Post-AMLO? The North American Semiconductor Opportunity

Andrés Manuel López Obrador's (AMLO) presidency will end on October 1st, 2024. His successor will inherit a country that is more financially constrained than when he assumed office. More interestingly, however, the country will face a series of enviable opportunities amid Washington's ongoing "decoupling" from Beijing. Primarily, AMLO's successor should take advantage of “de-risking” policy efforts by the U.S. government to try to insert Mexico into semiconductor manufacturing supply chains. Cooperation on this issue would revitalize North American integration while empowering Mexico's geostrategic relevance. 

Unlike other areas of untapped opportunity in the Americas, semiconductor development enjoys political backing and expanding partnerships. An aligned North American bloc holds the potential to advance hemispheric efforts in two areas: assembly, testing, and packaging (ATP) and research and development (R&D). Mexico can make a real difference in the foundational segments of this complex supply chain. Yet AMLO's sexenio has illustrated a painful lack of progress on energy matters. Consequently, efforts such as the North American Semiconductor Corridor (NASC) remain undervalued. Without the adoption of a more inclusive approach to balancing Mexico's energy sector, "ally-shoring" potential will prevail lackluster. To be precise, without the key integration of natural gas to feed forward-looking manufacturing, the country will find itself at a loss. 

At the heart of growing great-power competition, semiconductor chips are one of the most critical elements of the global economy. This industry is central to the “new economic security state” proposed by the Biden administration. U.S.-China economic confrontation—and the risk of the People’s Republic of China (PRC) weaponizing its dominance over raw material inputs of chip production—has prompted countries to expand technological resilience. This phenomenon is captured by recent U.S. landmark legislation such as the $52 billion CHIPS and Science Act, which, according to the Semiconductor Industry Association (SIA) galvanized new investments worth more than $200 billion. Still, it is unclear how planned investment will be allocated across foreign markets. 

 Chip foundations have been built in East Asia for over 30 years, and will prove difficult to change. The substantial fixed investments that are needed for these projects, as demonstrated by the PRC’s industrial efforts, underscore that there is no guarantee of success in this high-cost industry. At the same time, U.S. officials are likely to augment already stringent export controls to try to harness their own position. That being said, if North America fails to design a geoeconomic strategy that enhances international links  for both minerals sourcing and supply chain cultivation, the region could suffer from the harmful effects of economic nationalism. 

A broader Mexico-U.S. strategy can preserve and even expand supply chain networks in the United States. Tens of billions of dollars of investment have already been directed into contiguous states, chiefly Arizona and Texas. Capitalizing “nearshoring momentum” and cementing chip projects in Mexico could enhance these initiatives. Success, however, will depend on the next administration's ability to address growing energy insecurity. Until then, Mexican diplomats will struggle to sway U.S. officials and companies to allocate new funds for designated projects. A robust strategy will require facilitating the production of more sustainable and reliable energy sources—which will entail a smart capitalization of abundant natural gas supplies. 

As emphasized during the 2023 North American Leaders Summit (NALS), a shared strategy to develop this vital realm is possible. Yet Mexico’s despotic attitudes and near-absence on the global stage, as demonstrated under AMLO, will not be easy to dethrone. Worse still, long before AMLO's rise, Mexican authorities proved inadequate at elaborating a concise development strategy; this time, this could be enabled by tectonic, geopolitical changes. As previously argued, it is on Mexico if it fails to act on these once-in-a-generation nearshoring opportunities. 

The reallocation of semiconductor supply chains closer to the U.S. market is not only about extricating away from China. It also represents a major opportunity for regional integration. Technological resilience and value-added manufacturing should be the focus of U.S. foreign policy in the Americas. All in all, a strategic approach to supply chain integration could be a powerful antidote for crude nationalism and isolationism, which, in the context of near-simultaneous elections in both countries next year, will be triggered by political actors both in Washington and Mexico City.