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Date: April 01, 2024

Amid a heated US-China tech standoff, Mexico has become the new hub for developing semiconductor chips for AI development.

According to recent reports, AI investments have rapidly grown in Mexico to curb the reliance on China and Asia-imported materials. The US-China tech standoff is at its peak. Major tech giants in the United States have urged Taiwanese manufacturing partners to shift their hardware dependencies from China and Asian countries to Mexico.

As a result of this request, Foxxcon, one of the largest semiconductor hardware manufacturers, has boosted its investment in Mexico. The main benefit to these companies is the free-trade agreement between the US, Canada, and Mexico that came into effect in 2020. More manufacturing partners look forward to shifting their operations from China to Mexico and other countries offering less controversial business environments.

In the last four years, Mexico has received over $690 million from the largest contract electronics manufacturer in the world. Foxconn also recently paid $27 million to buy land in the western state of Jalisco. Foxconn is the preferred supplier for some of the biggest tech players in the AI industry. Its clientele includes Nvidia, Amazon, Google, and Microsoft. These tech giants are leveraging Foxconn’s in-house and partner facilities in Mexico to meet their AI server needs for building the latest and greatest AI technology.

China has become a potent adversary of the United States, and Big Tech Corporations are revoking their business contracts with Chinese semiconductor manufacturers. On the other hand, Mexico has proven itself to be a more profitable investment opportunity for AI development aspects. The countries are connected through the land, and free trade significantly reduces the cost of exports and imports. A US report released last month by the Bureau of Census revealed that imports from Mexico exceeded China for the first time in 20 years.

However, the underlying challenges in Mexico still exist. From high crime rates to inadequate water and energy supplies, the local manufacturing partners are looking for sources of funding to scale their operations and security. Fierce competition between laborers proficient in assembling high-tech products is increasing unpredictability. Taiwanese manufacturers in Mexico heavily depend on private security to prevent local gangs from stealing chips or other expensive equipment from their plants.

During discussions with Dutch Prime Minister Mark Rutte, Chinese President Xi Jinping recently issued a stern warning for all organizations trying to restrict China’s access to technology. He claims that the tech restrictions will not stop China’s advancement in the AI sector. China reportedly increased its funding in AI development from last year’s budget and blocked major tech giants like Intel, AMD chips, and Microsoft Windows from its Government devices.

By Arpit Dubey

Arpit is a dreamer, wanderer, and a tech nerd who loves to jot down tech musings and updates. With a logician mind, he is always chasing sunrises and tech advancements while secretly preparing for the robot uprising.