Mexico looks to attract chip makers with incentives

The state of Baja California in Mexico has signed a deal with Silicon Border Development LLC of Rancho Santa Fe, California, to establish a 10,000-acre industrial park in Mexicali, Mexico, for semiconductor manufacturing that hopes to lure chip makers with tax breaks and other incentives, the company announced Wednesday.

To lure chip makers to the park, the Mexican government has assembled a series of incentives that are meant to rival those offered in Asian countries, Silicon Border said in a statement. Those incentives, which were first presented to companies in April, include tax-free periods for companies that invest $2 billion or more in chip-making plants and asset deductions for chip-making facilities and equipment, it said.

Whether the plan to build a chip-making center in Mexicali will be successful remains to be seen. Mexico does not have a domestic semiconductor manufacturing industry like Taiwan, which has built its Hsinchu Science Park into a global center for chip manufacturing. Instead, the Silicon Border project is relying on financial incentives, a large domestic market in Mexico and the North American Free Trade Agreement (NAFTA) and free trade agreements with 32 countries to attract chip makers to Mexicali as an alternative to other sites in North America, according to the statement.

Silicon Border hopes that establishing chip-making plants at the park will attract other semiconductor-related operations, such as test and assembly plants and contract manufacturing operations, it said. Down the road, Silicon Border hopes this will attract companies in biotechnology, telecommunications and precision-machinery manufacturing to the park, eventually creating 100,000 jobs, it said.