Several investors from the United States and Mexico have shown interest in promoting a boom in the semiconductor industry in Mexico, reported Luis Rosendo Gutiérrez, Undersecretary of Foreign Trade of the Ministry of Economy.
“I was at a semiconductor forum in Ciudad Juárez and there is a great appetite from American and Mexican investors to make a chip boom in Mexico,” he said.
The forum was held last Wednesday with the objective of presenting a plan for the semiconductor industry, which was developed jointly by the United States Embassy in Mexico and the National Chamber of the Electronics, Telecommunications and Information Technology Industry (Canieti).
Interviewed by El Economista, Eugenio Marín, executive director of the Mexico-United States Foundation for Science (FUMEC), specified that the areas of opportunity for investment in Mexico are in Design, Assembly, Packaging and Validation (ATP), in the supply of inputs and components for these productions and in the supply of inputs required by wafer factories installed in the United States.
“We are currently designing with the Ministry of Finance an incentive program very much in the style of what was done in the United States in the Inflation Act and the CHIPS Act to support the semiconductor chip industry in our country and support these high-tech industries,” added Gutiérrez, participating in the XXX Mexican Foreign Trade Congress, organized by the Mexican Council for Foreign Trade, Investment and Technology (Comce).
As part of the CHIPS and Science Act grants, enacted in August 2022, the Department of Commerce is responsible for administering $38.22 billion in direct funding for semiconductor manufacturing incentives, including $500 million for seven countries outside the United States, including Mexico.
A portion of these funds (up to $6 billion) will be used to subsidize direct loans or loan guarantees totaling up to $75 billion.
The U.S. Department of Commerce expects the total amount of incentives awarded for a project (including grants, loans, and loan guarantees) to represent less than 35% of total capital expenditures.
While direct grants must represent between 5 and 15% of total project costs, individual projects cannot receive more than $3 billion in federal investments without certification by the President to Congress.
In addition, Section 107 of the CHIPS Act creates a new tax credit, the Advanced Manufacturing Investment Credit (AMIC), which will be administered by the Internal Revenue Service.
The AMIC is equal to 25% of the value of qualified investments in buildings and other depreciable tangible assets eligible for advanced manufacturing facilities whose primary purpose is the manufacture of semiconductors or semiconductor manufacturing equipment.
Marín explained that Mexico needs to analyze how to grant specific incentives to the semiconductor sector, considering the formats, competition with direct competitor countries, and the size of the investments.
“In these niches, investments are not in the billions of dollars, they are much smaller, and that is what needs to be studied well to find the balance with respect to the nations with which Mexico competes,” he said.
The Inflation Reduction Act, also for 2022, allocates some $380 billion to tax incentives and other support related to clean energy and climate change. It includes incentives for the production of diodes, transistors, and similar semiconductor devices; photosensitive semiconductor devices; and light-emitting diodes.
There is an urgent need to balance: Economy
In its 2024-2030 Work Plan, presented a few days ago, the Ministry of Economy diagnosed the urgency for Mexico to increase incentives to attract more investments in sectors such as advanced manufacturing.
“The Ministry of Economy is working on the 2025 Investment Portfolio to create a pipeline (structured process) for monitoring and landing investments in our country,” states a presentation of the Work Plan.
To do this, it adds that coordination with various ministries will be needed. “It is urgent to reduce the disadvantage represented by the Law for the Reduction of Inflation by the United States and the Stimulus Package Implemented by Canada,” it urges.
Mexico grants key export sectors an immediate deduction for new fixed assets acquired from October 12, 2023, through December 31, 2024, with deduction percentages ranging from 56 to 89%, and an additional 25% deduction over three years for job training expenses.
Incentives granted by the US to the chip industry
The CHIPS and Science Act allocated more than $50 billion to the Department of Commerce’s CHIPS for America program, both for R&D and to expand semiconductor manufacturing capacity in the United States.
As part of the CHIPS and Science Act support, the Department of Commerce is responsible for administering the $38.22 billion in direct funds available for semiconductor manufacturing incentives.
The CHIPS Act of 2022 created the ITSI Fund, which provides the Department of State with $500 million ($100 million per year for five years, beginning in fiscal year 2023).
The ITSI Fund seeks to ensure semiconductor security and supply chain diversification through new programs and initiatives with seven U.S. partner and ally countries, including Mexico.
A portion of the CHIPS Act funds (up to $6 billion) will be used to subsidize direct loans or loan guarantees totaling up to $75 billion.
The Inflation Reduction Act of 2022 allocates about $380 billion for tax incentives and other support related to clean energy and climate change.
Source: eleconomista
