By Mary Jordan
Washington Post Foreign Service

MEXICO CITY -- As soon as next year, Mexico plans to break ground on a 15-square-mile science park in Mexicali, just south of the U.S. border, Mexican officials said. Called "Silicon Border," the project is the brainchild of U.S. entrepreneurs who say Asia is attracting too much of the critical semiconductor industry and who want to keep more of it in North America.

"Asia has not just taken manufacturing, but technology, too, and a lot of people recognize that we need to do something about this," said D.J. Hill, chairman of the project, which has the support of Mexican President Vicente Fox. Hill said the park's infrastructure will cost at least $400 million. "We are not going to turn the tide" with a new high-tech park 100 miles southeast of San Diego, he said, "but we will take some of it to North America."

Hill said his development company has signed agreements to purchase 6,000 of the park's planned 10,000 acres and is in negotiations for the final parcels. The plans call for Silicon Border to open in phases, and Hill said it may take as long as 20 years to build completely.

Information technology and the latest electronic gadgets are driven by advances in semiconductor technology, a main focus of the science park.

Because the U.S. economy depends so much on electronics, Hill said he believes it is unwise to let semiconductor manufacturing transfer to Asia unchallenged. Pioneered in Silicon Valley, Calif., an area that served as a hub of research into using wafer-thin silicon chips as the brains of computers and other machines, the semiconductor industry has been migrating to high-tech plants in Asia.

George Scalise, the president of the Semiconductor Industry Association, estimated that about half the world's semiconductors are made in Asia, even though half the revenue goes to U.S. companies. The semiconductor market worldwide is worth about $214 billion.

"There is value in having geographic diversity. You don't want to have all your eggs in one basket," said Daryl Hatano, a vice president of the Semiconductor Industry Association, a California-based trade group representing 90 percent of the U.S. semiconductor industry.

If it develops as planned, Silicon Border would transform Mexicali, a border city of 900,000, into a high-tech center and demonstrate that Mexico is moving away from lower-end assembly plants, Mexican officials said. In recent years, many of the hundreds of Mexican assembly factories along the border with the United States have faltered in the face of rising competition from lower-paying Chinese manufacturers.

Eduardo J. Solis, chief of Mexico's office of promotion and investment, said in an interview that the state and federal governments have committed more than $2 million to the design and marketing of Silicon Border and are offering 10 years' tax-free status to semiconductor companies that move into it. "We are very much committed to offering a competitive package so it works," he said.

Solis said that a single semiconductor manufacturing plant can cost more than $1.5 billion to build and that the Mexican government is seeking to ease tax burdens on those companies, as Asian governments do, because of the jobs and benefits they bring to Mexico.

No tenants have been named for the science park, and those involved would not confirm the names of any of the companies with which they are negotiating. But Solis said the Mexican government is in talks with several companies about locating in Silicon Border. Mexicali was chosen for the site, officials said, because unlike many other cities along the U.S. border, it has a ready water supply and is relatively close to Silicon Valley, 500 miles to the north, where many U.S. semiconductor and technology companies are headquartered.

Solis said he expected that in the initial phases, many U.S. engineers would come to train Mexican engineers. One key advantage Silicon Border would have over similar plants in Taiwan, he said, is that U.S. engineers could work in Silicon Border and "go home to California for dinner."

Mexico has long suffered a "brain drain" as many of its top scientists and engineers leave here to work in U.S. laboratories or elsewhere around the world. Mexican officials said this project offers those professionals a reason to stay home.

Hill, a veteran of the U.S. semiconductor industry who is based in San Diego, said that since Silicon Border was announced last summer, the momentum has been building and key land deals have been signed. Also, he said, the Mexican government this week added more grant money. "So many forces are in our favor. It is becoming a sure thing," Hill said.

Sergio Tagliapietra, head of economic development for the Mexican state of Baja California, where Silicon Border is to be located, said the project was not just good news for Mexicali. "It's a big opportunity for the country," he said.

He said that he expected groundbreaking in 2005 and that the spinoff effect for the local economy would be huge, including construction for upscale housing and shopping malls, transforming that western stretch of the U.S.-Mexico border. "It brings the type of industry we are pursuing," he said.

Tagliapietra said that Tijuana-Mexicali region of Baja, where millions of television sets are assembled, has been leading this shift to higher-skilled work.

Risto Puhakka, vice president of VLSI Research Inc., an independent marketing research firm in California specializing in semiconductors, said Silicon Border offers good news for Mexico. "It would create high-quality jobs," he said.

Washington Post staff writer Mike Musgrove contributed to this report.

© 2004