Silicon Valley has apparently moved south where housing costs are cheap
and engineers are cheaper.
According to recent research
from Technology Forecasters Inc. in Alameda, CA, Guadalajara has become a hot
spot for manufacturing and engineering services in the electronics industry.
Apparently, many American companies would rather outsource a couple hours south
rather than halfway across the world.
"They say Guadalajara has become
Mexico's Silicon Valley. That's because so much engineering has grown in the
area," says Eric Miscoll, senior consultant at Technology Forecasters.
"Freescale Semiconductors alone has hundreds of engineers in
According to the Secretaria de Economia of Mexico, there
are 700 companies with manufacturing in Guadalajara. They include among them
IBM, HP, Flextronics, Solectron and Benchmark.
That's in part because the Mexican
government has invested heavily in R&D and design engineering in an attempt
to move up the value chain in electronics manufacturing. Further, the government
offers a 30 percent new tax credit for companies that spend on engineering and
Emphasis on Engineering
The emphasis on engineering is paying off in the Guadalajara area. GE Engines has 600 engineers working there, and first-tier automotive supplier, Delphi, has 2,200 engineers working on projects in the area.
In the past, most engineering in Mexico was related to manufacturing. In the last three years, however, there has been a shift to design engineering.
"In Mexico, it used to be all production process engineering, but now it's product design capabilities," Miscoll says. He notes that Mexico has gained a strong reputation for its engineering talent. "They've grown up the food chain," Miscoll says. "Siemens' VDO division sent a couple engineers from Mexico to its Detroit facilities, and the engineering team in Detroit said, 'Send us more of these guys!'"
Miscoll notes that it took a few years for U.S. manufacturers to get accustomed to the idea that Mexico is a source for design engineers. "The talent was there, but they didn't have the ability to show off their talent," Miscoll says, adding that the word got out from the EMS providers that Mexico was developing a strong engineering base. "It grew when the EMS providers recognized that Mexico was developing good engineering schools and good engineers."
Guadalajara 'Graduates' to High Tech
Due to favorable labor costs, Mexico is an attractive place for some U.S. companies to relocate manufacturing and engineering centers.
Technology Forecasters Inc. estimates that Mexico is now graduating the same number of engineers as the U.S. Plus, there is a lot of cooperation between industry and the engineering schools in Mexico. The engineers in Mexico come at a significant savings. The labor rate for engineering services in Mexico is $15 to $20 per hour for light jobs, compared with the typical rate of $70 per hour for the equivalent work in the U.S.
Guadalajara has become the center of engineering development in Mexico, with 12 global OEMs on hand, 16 EMS providers, and 24 design centers. The area is also home to the Mexico Center for Semiconductor Technology, renowned for its leading-edge IC technology. On the software side, Mexico is strong in middleware because of the many legacy systems that are already installed there that need to be connected to emerging technology.
According to Miscoll, the rapid developments in the Guadalajara areas of Mexico are giving U.S. engineers pause. "I know an engineer who has been in the electronics industry in the U.S. for 40 years," Miscoll says. "His son said he wanted to go into engineering in the electronics industry. He told his son not to. That's how concerned U.S. engineers are about Mexico."
Reach Contributing Editor Rob Spiegel at firstname.lastname@example.org.
|Design Moves to Mexico
Forecast Employment 2005
|ST Microelectronics: Guadalajara Design Center
||20 people US$3,000/mo
||99 people end of 2005 US$4,500/mo
|Freescale: Mexico Center for Semiconductor Tech
||35 people US$5,000/mo
||45 people 2005, 90 in 2009 US$5,000/mo
|Intel: Platform Technology Lab
||6 people (Ph.D.) US$6,000/mo
||20 people end of 2005 US$6,000/mo
|HP: Paper Handling Solutions/Future Products
||155 people US$4,500/mo
||300 people end of 2005 US$5,000/mo