Energy Policy Hinders Mexico’s Opportunity for Semiconductors
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Energy Policy Hinders Mexico’s Opportunity for Semiconductors

Photo by:   Umberto - Unplash
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Eliza Galeana By Eliza Galeana | Junior Journalist & Industry Analyst - Wed, 12/14/2022 - 12:03

In September 2022, US Secretary of Commerce Gina Raimondo announced that the CHIPS and Science Act would create important opportunities for the Mexican industrial sector. However, Mexico’s over-reliance on fossil fuels and lack of financial incentives in energy policy could jeopardize this growth.

Semiconductors are used in many industries, including telecommunications, defense, automotive and computing, among others. During the COVID-19 pandemic, the supply of this technology was severely affected, causing serious delays in global manufacturing. To tackle this issue and reduce North America’s dependence on Taiwan’s semiconductor centers amid an uncertain US relationship with China, the CHIPS Act was born. 

The US Congress passed CHIPS in July 2022 with a budget of US$52.7 billion. The act aims to strengthen domestic semiconductor manufacturing, design and research, fortify the economy and national security, and reinforce the US’ chip supply chains. 

The country is building plants to make high-tech chips, the most expensive part of the semiconductor business. Meanwhile, Mexico is interested in stepping into the design, packaging and testing stages of the productive process. Nevertheless, to do so, the Mexican government must work hard to modify the negative image of the country’s electricity market, which is a result of President López Obrador’s campaign to prioritize fossil-fuel-dependent state energy companies CFE and PEMEX. 

These controversial policies are putting several foreign investment opportunities at stake. In the past months, authorities from different states, including Puebla and Jalisco, have complained about the situation. According to Jalisco’s energy agency, the state has seven private renewable power projects on hold, encompassing a total of US$1.1 billion.

At the beginning of 2022, US Secretary of Energy Jennifer Granholm warned that Mexico's treatment of foreign energy companies could hamper economic growth. "You cannot do stuff like that if you want to be a team player, especially in being part of a North American supply chain. It is all interrelated," said Henry Cuellar, a Democratic Congressman who chairs the US-Mexico Interparliamentary Group. 

Luis Hernandez, Head of the Mexican Manufacturing Export Industry Group Index, emphasized that Mexico needs to start thinking more like a region and less like a country. "If we want to sit at the big table, we need to make different decisions," he said. 

Mexico’s ongoing controversy with the US and Canada over alleged violations of energy policy under the USMCA treaty has now reached its third period of consultations. Most recently, the Mexican Minister of Economy, Raquel Buenrostro, presented a plan to resolve the disputes.

Photo by:   Umberto - Unplash

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