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ELECTRONICS<br />
Foxconn and HP executives<br />
weigh in on future of Mexico’s<br />
electronics industry<br />
By Graeme Stewart<br />
<strong>Leaders</strong> in Mexico’s electronics industry<br />
know the sector is in a rut and<br />
that positive steps must be taken to<br />
reinvigorate it from the stupor of a mere<br />
6.3 per cent increase in exports that it has<br />
been stuck in for several years.<br />
Francisco Uranga<br />
Corporate VP and Chief Business<br />
Operations Officer<br />
Foxconn Latin America<br />
It would be a big mistake to think<br />
that these captains of industry are doing<br />
nothing to improve the situation. In fact,<br />
they are working night and day to retrieve<br />
the position and restore electronics to its<br />
former glory.<br />
Two of those hard pressed and hard<br />
working industry executives are Francisco<br />
“Pancho” Uranga, Corporate Vice<br />
President and Chief Business Operations<br />
Officer for Foxconn Latin America, and<br />
Carlos Cortes, Director General of Hewlett<br />
Packard Mexico.<br />
We first met with Pancho Uranga in<br />
Carlos Cortes<br />
Director General<br />
Hewlett Packard<br />
Mexico<br />
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ELECTRONICS<br />
Coto Contract Manufacturing, Mexicali.<br />
one of Mexico City’s best hotels while<br />
he was holding meetings in the capital, a<br />
change of scenery from the El Paso-Juarez<br />
region where Taiwanese-owned Foxconn’s<br />
Mexico operation is based and which is,<br />
incidentally, home to Mr. Uranga.<br />
Pancho had declared on the telephone<br />
that while your narrator may hold the<br />
advantage over him in terms of height, he<br />
was certain he had more grey hairs. He was<br />
right, by a whisker.<br />
We sat down over coffees and the fast<br />
talking businessman launched into an overview<br />
of the electronics industry in Mexico.<br />
He said: “We have a lot of opportunities<br />
and I think it is time for the electronics<br />
industry in Mexico to get creative and<br />
innovative. I don’t think we have done<br />
enough to attract new investment into the<br />
electronics market.”<br />
“Asia – and by Asia I mean Japan,<br />
Taiwan, South Korea and now China as<br />
well as India and, more and more, Singapore<br />
and Indonesia – has become very<br />
competitive in the electronics market and<br />
if we don’t do more in Mexico, we stand<br />
the risk of becoming nothing more than a<br />
large assembly plant.”<br />
“But we have great opportunities because<br />
electronics is not just computers. It<br />
also involves all the equipment needed in<br />
the automotive and aerospace industries<br />
too.”<br />
“Unfortunately, our policy so far has<br />
not connected those dots and to do that<br />
we need to be aggressive and create new<br />
tax policies. The problem is that those of<br />
us that don’t evade taxes are constrained<br />
in a little bubble and all the authorities do<br />
is continue to try and get more money out<br />
of those that do pay taxes rather than from<br />
those that don’t.”<br />
He continued: “My hope is that we’re<br />
beginning to wake up and that there will<br />
be a reaction from the Government that<br />
is beneficial to the electronics industry.<br />
I don’t care if it’s a slow reaction just as<br />
long as there is a reaction of some kind.”<br />
“I really hope that the Mexican Government<br />
will develop a program for electronics<br />
similar to the program created 25 years<br />
ago for the automotive industry. One that<br />
will enable the electronics sector to make a<br />
mark on the global map just as the automotive<br />
sector has done.”<br />
“Strong backing from the Government<br />
is a must if the electronics sector in Mexico<br />
is to recover. I would look on it as a strategic<br />
partnership and that partnership has<br />
already worked well with this Administration’s<br />
Constitutional Reforms.”<br />
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ELECTRONICS<br />
Chip manufacturing at Foxconn<br />
“That is the kind of positive action<br />
that’s required. Let’s see more of that<br />
strong leadership.”<br />
HP Elite 700 laptops presentation, Mexico City<br />
A few weeks later, we caught up with<br />
Carlos Cortes, again in a plush hotel but<br />
this time at the CANIETI National Convention<br />
in Mexico City where innovation<br />
was the buzz word among the electronics<br />
industry representatives.<br />
Along with education and training, innovation<br />
is seen as one of the key drivers<br />
that will revitalize the electronics industry<br />
in Mexico and help lead the sector back to<br />
its previous heights. To do that, it is widely<br />
recognized that there has to be a degree of<br />
co-operation between electronics companies,<br />
academia and government.<br />
Taking time off from his busy schedule,<br />
Mr. Cortes explained how the electronic sector<br />
could recover from its years in the doldrums.<br />
He said: “I have been speaking with<br />
some colleagues in other electronics companies<br />
and we agree that to secure a bright<br />
future for our industry in Mexico, we have<br />
to work around major trends like working<br />
with the cloud, technological advances and<br />
changes in the workplace.<br />
“We are developing capabilities in<br />
terms of capturing more infrastructure<br />
through cloud enabled systems, how we<br />
capture more managed services through<br />
our technological capabilities and how<br />
are we moving our traditional personal<br />
computing and printing businesses into<br />
more of a personal services solution.<br />
“The Constitutional Reforms recently<br />
put in place by the Peña Nieto<br />
administration are viewed positively,<br />
although we see it as more of a long-term<br />
play, and right now we are seeing tele-<br />
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com reform, which will be one of the low<br />
hanging fruits in terms of seeing more<br />
