Mexico’s attempts to join the U.S. semiconductor boom are complicated by energy policy | Daily News Byte

Mexico’s attempts to join the U.S. semiconductor boom are complicated by energy policy

 | Daily News Byte


Mexico’s ambitions to benefit from increased North American semiconductor production through investment are at risk of collapse due to corporate concerns about the availability of electricity, their reliance on fossil fuels and the absence of financial incentives. The $52.7 billion U.S. law known as the CHIP Act, according to U.S. Commerce Secretary Gina Raimondo, would also open up “significant prospects” for Mexico in the energy- and water-intensive semiconductor sector.

But if Mexico doesn’t act quickly to strengthen electricity transmission networks and access to renewables, as well as provide competitive incentives, it could lose out, according to interviews with more than a dozen people familiar with the investment talks. The most expensive component of the semiconductor industry, high-tech chips, are manufactured in massive factories being built in the United States. Mexico, on the other hand, focuses on components of the supply chain that are easier to access, such as design, packaging and testing.the chip crisis started a frantic technological race between us, China, Europe

President Andres Manuel Lopez Obrador’s push to give market power to Mexico’s cash-strapped fossil fuel-reliant national energy corporations has stoked concerns from companies about the availability of electricity, which the government must ease to create those jobs. Producers trying to reduce their carbon footprint are baffled by his pursuit of “energy sovereignty” by helping state-run Petroleos Mexicanos and utility Comision Federal de Electricidad while limiting privately funded renewable generation.

According to Neil Herrington, senior vice president for the Americas at the US Chamber of Commerce, “Mexico’s current energy strategy is significantly undermining the country’s capacity to attract new investment, especially in vital industries like the semiconductor industry.” Lopez Obrador’s office did not respond to calls for comment for this article.the semiconductor boom could be at an end - tvj

Semiconductors, used in a variety of sectors including computers, communications, defense and vehicle manufacturing, hit the headlines during the COVID-19 outbreak when supplies collapsed, severely choking the industry worldwide. Unlike the United States, Mexico has not yet spelled out the incentives it would provide to businesses to help North America reduce its reliance on semiconductor hubs like Taiwan given the ongoing ambiguity in US-China ties.

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However, according to government data, gross fixed investment is still 11% lower than it was in mid-2018. Officials, business leaders and lawmakers agree that Mexico’s semiconductor industry would fail without improved energy infrastructure. The handling of energy companies in Mexico, as US Energy Secretary Jennifer Granholm previously warned in January, could hinder development. Democratic congressman and head of the US-Mexico anti-parliamentary group, Henry Cuellar, noted, “You can’t do something like that if you want to be a team player. “especially when you’re part of a supply chain in North America. Everything is connected.”

By the end of February, Mexico has promised to offer close incentives, and last week Economy Minister Raquel Buenrostro said a planned economic corridor in southern Mexico would turn into a hub for semiconductor investment. According to Minister Arechedera, states like Jalisco, home to a major Intel Corp plant, are providing their own incentives, including tax breaks and affordable land. According to executives, Mexico has been a major driving force behind cooperation in the semiconductor industry. During a trip to Washington in June 2021, Carlos Salazar, then head of the Mexican Business Coordination Council, presented Raymond with a proposal.

Following commitments to strengthen supply chains, Mexico hosted a conference focused on semiconductor investments in August 2022 with companies including Intel and Skyworks Solutions Inc., a major employer in the border city of Mexicali. The vice president of operations for Skyworks in Mexico, Josep Marce, urged the nation to seize the window of opportunity. Consequently, Mexico must continue to make sustainable investments in its water and energy infrastructure, he told Reuters, citing his customers’ commitment to fighting global warming.our restrictions on Chinese chipmaker smic could have been worse |  Barron's

While multinational corporations on the American side of the border, such as Taiwan Semiconductor Manufacturing Co. Ltd. and Intel, have announced billions of dollars in investment, Mexico has yet to unveil significant projects that could feed those factories. The leader of Mexico’s export industry organization Index, Luis Manuel Hernandez, said: “The United States thinks regionally, while Mexico still thinks as one country. “We have to make new choices if we want to sit at the big table.”

The energy-related issues erupted into a formal dispute with the United States and Canada in July, which claim that Mexico treats their firms unfairly. The Mexican government said Monday it wants the dispute resolved so businesses feel confident investing there. According to López Obrador, previous, dishonest administrations distorted the energy market in favor of corporate interests at the expense of the state. Federal energy policy has halted seven private renewable energy projects in Jalisco, five solar and two wind, totaling $1.1 billion in investment, according to the state energy agency.

Companies are taking notice, especially in the auto industry. Companies want to take advantage of the nation’s location and affordable labor costs, says Julian Eaves of CV Bearing, a Chinese-owned auto supplier in central Mexico. But to attract new customers, businesses need to show customers how they will reduce global emissions, a goal he says is hindered by government regulations. According to Eaves, CV’s head of operations and manufacturing for North America, “this could be Mexico’s golden age.” But it has not changed to adapt to market demands.

According to Francisco Fiorentini, executive vice president of industrial park development company PIMSA in Mexicali, foreign investment in the state of Baja California could increase by up to 45% if government policy had not limited the supply of electricity. In 2020, López Obrador canceled the nearly completed $1 billion Constellation Brands brewery in Mexicali after organizing a vote against it, claiming it threatened the city’s water supply. This act served as a message to investors.

To meet demand, Baja California and Chihuahua, two border states with close economic ties to the United States, lacked about 1.8 gigawatts of total electricity over the past three years, according to Indec’s Hernandez. According to Monica Diem, who until October oversaw initiatives at the economy ministry to attract investment, Mexico made progress by working with the academic community to speed up engineer training and analyzing where U.S. firms could convert factory floors to focus on assembly, packaging and testing. semiconductors.Taiwanese processor chipmaker to set up $3.5 billion US branch

Although the president would privately assure them that investing in Mexico is desirable, she argued that his repeated criticism of energy companies is causing public skepticism. Speaking recently to businessmen about semiconductor investment in the border city of Tijuana, Foreign Minister Marcelo Ebrard said Mexico needs to invest $50 billion to increase its renewable energy capacity by 2030.

edited and proofread by Nikita Sharma


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