Mexico advised by the US to ramp up AI chip manufacturing in two years

Mexico must increase investment in the semiconductor sector in the coming two years to keep up with rival countries in the same industry. A USAID official in Mexico said the North American country must ensure that companies have enough water and energy to support their operations.

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Jene Thomas, Director of the Mission for USAID in Mexico, said the country is positioned to take part in the lower-cost region of the manufacturing chain. This also includes testing and assembly. States in central and northern Mexico are already manufacturing electronic components and are the best candidates for receiving new investment in the semiconductor sector in the short term, according to a report by Bloomberg.

Mexico is in competition with other states for AI chip manufacturing

US Secretary of State Antony Blinken met with associates from different countries, including Mexico. This was in an effort to push for Latin America to enhance its role in the semiconductor industry, which is a key player in the artificial intelligence boom. Thomas said,

“The competition is on — that’s what’s happening — and nearshoring isn’t just about Mexico.”

He spoke during an interview on Monday. He added that Panama and Costa Rica are also in close proximity to the United States and they also have similar business environments which makes them competitive in the AI and especially chip manufacturing sector. 

As the AI boom continues, Asian countries are better positioned to take advantage of the West’s interest in diversifying resources for AI chip supply. Thomas said this is why they keep talking about a time frame of two years, as other countries are also making quick progress.

The United States-Mexico Foundation for Science (FUMEC) and the US Agency for International Development outlined a plan for saving on semiconductors. It suggested that these states can save $30.94 billion that they spend on importing semiconductors mainly from Asia. 

Mexico can benefit from nearshoring

According to the roadmap, states bordering the US, such as Jalisco and Baja California, can participate in the broader process of chipmaking by designing basic and intermediate chips. However, production is expected to take place in the US.

Mexico has the potential for expansion in packaging, assembly, and testing procedures in the short term. FUMEC executive director Eugenio Marin said establishing these facilities requires an initial investment of between $2 million and $5 million per company.

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In recent times, the Biden administration has tried to increase chip manufacturing to compete with Chinese firms. Nearshoring has been promoted as a promising investment source in Mexico, according to the report. Nearshoring is the process of relocating manufacturing plants near the US consumer market to mitigate supply chain issues. 

Thomas mentioned that a portion of the US Chip Act’s funds for academic purposes can be used to train students and educators in Mexico. He said, “The money’s there,” and what’s remaining is that the governments must take action. He noted, “Semiconductors are one component of nearshoring.” He said more investments should be made in water and energy production.