasing separation between the creators of products and the manufacturers of the products. Some pundits will argue that owning the design is the only true value, and that manufacturing is strictly a matter of finding the lowest cost source. That’s how we get Barbie Dolls with lead paint, and why it’s hard to buy a Toaster Oven that will last more than three years. Guitars are not appliances or toys, and should not be built that way.

Fender has its share of troubles, and for some purists the only real Fender guitars are those made before 1965 when a man named Leo ran the company. But for people of normal means, Fender Ensenada products are the pathway to owning what are arguably the most recognizable shapes in rock and roll. Kudos to Fender for keeping the dream of rock and roll alive.