Leaders

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