How Mexico is Positioning to Benefit from the CHIPS Act?

Semiconductors are materials that can be transformed into electrical conductors when exposed to certain stimuli and are used in the production of a wide range of electronic and technological products. The majority of semiconductor production takes place in Asia, particularly in China and Taiwan. In the past, the United States and China engaged in a trade war over semiconductors, and the COVID-19 pandemic exacerbated the issue by disrupting supply chains and causing a semiconductor shortage. In response, the United States government passed the “Chips and Science Act” in an effort to reduce the country’s reliance on Asian semiconductor producers and strengthen its own semiconductor industry.

What’s in the CHIPS Act?

The CHIPS Act (Creating Helpful Incentives to Produce Semiconductors for America Act) is a US law that was signed by President Biden on August 9, 2022. The Act aims to reduce the US’s dependence on imports of semiconductors from Asia, particularly China, by providing incentives for semiconductor research, development, production, and workforce training in the US. The Act provides more than $52 billion in funding for these purposes, with the goal of positioning the US as a global leader in the semiconductor industry and strengthening the economy and national security.

The CHIPS Act is seen as a response to the challenges faced by the semiconductor industry in recent years, including supply chain disruptions caused by the Covid-19 pandemic and geopolitical tensions. By increasing domestic production, the US hopes to reduce its reliance on imports and improve the resilience of its supply chains.

The US Department of Commerce has identified four strategic goals for the CHIPS for America Fund:

  • Invest in U.S. production of strategically important semiconductor chips, particularly those using
    leading-edge technologies.
  • Assure a sufficient, sustainable, and secure supply of older and current generation chips for national security purposes and for critical manufacturing industries.
  • Strengthen U.S. semiconductor research and development (R&D) leadership to catalyze and capture
    the next set of critical technologies, applications, and industries.
  • Grow a diverse semiconductor workforce and build strong communities that participate in the prosperity of the semiconductor industry.

Semiconductor Companies in Mexico

  1. NXP Semiconductors Mexico
  2. BigBang Semiconductors
  3. Texas Instruments Incorporated Mexico
  4. Solantro Semiconductor
  5. Vishay Mexico
  6. Infineon Technologies Tijuana
  7. TE Connectivity Mexico
  8. Future Electronics Mexico
  9. Rutronik Mexico S.A. DE C.V.
  10. Avnet de Mexico SA de CV

CHIPS Act and Mexico

The US recently passed the CHIPS Act, which offers incentives for semiconductor research, development, production, and workforce training in an effort to lessen reliance on imports from Asia and establish the US as a global leader in the semiconductor industry. Mexico is hoping to benefit from this. Mexico sees this as an opportunity to draw investment into the semiconductor industry and help the US in its efforts to boost domestic production because it is the US’s largest trading partner and most reliable ally.

For semiconductor producers, Mexico has many benefits, including a talented labor population, proximity to the US market, and solid trade ties thanks to the USMCA. Through relationships with firms like Intel, the nation is also seeking to strengthen its supply chain, encourage innovation, and develop its talent in the area. Due to the CHIPS Act and other initiatives, it is anticipated that Mexico’s semiconductor industry would experience tremendous growth.

The US and Mexico have been collaborating through the Mexico-US High-Level Economic Dialogue in addition to the CHIPS Act to promote regional prosperity, increase and create employment, invest, and decrease inequality and poverty as top priorities. The CHIPS Act is an opportunity for the two nations to strengthen their supply chains and the semiconductor sector and allied businesses.

Mexico is taking steps to draw manufacturers to the nation and participate in the expansion of the semiconductor industry and is well-positioned to profit from US investment in the sector.