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Offering Tech an Alternative in Mexico

Developer Silicon Border hopes a planned industrial park in Mexicali will vie with Asian locales. Finding tenants may be tough.

June 22, 2005|Claire Hoffman | Times Staff Writer

A private development firm is expected to break ground today in Mexicali, Mexico, on a proposed industrial park that the developers hope will lure technology companies from Asia with tax incentives and government grants.

The 15-square-mile site is just south of the U.S.-Mexico border, 120 miles east of San Diego.

Silicon Border Development plans to spend $425 million on infrastructure for the site, including utilities, roads and water and sewer lines. But so far, only about $5 million has been raised. No tenants have been announced for the park, and without a commitment from a major manufacturer, there are questions about the viability of the project.

"I wish them the best of luck, but I honestly don't think it's going to fly," said Bob Johnson, a semiconductor industry analyst at Gartner Proquest, an industry research group. Semiconductor fabrication plants can cost $2 billion or more to build, and persuading manufacturers to make that large of an investment in Mexico could be tough, he said.

Still, Silicon Border Development, which first announced plans for the Mexicali industrial park a year ago, is making progress. In addition to securing 10,000 acres for the park, the company has hired a contractor to begin work on the infrastructure. It also said it has gotten a commitment from the Mexican government to provide tax breaks that will apply to companies within the tech industry.

The project's backers say the location of the proposed park is a primary selling point. They contend that some chip companies and their customers are concerned that the industry has become too dependent on imports from Asia, which analysts estimate will soon have more than half the global manufacturing capacity for semiconductors.

"We provide an alternative with Asian prices, with Asian incentives, right in your backyard," said DJ Hill, chairman of Silicon Border Development, which is based in Mexicali.

"Geography is important, even though we are in the age of the Internet," said George Burns, whose market research company has tracked the construction of semiconductor manufacturing plants for more than a decade.

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