Key Tronic Corp. expects to add about 100 jobs to its Spokane Valley headquarters over the next five years and even more elsewhere as it looks to expand production capacities at its Arkansas and Vietnam facilities, says Brett Larsen, president and CEO. 

He says the jobs here include professional support roles, such as engineering and design. 

“We’re fully expecting growth,” Larsen says of the Spokane Valley-based contract manufacturing company. “With the change in new administration, there are a lot of international companies looking to build their product in the U.S.” 

The expansion is expected to help mitigate impacts related to the newly announced tariffs on products manufactured in China and Mexico, Larsen says. An additional 10% tariff on all Chinese goods took effect Feb. 4, and a 25% tariff on all goods from Mexico has been paused until early March. 

“There is no perfect solution when you start talking about tariffs,” he says.

In Arkansas’ northwest corridor, Key Tronic is relocating its existing operations to a new, larger facility in Springdale, increasing its total U.S. production capacity by about 40%, Larsen says. The new 300,000-square-foot manufacturing, research, and development facility is triple the size of its current plant in neighboring Fayetteville, Arkansas, and is expected to create 400 new jobs over the next five years, up from a current workforce of 250.

The company expects to invest above $28 million into the new facility over the course of its 10-year lease. The state of Arkansas has a business-friendly environment, Larsen says, and is offering Key Tronic incentives and grants, such as aiding with leasehold improvements. 

According to Northwest Arkansas Business Journal, the Springdale building was completed in 2023 inside a 91-acre business park. A commercial alternation permit valued at $7 million for tenant improvement was issued in January. 

Larsen says Key Tronic’s Fayetteville employees are expected to start moving into the new facility in June and take two to three months to complete. The Fayetteville location will shutter by the end of the year. 

In the company’s Vietnam facility, Key Tronic anticipates doubling its manufacturing capacity by September and making significant investments in capital equipment, he says. 

Key Tronic opened the 130,000-square-foot Vietnam facility just before the onset of the COVID pandemic, Larsen says. 

“We expected to be far bigger than we are today, but COVID slowed it down,” he says. “So Vietnam is fairly small today; we’re expecting that to contribute more and more to our overall revenue and profitability in the future.” 

Key Tronic was founded in 1969 as a keyboard manufacturer and has evolved into a design and manufacturing service provider with factories in the Spokane area, Arkansas, Minnesota, Mississippi, Mexico, Vietnam, and China. It is headquartered at 4424 N. Sullivan Road and employs 4,122 people company-wide, of which 233 are based in Spokane Valley. 

Earlier this month, Key Tronic reported a loss in earnings and revenue, but stated it expects to recover in the following quarter. 

The company reported a net loss of $4.9 million, or 46 cents per diluted share, for its fiscal year 2025 second quarter, which ended Dec. 31. That's down compared with income of $1.1 million, or 10 cents a share, in the year-earlier period. 

The company posted second-quarter revenue of $114 million, down from $148 million the year before. The lower-than-anticipated revenue and earnings are a result of unexpected shortages of specific components managed by a large customer, underwhelming production during the holiday season, and reduced demand from certain customers, which altogether lowered revenue by about $15 million for the quarter. 

During a Feb. 4 conference call regarding the second-quarter earnings report, Larsen says he expects the company’s earnings and revenue to improve in the third quarter of fiscal 2025, noting the company’s Mexico and Arkansas facilities will begin initial production of a new innovative energy resiliency product. Once production is fully ramped up, revenue for the product could exceed $60 million annually.

The company did not disclose the name of the new customer, describing it only as an "Innovative energy resillience technology provider." 

As of Feb. 24, the price for Key Tronic stock (Nasdaq: KTCC) closed at $3.10 a share, down from a 52-week high of $6.14 and just above its $3.03-a-share 52-week low. 

Reshoring

Larsen says the company began the process of reshoring production over a decade ago. In the early 2000s, it seemed like almost everybody wanted to build their product in China, he says. However, businesses became disenchanted with logistics concerns and supply-chain constraints that made it difficult to get products to North America quickly. 

“I think the geopolitical tension that started just ramped up the velocity (of reshoring); it had already started,” he says.

Key Tronic still maintains a facility in Shanghai, China, but the plant serves only Chinese companies now, he says. 

The company’s largest campus is in Juarez, Mexico, where it operates 1 million square feet of manufacturing space. While the threat of potential tariffs hangs over the company’s operations, Larsen says the company’s Juarez campus has more diverse manufacturing capabilities beyond some of its other sites. Additionally, the company has developed a tool that can price customers products depending on which location it is built and choose which is the most beneficial path to take, he says. 

“Even if you build a product in the U.S., you still have to pay all the tariffs on the Chinese component that you pulled in,” he says. “Whereas if you build it in Mexico, you don’t have to pay the tariffs on the Chinese component, but you have to pay some tariffs to get the final product across the border.” 

Visitors to the company’s website are met with a message explaining the current tariff environment that may affect Key Tronic customers’ products. Tariffs are currently assessed on raw materials entering the United States from China, and have increased by an additional 10%, it states. It further adds that the United States Mexico Canada Agreement currently shields certain tariffs on goods from China to Mexico, and that customers can use Key Tronic's pricing tool to evaluate the pricing on each location depending on the tariffs imposed.

“It’s good to see Mexico and Canada have essentially placated and said, 'What specifically can we do as a good trading partner to avoid these tariffs?'" Larsen says.

He adds that he hopes the dialogue continues, but believes there will always be a degree of tariff risk the company and its customers will have to navigate.