and more new companies entering that<br />
sector like AT&T coming into Mexico.<br />
As long as there is more investment in<br />
the telecom sector, IT companies are<br />
going to benefit from those new investments.”<br />
Electronics Manufacturing, Zentech<br />
“We could always argue that the<br />
reforms could have been more comprehensive<br />
but I think they are good first<br />
steps in terms of having a long-term vision<br />
in attracting foreign investment as<br />
they have been doing so far. But I think<br />
it is necessary to have a long-term vision<br />
around those reforms.”<br />
Mr. Cortes urged the industry to look<br />
to the long-term future rather than go for<br />
the quick fix. He said: “I think we have to<br />
look at Mexico in the long-term basis. At<br />
the moment we concentrate too much on<br />
the short-term – the day, the week or the<br />
month – and we need a longer-term evaluation<br />
taking into the account the growth of<br />
the Mexican economy and the problems of<br />
the world economy.”<br />
“But with the Constitutional Reforms, I<br />
think Mexico has a great future. We are seeing<br />
a lot of foreign investment coming into<br />
the country and we have a lot to play for.”<br />
“The electronics industry in Mexico has<br />
suffered a slump in growth over the past<br />
five years or so but it’s not only in Mexico.<br />
We have seen a global slump in various<br />
categories, including the PC business, and<br />
we have to revitalize those categories.”<br />
“According to analysts, by this time<br />
next year we should be seeing neutral or<br />
positive growth in the electronics industry.<br />
If we are able to move our transactional<br />
business into more of a solution based<br />
field - in a word, innovation - then we<br />
should be doing a whole lot better this time<br />
next year.”<br />
MAY - JUNE 2016 MEXICONOW 51
ELECTRONICS<br />
Electronics Manufacturing, Tecma<br />
Mr. Cortes admitted that innovation,<br />
a key driver of economic growth and<br />
productivity in today’s global economy,<br />
was something that Mexico was behind<br />
other emerging economies, with regards<br />
to productivity.<br />
He said: “Continuing dialogue with<br />
regional partners is important to increase<br />
understanding of policy reforms<br />
that strengthen regional innovation and<br />
productivity outcomes. Innovation operates<br />
within an ecosystem of four main<br />
components: government, infrastructure,<br />
funding and community. The overarching<br />
role of government should be uniting and<br />
enhancing all the aspects of the innovation<br />
ecosystem.”<br />
“Innovation occurs in environments<br />
that encourage experimentation and accept<br />
failure as a necessary part of the process<br />
and sustaining the growth of innovation<br />
clusters and enhancing integration between<br />
universities and businesses can help turn<br />
research initiatives into market realities.”<br />
“Business incubators are also important<br />
programs that help facilitate mentoring relationships<br />
vital for smaller businesses and<br />
non-traditional policy efforts outside of the<br />
regulatory framework such as promoting<br />
the use of crowdfunding and incubator programs,<br />
building and expanding innovation<br />
clusters, tapping into the Mexican diaspora<br />
and implementing programs that celebrate<br />
entrepreneurship at local level can help<br />
drive innovation in the short-term.”<br />
“Innovation is the key driver of economic<br />
growth and productivity in today’s<br />
global economy but Mexico is behind other<br />
emerging economies with regards to productivity.<br />
Traditional business models do<br />
not have the processes in place to thrive in<br />
a 21st century environment. That has put<br />
innovation policy at the top of the agenda<br />
for decision makers in business and government<br />
all over the world.”<br />
Mr. Cortes’ comments were echoed<br />
by the Mexican Institute of the Wilson<br />
Center, a Washington DC-based think<br />
tank, who added that Mexico should also<br />
consider exploring a government sponsored<br />
program such as the SBIR grants program<br />
in the USA to minimize risks for venture<br />
capitalists and stimulate venture capital<br />
fund development.<br />
The Institute said: “The SBIR program<br />
helps entrepreneurs assemble a portfolio<br />
for a technology worthy of entering the<br />
marketplace and serves as a credential<br />
to obtain third party funding. The U.S.<br />
government funds the critical startup and<br />
development stages and it encourages the<br />
commercialization of the technology. As a<br />
result, venture capitalists are finding companies<br />
less risky and are willing to invest<br />
in SBIR startups.”<br />
“We believe that Mexico can benefit<br />
from such a program. We must emphasize<br />
that Mexico does not need to copy the<br />
American innovation model. In fact, what<br />
works in one country may not work in another,<br />
given their unique economic, social<br />
and cultural makeup.”<br />
“Mexico has the opportunity to learn<br />
from other innovation models but it needs<br />
to understand its own economic profile<br />
and work to design a framework suitable<br />
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Electronics Production, Foxconn<br />
for Mexican entrepreneurs that is creative,<br />
flexible and risk-friendly.”<br />
“The way ahead for Mexican legislators<br />
is to continue to engage the academic<br />
community, business, innovation experts<br />
and international partners, and to review<br />
existing policies and strategies.”<br />
We know what has to be done and innovation<br />
along with a close working partnership<br />
with the Mexican Government are two<br />
important actors in leading the electronics<br />
industry out of the doldrums and back to<br />
the forefront of Mexico’s manufacturing<br />
and export sector.<br />
Panasonic plant, Ixtapaluca<br />
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