Recent events have revealed the vulnerability of global supply chains. A global pandemic, geographically concentrated production, and growing political tensions in Asia have made supply chains diversity a priority for the U.S. government and large industrial firms that outsource much of their production.
In this context, no sector is more critical than semiconductors— the technological marvels commonly called microchips— which are central components in vehicles, airplanes, consumer electronics, home appliances, and many other everyday products.
Dexis is collaborating with Mexican state governments and industry partners to build the local capabilities needed to protect North American semiconductor production from costly and potentially catastrophic interruptions.
The COVID-19 pandemic, Houthi maritime attacks in the Red Sea, and the threat of conflict between China and Taiwan have diverse origins. However, they share the ability to significantly and rapidly reduce the availability of semiconductors. Increased prices of microchips, or worse, a halt in their supply, can cost mature industries tens or even hundreds of billions of dollars. Nearshoring—locating production closer to home—promises not only to insulate regional industrial production, but also to bolster technological know-how and well-paid jobs throughout North America.
Microchips are found in almost all modern electronic devices, from computers and smartphones to appliances and automotive systems, enabling these devices to operate efficiently and perform complex tasks.
In pursuit of these geopolitical and economic goals, policymakers and industry leaders are working to build supply chains that are less reliant on components manufactured halfway around the globe. In 2022, Congress passed the CHIPS and Science Act, allocating public sector resources to make and leverage investments that increase all major activities required for semiconductor production in the United States and its neighbors.
Building Mexico’s technical capacity to strengthen a regional semiconductor supply chain will bring major benefits to North America in general, and to economically dynamic Mexican states in particular. Given its proximity to the U.S., low-cost transportation, a 30-year-old free trade agreement, a young and talented workforce, and world-class industrial prowess in sectors ranging from autos to TV screens, Mexico is exceptionally well-positioned to become a key partner in U.S. semiconductor nearshoring.
Yet success will not be automatic and cannot be taken for granted. Much work needs to be done to achieve this goal. Mexican states and companies must improve governance and make investments to increase their readiness to expand, and in some cases, begin their role in semiconductor production. To support this process, Dexis partnered with the U.S.-Mexico Foundation for Science (FUMEC) under the USAID-funded ProIntegridad Activity to develop a roadmap with practical and operationally specific recommendations for developing a Mexican semiconductor strategy. The roadmap provides guidance for actions that include:
- Upgrading infrastructure: Mexico currently has few advanced technological facilities to process or produce semiconductors, such as cleanrooms and testing labs. These facilities also require reliable energy and water services, making infrastructure investment an immediate priority.
- Building a skilled workforce: Although Mexico produces a large supply of engineers through its extensive network of universities, most lack the specific skillsets needed in the semiconductor sector. Additionally, the participation of women in this critical technical cohort is very low, further limiting the talent pool. The public sector and higher education institutions must collaborate with tech firms to generate the required expertise at scale.
- Connecting Mexican SMEs to U.S. venture capital: Established Mexican companies and startups in the semiconductor sector require technical and managerial support to be considered good prospects by American VC firms.
- Removing regulatory barriers: Mexican states must demonstrate political commitment to streamline local regulations to avoid unnecessary costs and bottlenecks that discourage semiconductor firms from investing.
- Reinforcing Mexican firms’ integrity and due diligence standards: Integrated supply chains mitigate risk from suppliers at every level and size. Mexican firms seeking to partner with U.S. semiconductor heavyweights must meet their integrity and due diligence standards. They will need to adopt strong anti-corruption, IP protection, and information management protocols to generate the trust required to become integrated into high-tech processes.
Based on reliable data about existing installed capacity, workforce talent, and infrastructure, the supply chain roadmap created by Dexis and FUMEC identifies twelve out of Mexico’s 32 states that can reasonably aspire to begin or expand their role in North America’s semiconductor supply chain. With sustained political commitment, paired with continued technical support and investment, members of this select group will position Mexico as a major player in this all-important economic sector.
The research report, published by Dexis partner FUMEC with USAID funding, can be found here: www.fumec.org/semiconductors.
Tim Kessler
Tim Kessler is the Chief of Party of the USAID ProIntegridad activity. He has led four flagship USAID-financed projects over the past 18 years.
Sebastián Albuja
Sebastián Albuja is a Senior Technical Director with Dexis’ governance practice. He leads Dexis’ projects in El Salvador, Guatemala, and Mexico.
