Mexico’s recovery in electronics manufacturing is being tested by widespread violence among warring drug cartels.

Electrolux, for one, has opted to locate a $190 million appliance factory in Memphis, TN, after being turned off by the shootings and other skirmishes taking place daily in many Mexican states, the Wall Street Journal reports today.

Electrolux, which has a large campus in Juarez, must have been influenced by the rapidly climbing death tolls: some 11,000 citizens have been murdered as part of the drug wars this year alone. Many more have been beaten up or kidnapped.

On the surface, the insanity hasn’t appeared to suppress investment from the EMS side: Victron and Federal Electronics, among others, have opened plants south of the border this year. But overall US investment, while up over 2008 levels, is down versus 2006-08.

As OEMs take a conservative route and opt for safer environs, will their supply chains follow? If so, the recent gains Mexico has made against China might be lost — this time for good.