Mexico bets on semiconductors with new tax incentives

Mexico seeks to close the gap with the United States in terms of tax incentives and support for the semiconductor industry, with the goal of becoming a key player in the global chip supply chain.

Mexico is preparing to improve tax incentives and attract investment in the semiconductor industry, a sector that has attracted great interest from both domestic and international investors. 

Luis Rosendo Gutiérrez, Undersecretary of Foreign Trade, stated that the semiconductor industry in Mexico has the potential to generate a significant boom, especially after the recent semiconductor forum in Ciudad Juárez, where the interest in boosting this strategic area for the economy was expressed.

The forum, jointly organized by the U.S. Embassy and the National Chamber of the Electronics, Telecommunications and Information Technology Industry (Canieti), underscored the need for Mexico to develop a plan to attract investment through appropriate tax incentives.

The growing interest in the semiconductor industry in Mexico is due in large part to its geographic proximity to the United States and the cooperative framework offered by treaties such as the T-MEC, which facilitate the integration of supply chains. 

Although Mexico has important strengths such as a strategic location and competitive manufacturing costs, it also faces significant challenges. Eugenio Marín, executive director of the United States-Mexico Foundation for Science (FUMEC), pointed out that although the country has areas of opportunity in assembly, packaging, validation and input supply, it will be essential to design incentives that compete with those of other countries, whose investments in this sector are considerably higher.

Undersecretary Gutiérrez mentioned that Mexico is already working on an incentive program similar to that of the United States, based on the CHIPS Act and the Inflation Reduction Act, in order to make investment in advanced technology more attractive. This initiative aims to shorten the disadvantage Mexico has compared to countries such as the United States and Canada, which have implemented massive fiscal stimulus programs for technology industries. While the United States has allocated more than 50 billion dollars to its CHIPS for America program, Mexico needs to balance its fiscal incentives to remain competitive.

Despite these advances, Mexico must also confront certain structural weaknesses. The country's technological infrastructure, although growing, is not yet fully developed to support such a high-tech industry as the semiconductor industry.

The innovation ecosystem, which includes linkages between universities, research centers and private companies, still requires consolidation. In addition, competition to attract investment in this sector is fierce, with countries offering more robust incentives and more advanced business environments.

On the other hand, the current juncture offers unique opportunities for Mexico, particularly in the context of the nearshoring. The trade tension between the United States and China has led many companies to seek to diversify their supply chains, and Mexico, due to its geographic proximity, can position itself as a strategic partner for the United States in semiconductor manufacturing. In addition, the CHIPS Act's focus on diversifying semiconductor supply sources opens a window for Mexico to consolidate its position as a key supplier in this sector, not only in assembly and packaging, but also in chip design and development.

Global competition in attracting semiconductor investment is intense, and countries such as South Korea, Taiwan and Singapore have made significant progress in creating technology ecosystems and offering aggressive tax incentives.

Mexico will need to quickly adjust its regulatory and fiscal framework to avoid falling behind. In addition, the lack of a clear and coherent industrial policy could delay the attraction of significant investment in this sector, leaving the country at a disadvantage compared to nations that have already developed solid strategies to attract technological investment.

The Ministry of Economy has diagnosed this situation as urgent and is working on its Investment Portfolio 2025, where it seeks to develop a pipeline structured to attract and land investments in advanced manufacturing.

This effort will require close coordination among various ministries to address the current disadvantages of the U.S. Inflation Reduction Act and Canada's stimulus package.

Mexico has the capacity to play a crucial role in the global semiconductor supply chain, but it will need to act quickly to improve its competitiveness. The key will be to design tax incentives that balance investment needs with the Mexican government's ability to provide support.

The country will need to foster an environment that allows technology companies to thrive, thus ensuring their integration into an industry of vital importance to the 21st century economy. The window of opportunity is open, but the speed and effectiveness with which Mexico responds will determine whether it manages to position itself as a relevant player in the global semiconductor industry or whether it will lag behind other countries that are already further along this path.

Collaboration: Editorial Auge.