Introduction
The Bank of the Americas (BID) has recently circulated a working document, still under discussion, focusing on Mexico’s competitiveness in value chains within three crucial sectors for the country’s future: semiconductors, pharmaceuticals, and medical devices. This analysis provides valuable insights into Mexico’s strengths and challenges in these sectors, as identified by the Secretaría de Economía.
Semiconductor Industry
Current Participation: Mexico’s participation in the global semiconductor market is minimal, around 1%, but it has been growing steadily. In 2023, the country exported $7 billion worth of semiconductor-related products, making it one of the top four fastest-growing countries in the past decade and ranking 16th globally for exports. Major global companies are present in Mexico, contributing to assembly, testing, packaging, and design.
Strengths and Opportunities: Mexico excels in assembly, testing, packaging, and some design activities. To further integrate into the global semiconductor value chain, Mexico should focus on expanding its production capabilities. Currently, most research and development occur in the United States, but Mexico can capitalize on geopolitical shifts that favor its growth. Additionally, Mexico should prioritize the production of specialized chemicals and consumables within the semiconductor industry.
Challenges: Mexico’s reliance on imported semiconductors, valued at approximately $29 billion annually for sectors like aerospace, automotive, electronics, and medical devices, highlights the need to develop domestic production capabilities. This would foster a more significant transformation of Mexico’s manufacturing sector.
Pharmaceutical Industry
Current Position: Mexico is the fourth-largest global exporter of generic drugs, with its export value doubling since 2016. The country has the potential to become a regional hub for pharmaceutical production and export, supported by major global players like AstraZeneca, Bayer, Boehringer, and Sanofi, alongside domestic generic manufacturers.
Strengths and Opportunities: Mexico boasts a large and diverse chemical sector, valued at $25 billion in added value. This could serve as a foundation for producing precursor chemicals essential for pharmaceutical manufacturing. The country also has a solid pool of engineering, chemical, and pharmaceutical professionals, supported by numerous university programs. However, there is room for improvement in linking public procurement to domestic medication production.
Challenges: Enhancing regulation by Cofepris, Mexico’s health agency, is crucial to accelerate or streamline investment processes. Addressing bureaucratic hurdles will encourage more foreign investment in the pharmaceutical sector.
Medical Devices Industry
Current Position: Mexico ranks third in medical device exports, with investments from eight of the top ten global firms. The industry focuses on labor-intensive activities such as assembly, component manufacturing, sterilization, and distribution. It benefits from a skilled workforce experienced in advanced manufacturing and electronics.
Strengths and Opportunities: Mexico’s regulatory framework aligns with international standards, though there is room for improvement in response times and avoiding double regulation with export destinations. Cofepris is actively working to address these issues. The industry should prioritize producing higher-value medical devices, increasing sterilization capacity, and raising the percentage of domestic inputs. Public procurement can also be leveraged to bolster this sector.
Challenges: The medical devices industry must focus on producing more high-value products, increasing sterilization capacity, and raising the percentage of domestic inputs. Participating in research, development, and design processes is essential for long-term growth.
Key Questions and Answers
- Q: What are Mexico’s current strengths in the semiconductor industry? A: Mexico excels in assembly, testing, packaging, and some design activities within the semiconductor value chain.
- Q: How can Mexico improve its competitiveness in the pharmaceutical sector? A: Mexico should focus on enhancing regulation, streamlining investment processes, and leveraging its large chemical sector for precursor chemical production.
- Q: What challenges does Mexico face in the medical devices industry? A: The industry must prioritize producing higher-value medical devices, increasing sterilization capacity, and raising the percentage of domestic inputs.
In summary, Mexico is well-positioned to enhance its competitiveness in semiconductors, pharmaceuticals, and medical devices. Collaborative efforts from the government and private sector are essential to capitalize on existing strengths and address challenges in these key industries.
