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This article was originally published in Rest of World, which covers technology's impact outside the West.
In February, Mexican President Claudia Sheinbaum unveiled Kutsari Center, a national chip design hub – the first step in an ambitious plan to develop a homegrown semiconductor industry.
Dozens of scientists and researchers stood by the president as she described the “very important” project. The centre, due to open next year, is key to a semiconductor factory which could reduce the country's $24 billion annual spend on importing chips for its electronic and automotive industries.
“We want to stop being a country that assembles chips and become one that designs and makes them,” Edmundo Gutiérrez Domínguez, general coordinator of Mexico's national semiconductor plan, told Rest of World.
Mexico is not alone in its ambition: In the past five years, Malaysia and India have also drafted national strategies to ramp up their semiconductor design and manufacturing capabilities as they embrace artificial intelligence, and as the tech rivalry between China and the US deepens.
Mexico, Malaysia, and India are not aiming to compete with the state-of-the-art chips produced by leaders TSMC or Nvidia. Instead, their goal is more modest: to make legacy chips that require less investment, and which can be used in electronics and other applications.
Producing chips in the same country where electronics that use them are assembled or manufactured will help them move up the semiconductor supply chain, and become less dependent on expensive imports that are vulnerable to sudden policy shifts.
Some experts are sceptical about these efforts.
“The semiconductor industry [is] organised as a series of distinct yet interconnected sub-ecosystems,” Timothy J Sturgeon, senior researcher at MIT Industrial Performance Center, told Rest of World. “The notion of having a full semiconductor supply chain in any one nation is policymaker fantasy, based in ignorance of how complex digitally mediated industries actually work.”
Today, about 75% of the world's chips come from Taiwan and China, and 12% from the US.
Malaysia, the seventh largest exporter, is a major hub for assembly, packaging, and testing, with ambitions to boost its chip design and semiconductor equipment manufacturing. Tech giants including Intel, Infineon, and Texas Instruments have assembled their chips in the country for decades.
Malaysia's willingness to do business with both China and the US has made it “a sweet spot” for global semiconductor companies, Andrew Chan Yik Hong, executive director of the Malaysia Semiconductor Industry Association, told Rest of World.
Malaysia launched its National Semiconductor Strategy last year, aimed at attracting about $116.8 billion in investment by 2030. The plan is to nurture a sizable homegrown industry, including through companies such as Vitrox, an equipment manufacturer, and Inari, an assembly and testing company, Chan said.
“We want to create and help our local companies to be more international, and hopefully one or two of them can be global champions like TSMC of Taiwan,” said Chan.
Malaysia recently signed an agreement to pay ARM Holdings, a British semiconductor company, $250 million over 10 years to acquire its chip design blueprints, which are intended to create 10 local chip companies with yearly revenues of up to $2 billion. The agreement includes training for 10,000 local engineers.
But uncertainty over US tariffs has prompted chip companies in Malaysia to pause their investment plans.
Mexico's plan is also mired in uncertainty. As part of the North American semiconductor supply chain, the country mostly designs and assembles chips for TVs, appliances, and other electronics mainly destined for the US Companies including Qualcomm and Foxconn have assembly facilities in Mexico. The aim is to have local companies producing legacy chips by 2030.
For now, the country is home to just a handful of homegrown chip design companies, including Circuify and QSM Semiconductores. Circuify is headquartered in Guadalajara, in western Mexico. Its clientele is in the US. “Nationally, we don't have a market,” Rodrigo Jaramillo, CEO and head of chip design solutions at Circuify, told Rest of World.
In May, Mexico's secretary of economy, Marcelo Ebrard, said companies including IBM, Foxconn, and Qualcomm have committed to the semiconductor strategy. Mexico has research centers and some limited manufacturing facilities, but no outsourced semiconductor assembly and test (OSAT) facilities. The country also has no “fabs,” or fabrication plants – the highly specialised facilities where chips are made.
To build a semiconductor manufacturing facility, Mexico needs major investment and involvement from the government and private entities.
IBM declined to comment to Rest of World. Foxconn and Qualcomm did not respond to requests for comment regarding whether they were in talks with the Mexican government about the semiconductor project.
