Mexico: An Ally in Redesigning Global Microchip Supply Chains

Some of the most important lessons learned from the global microchip shortage that affected 169 industries and caused multi-million-dollar losses are that today’s global supply chains are more complex, interdependent, and precarious than ever and that there are no easy or fast solutions to fixing them. In retrospect, it has become clear that an over-dependence on a specific region and a lack of long-term investment in developing the human and industrial capacities required to manufacture the technology that plays an increasingly important role in a range of products used in our everyday lives are the root causes of this problem.

In light of these lessons, it has become clear that to find long-term solutions, governments must work closely with industry and academia to create more efficient, agile, and resilient supply chains. At the same time, strategies like diversification and nearshoring will allow for more transparency in supply chains and help reduce dependence on a single region or supplier.

Given the fact that it takes two to three years to build new semiconductor factories and that even adding just 5-10% more capacity to existing ones can take up to a year and cost 40 million dollars, governments in Europe and the United States are making long terms plans to prevent and prepare for future crises. For various reasons, Mexico is an essential ally in this strategy.

The country’s strategic geographic location as the United States’ southern neighbor and ease of logistics with Canada, Europe, and Latin America makes it ideal for nearshoring. Recently, Mexico has been invited to talks in the United States regarding a new law passed that will provide 28 million dollars in incentives for the production of semiconductors, 10 million for the new manufacture of chips, and 11 million for research and development.

Officials from state governments in Mexico have also held meetings with stakeholders in the United States to discuss these areas of opportunity for both countries, highlighting the many reasons Mexico is the perfect ally in creating these long-term solutions. By working together, the nations will facilitate increased agility and communication between all the links in the supply chain to allow them to adapt more quickly to changing markets and unforeseen global events in the future.

For example, states like Chihuahua, Guanajuato, Jalisco, and Queretaro have used a triple helix model for decades, which includes the cooperation of government, industry, and academia to solve industry’s most significant issues together. Part of their efforts include a program by the Ministry of the Economy to implement and strengthen an Industry 4.0 program that focuses on developing human capital and identifying high-priority technology areas, including big data, IoT, cybersecurity, and robotics, creating a legal framework for the digital economy, and establishing technological development centers. In addition, it includes other transversal initiatives being carried out through public and private coordination, such as innovation clusters, with Mexico’s automotive industry leading the way, which is also highly dependent on microprocessors.

Governments and industry worldwide continue to develop the paradigms, technologies, and processes that will prevent future crises in supply chains using lessons learned and increasing cooperation across borders and industries to avoid supply chain problems before they arise.