Border factories could hold long-term fix for volatile semiconductor market

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El Paso-Juarez business leaders push to bring "smart chip" production to region, thus stemming future shortages, logistical and political challenges

EL PASO, Texas (Border Report) – A worldwide semiconductor shortage hasn’t disrupted foreign manufacturing operations in Juarez yet.

However, the Mexican city south of the border from El Paso, Texas, has the potential to become an important manufacturer of these chips that nowadays regulate everything from cellphones to electric cars, border industry leaders say.

“Most maquiladoras here cater to the automotive industry, and most new cars increasingly have computer functions and electronic components,” said Thor Salayandia, president of the Juarez Chamber of Industry and Manufacturing. “Most of the (semiconductor) chips come from Asia now, but we have the know-how, the (engineers) and the facilities to make this happen. It’s just a matter of the automakers having the will to expand into this opportunity.”

The know-how comes from the tens of thousands of Juarez engineers and skilled labor that produce circuit boards and other electronic components for television, laptop, tablet and cellphone manufacturers in the United States and Europe, he said.

The semiconductor shortage this week prompted Ford to halt production in six plants and estimated the loses of $1 billion to $2.5 billion if chips remain scarce through next year. Japan’s Nissan Motor Company announced stoppages at two plants in the U.S. and one in Aguascalientes, Mexico due to the shortage, and Volkswagen idled a plant in Puebla, Mexico for two days, trade magazines reported.

Joe Biden
President Joe Biden participates virtually in the CEO Summit on Semiconductor and Supply Chain Resilience in the White House. (AP Photo)

President Joe Biden on Wednesday signed an executive order that addresses the semiconductor chip shortage. “I’m directing senior officials in my administration to work with industrial leaders to identify solutions to the semiconductor shortfall. Congress has authorized a bill but they need … $37 billion to make sure that we have this capacity. I’ll push for that as well,” the president told reporters in Washington, D.C.

Measures aimed at boosting chip manufacturing capacity were included in the National Defense Authorization Act but require a separate appropriations process.

A prolonged semiconductor chip shortage will affect virtually every consumer product across the globe, said Jon Barela, CEO of the Borderplex Alliance, an El Paso-based economic development nonprofit.

“Semiconductors are a strategic national asset. It’s important for us for north America to consolidate supply chains of semiconductor production,” Barela said. “Our region would be a great place to install a manufacturing facility for this commodity and we are working hard to try to get it here.”

Jon Barela, CEO Borderplex Alliance (photo from Zoom)

Barela explained the shortage has to do with natural disasters such as COVID-19 outbreaks, a high demand for electronic communications equipment during the pandemic and trade tensions between the U.S. and China.

“The Borderplex is the perfect region to place a large semiconductor factory or factories. […] We have easy access to North American and global markets here, we have the U.S.-Mexico-Canada agreement and we don’t have trade tensions,” he said. “It’s important for us to realize (semiconductors) are a strategic asset and consolidate supplies in North America so we have a reliable, predictable inventory of this important commodity.”

Salayandia in Juarez said the impetus for turning the U.S.-Mexico border region into a generator of semiconductors for North America must come from industry, have the support of governments and the interest of investors.

Once that comes together, Barela in El Paso estimates it can take up to two years to plan and build production facilities and support services.

That may not come in time to alleviate the current crisis, but could help prevent future shortages.

“They two-year process can certainly be started soon enough,” Barela said.

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