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On July 22, Bloomberg reported that Jene Thomas, director of the U.S. Agency for International Development (USAID) in Mexico, said that Mexico must expand its investment in the semiconductor industry in the next two years, while ensuring that companies are provided with sufficient water and energy supplies to avoid losing its advantage in competition among countries.

USAID/Mexico's Country Development Cooperation Strategy (CDCS) USAID official website

Thomas said northern and central Mexico already has electronics manufacturing and is best suited to new semiconductor investment in the short term, while Mexico also has the ability to participate in the lower-cost parts of the production chain, including testing and assembly.

On July 17, U.S. Secretary of State Blinken met with foreign ministers from various countries, including Mexico, to discuss promoting Latin America to strengthen its role in the chip industry.

In recent years, as the game between major powers intensifies and geopolitical conflicts frequently occur, the United States has set off a "countercurrent" of globalization. Under the pretext of "resolving the vulnerability of the supply chain", it encourages companies to outsource their business to neighboring countries or regions with similar geography, time zones, and languages, that is, to replace "offshore outsourcing" with "nearshore outsourcing". As a neighbor of the United States, Mexico has ushered in unprecedented development opportunities.

Data from the U.S. Department of Commerce showed that in 2023, the total value of U.S. imports from Mexico increased by 5% year-on-year to $475 billion. At the same time, the total value of U.S. imports from China fell by about 20% to $427 billion. For the first time in more than 20 years, Mexico surpassed China to become the largest source of U.S. imports.

“The competition has begun, it’s happening, and nearshoring is not just about Mexico — Costa Rica and Panama are also close to the U.S. and have similar foundations and experience, and are also competitive in this market,” Thomas said in an interview in Mexico City on July 22.

In addition, Asian countries are also actively taking advantage of global interests to diversify supply sources. "That's why we keep saying it will take two years - because we see countries moving very quickly," Thomas explained.

According to the plan proposed by USAID and the U.S.-Mexico Science Foundation (FUMEC), Mexican states could reduce the amount of semiconductors imported, mainly from Asia, by $30.94 billion compared to 2022. Although output will still be concentrated in the United States, states such as California and Jalisco can expand their participation in processes such as basic and mid-level chip design.

FUMEC CEO Eugenio Marin said that establishing packaging, assembly and testing processes in Mexico, which have room for growth in the short term, is expected to cost each company between $2 million and $5 million.

In recent years, President Biden's administration has been seeking to expand chip manufacturing while competing with Chinese companies, and Mexico has become a top choice for near-shoring investment. Thomas said that part of the funds provided by the US CHIPS Act for academic programs could be used to train students and scholars in Mexico.

“The money is there, we just need to see governments put it into action, which is why we already have six states that have made great progress in creating an enabling environment,” Thomas said. “Semiconductors are part of nearshoring. So we need to see states and cities invest more in water supply and energy production. Fortunately, Mexico has a lot of sunshine, so there are a lot of opportunities.”

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