Outsiders own most of industry in Mexico but 'home rule' grows

Electronic News, March 24, 1997 by Dick Bruner

Mexico's electronics industry is growing. But most of it consists of maquiladora assembly operations along the borders of Texas, California, and Arizona. A lot of them assemble televisions, PC monitors, and PC boards. A few put together automobile electronic components, telecommunication products, and even aircraft components. Only a few involve semiconductor production.

Nearly all of the industry is owned by outsiders--Japanese, Korean, Taiwanese, and American--or consists of joint ventures with Mexican firms. A few wholly-owned Mexican companies assemble PCs and televisions on a contract basis for foreign corporations.

Trade Show Draws

Gradually, Mexican ownership is growing. An indication is in the attendance figures for Mexitronica, an annual electronics conference held in Guadalajara, the country's second largest city. James Blankenhorn of SMT Plus, the conference organizer, said registration for the next conference, October 6-9, will be more than 400, twice last year's approximate 200. The conference consists of hands-on teaching workshops and delegates come from Guadalajara, Mexico City, Tijuana, Ciudad Juarez, and Mexicali, to learn such skills as 'rework-repair' and 'Designing SMT.'

The big-name electronic manufacturers and some of their key operations in Mexico include:

* Motorola, which has a thyristor fab in Guadalajara.

* IBM, which began making electric typewriters in Mexico in 1957. Today, IBM/Mexico is a $500 million company with 2,100 employees. It manufactures and exports PCs to 44 countries.

* Samsung, which opened a maquiladora plant in Tijuana across from San Diego in 1989.

* Olivetti, which began making typewriters in Mexico City in 1966. Today, it assembles PCs in Toluca.

* Philips, which has plants in Mexico City and Ciudad Juarez, across the border from El Paso, Texas.

* Panasonic, which has a manufacturing plant in Mexico City and a maquiladora plant in Tijuana, which assembles radio-cassette recorders, stereo systems and color TVs for the U.S. market.

* Sony, which came to Tijuana in 1985 under the maquiladora program.

* Honeywell, which makes sensors of all kinds in its plant in Ciudad Juarez.

* Hewlett-Packard, which began manufacturing in Guadalajara, Mexico's second largest city, in 1982.

Currently, HP makes paper-handling products for its laser jet printing line in Mexico. "When we first started,said a company spokesman, we were making line printers for bigger computer systems and that evolved overtime. We also had been doing some computer manufacturing. One operation does final assembly-type work for many of our PC operations. That final little push goes out the door making sure it's got the right manual, the right keyboard and this and that."

In semiconductor and related component areas, Mexico has Motorola's thyristor plant in Guadalajara. Texas Instruments has a fab in Aguascalientes, northwest of Mexico City, and Rockwell has a fab in Mexicali, across the border from Calexico, Calif. Both have substantial workforces--1,000 in Aguascalientes, 1,700 in Mexicali--and both serve the export market.

Obviously, a fab or two does not make a semiconductor industry. A big reason for the dearth of fabs is the lack of a Mexican market for semiconductors. What Mexico needs, according to Don Hutcherson, general director of TI activities in Mexico is "a disk drive industry or a motherboard industry." It has neither.

Stability Issues

Industry consensus has it that Mexico (and other Latin American countries) also lacks political or economic stability and a trained workforce. However, two American company representatives dispute those contentions. The HP spokesperson is bullish on Mexico. Although his company doesn't do much semiconductor manufacturing anywhere, since it builds only a small volume of semiconductors for its own use, he has strong opinions about Mexico as a site for U. S. industry. "HP has no problems in Mexico," he said. "One reason we're in Guadalajara is because we have strong ties to the university there. It has a very good program." Proximity to the university in Guadalajara is consistent with HP's policy around the world. In California, it is located near Stanford University. It also has facilities near the University of Colorado, Colorado State, Grenoble, France, and Dublin.

Although other manufacturers export Mexican-assembled products to the U. S. or Asia, HP exports from Guadalajara to Latin American markets. Its PCs have the biggest share of the Mexican market. "The same is true with printers," he said.

He thinks Latin America offers "tremendous growth potential. Throughout Latin America, markets are opening up. Telecommunications in Latin America, for example, needs a lot of computational power behind it. Plus instrumentation." He also sees the region's big populations as an opportunity. "The infrastructure is not as developed as it needs to be. In Brazil you see an emerging middle class. There are tremendous opportunities for companies like HP."

Upbeat On Workforce

Mr. Hutcherson, who came to Mexico in 1993, is also enthusiastic about the country and says its labor force can handle semiconductor manufacturing. "Mexico is a very cost-effective manufacturing place particularly in light of the work ethic of the Mexican workers and the quality we've been able to produce," he said. "I've worked in sites for TI around the world and I'd say Mexico has certainly got a competitive work ethic. The thing they suffer from is lack of exposure to and experience with the world global market. They're naive and a lot of that hard work is ineffective and inefficient. But, with time, training and development, that begins to be less of a problem."