High-tech park to woo firms
By Terril Yue Jones and Marla Dickerson
Los Angeles Times
SAN FRANCISCO — American investors and Mexican officials unveiled an ambitious plan yesterday for an industrial park on the California-Mexico border to entice computer chip companies to build multibillion-dollar factories there instead of exporting production to Asia.
State-of-the-art factories on the 15-square-mile site in Mexicali, Mexico, about 120 miles east of San Diego, could create as many as 100,000 high-tech jobs in 10 years, said Daniel Hill, chairman of Silicon Border Development, the private company that intends to build the park.
To lure would-be tenants, Mexican President Vicente Fox has agreed to waive taxes for 10 years for companies that move to the park, and the federal and state governments will offer other financial incentives and assistance, Hill said.
Silicon Border Development plans to spend $300 million to $400 million to build the park in Mexicali, the state capital of Baja California.
Construction is expected to begin in early 2005 after the purchase of the land is finalized, said Ron Jones, Silicon Border's chief executive.
Jones said the money would come from "industrial investors" whom he declined to identify.
"We see no reason that operations can't be set up in Mexico and have all the cost advantages of Asian countries and compete equally or even better than them," said Jones, who spent 12 years in South Korea and Thailand working with companies including Texas Instruments Inc.
Asia is the fastest-growing region for semiconductor fabrication plants, or "fabs," which typically cost $2 billion or more to build.
Taiwan and China dominate the fab market in Asia; Malaysia, Singapore and South Korea also have chip plants. Virtually every circuit board built today contains chips from Asia.
"We've watched how everything's moving in that direction, and we were worried it may be going too far," Hill said at a news conference at Semicon West, a semiconductor manufacturing trade show here.
"Semiconductor companies and their customers are increasingly concerned over growing dependence on China," said Hill, a veteran of National Semiconductor Corp. who spent eight years in Malaysia.
With constant military tension between China and Taiwan, and North and South Korea, "any issue over there could bring the chip industry to a halt," Hill said.
Silicon Border Development hasn't sign up any tenants, though it says it is close to finalizing a couple of deals.
Tech companies were once eager to manufacture in Mexico. Hewlett-Packard Co., Lucent Technologies Inc., Solectron Corp. and others opened plants in Jalisco state in the 1990s, but they have since closed or downsized their operations in response to an industrywide production overcapacity created by the recession in the United States and elsewhere.
Chalmers Johnson, a retired professor at the University of California, San Diego, who has closely studied Japanese investment in Mexico, said he was puzzled at the idea of trying to lure tech companies back.
"If you want to invest in Mexico, why go to Baja?" Johnson said. "Taiwan is easily the most important place on earth for computer chips."
But backers of the project said the border region has advantages, including a work force of 750,000 in Mexicali and another 142,000 in neighboring Imperial County in California. Mexicali also boasts a reliable water supply.
What's more, Mexico has 11 free-trade agreements with Latin American countries and the European Union, and is finalizing one with Japan, said Mexican Minister of Economy Fernando Canales Clariond.
"The industry is growing," Canales said. "Markets are starving for new products, and we want to be a part of it."
The hope is to attract not only the semiconductor fabs, but the entire supply chain of chip manufacturing — from silicon wafer producers, to facilities where wafers are cut up into chips and tested, to plants where microprocessors are installed on circuit boards.
A high-tech injection south of the border would be welcome news for Mexico's hard-hit "maquiladora" export factory sector, which was hammered by the slowdown in the U.S. economy. The sector shed more than a quarter-million workers or nearly 18 percent of its job base between 2000 and 2003.
Jones reported from San Francisco and Dickerson reported from Mexico City.