Though the Mexican government has not disclosed an estimate of the cost for the semiconductor plan, a state-of-the-art fab requires an initial investment of about $10 billion, Eugenio Marín, CEO of the Mexico-US Foundation for Science, a nonprofit, told Rest of World. OSATs tend to be less capital-intensive.
For Mexico and Malaysia, India is a cautionary tale: Government buy-in, billions in promised investments, and international partnerships have not been enough to get the country's fully integrated semiconductor industry off the ground.
In 2021, the government announced the India Semiconductor Mission – a $10-billion initiative to build a domestic chip manufacturing ecosystem. The mission was born out of the ashes: The country's first semiconductor programme burned down in 1989.
Major companies scrambled to secure government subsidies after the mission was launched, and a flurry of high-profile announcements promising the creation of at least 100,000 jobs followed. These quickly fell through.
A proposed $19.5 billion joint venture between metals and mining conglomerate Vedanta Resources and Foxconn fell apart in 2023 amid concerns about bureaucratic delays and costs. In April this year, billionaire Gautam Adani's company paused discussions with Israel's Tower Semiconductor on a $10-billion chip project because it “did not make strategic and commercial sense.” The following month, Indian software firm Zoho called off its pursuit of a $700-million plan to expand into chip manufacturing due to a lack of “confidence in the tech.”
For now, the only big project in the pipeline in India is a Tata Electronics chipmaking facility in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corporation, or PSMC, worth $11 billion. Construction is scheduled to begin this year, and the fab will have a manufacturing capacity of up to 50,000 wafers a month.
This time around, “policies are in place and global players are also joining, so there is a drive”, Eri Ikeda, an assistant professor in the department of management studies at the Indian Institute of Technology Delhi, told Rest of World, referring to partnerships with Foxconn, Powerchip, and Micron. The government must also double down on R&D and joint development of the projects, she said.
But for all their ambition and respective advantages, experts worry that Mexico, Malaysia, and India are short on specialised human talent.
Companies like Qualcomm often bring engineers from Malaysia or the Philippines to work at their Mexican facilities because there's not enough talent in Mexico, José Jáuregui, a professor of engineering and innovation at CETYS University in Mexico, told Rest of World.
Despite the government's claims that Mexican engineers can design a range of semiconductor technologies, “one of the biggest challenges in Mexico is that many qualified engineers don't speak technical English,” said Jáuregui.
Mexico needs a critical mass of 100 designers, but top public institutions like the National Polytechnic Institute have only about five designers graduating every year, according to Gutiérrez Domínguez.
Malaysia has a similar deficit of engineers. The country produces 5,000 engineering graduates a year, but its electrical and electronics sector requires about 10 times that number, according to the Ministry of Investment, Trade and Industry. Brain drain is a persistent issue, with many of Malaysia's top engineers seeking higher salaries and better career prospects abroad, including in Taiwan and the U.S.
Malaysia's semiconductor plan includes a $280 million investment to train and upskill 60,000 high-skilled engineers. But there is no guarantee they will stay, said Chan.
In India, several semiconductor companies “have provided consistent feedback regarding manufacturing and packaging talent unavailability”, Danish Faruqui, CEO of Fab Economics, a US-based fab and OSAT consultancy, told Rest of World. It limits India's ability to build and operate domestic semiconductor fabs and packaging plants, slowing progress toward self-sufficiency and undermining its ambitions in advanced electronics manufacturing.
In Mexico, Sheinbaum's February announcement was bittersweet for some scientists. Marco Antonio Ramírez Salinas, a researcher at the National Polytechnic Institute, had led a project in 2010 to develop the first-ever semiconductor fully designed in Mexico. The chips were eventually produced in Europe because of a lack of funding at home, he told Rest of World.
“We're quite hopeful about the [new] plan. If our students end up being part of it, it will be life-changing for them,” he said. “But so far, we haven't been formally invited to join.”
Daniela Dib is a freelance journalist based in Mexico City covering business and technology in Latin America. She was previously a Rest of World reporter.
Lam Le is freelance a reporter covering Southeast Asia's tech industry, based in Hanoi, Vietnam.
Yashraj Sharma is a reporter based in India.
This article was originally published in Rest of World, which covers technology's impact outside the West.
Source: Scroll
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