2012: "Cleantech Companies Seeing Green in Nearshore Tijuana"

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2012 white paper developed by Crossborder Group for the Tijuana Economic Development Corporation (DEITAC) combining updated
research on solar panel manufacturing for the City of Tijuana, a comparison of Tijuana's current photovoltaic manufacturing capacity compared to selected U.S. states, manufacturing costs, and tariff and logistical information to inform potential investors about the current status of solar panel, cleantech, and photovoltaic manufacturing in that city. Developed by Crossborder Group as one in a series of research-based informational documents for our client.

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2012: "Cleantech Companies Seeing Green in Nearshore Tijuana"

  1. 1. photo: Government of Baja California Tijuana-San Diego Region photo by Antonio Mercado Cleantech Companies Seeing Green in Nearshore Tijuana July 2012
  2. 2. Tijuana: a Brilliant Place for Cleantech Annualized Solar Module Manufacturing Capacity Today’s fast changing and highly competitive cleantech (2011, Mega Watts) industry requires that companies see green both for the environment and in their bottom line. One of the best places to Ohio 361 do this in North America is a bright spot only 15-minutes from Oregon 360 downtown San Diego: Tijuana, Mexico. Tijuana 325 Tijuana’s nearshore location has become a natural choice for California 286 some of the biggest names in the solar industry – Kyocera, Siliken, and Energy Conversion Devices/UniSolar – with over Tennessee 210 1,350 workers in early-2012. As seen at right, in 2011 these Colorado 138 three manufacturers had an annual photovoltaic module manufacturing capacity in Tijuana of 325MW – making the 0 100 200 300 400 city a leading North America solar module production site, only behind the factory capacities in Ohio and Oregon1. US State Data Source: GTM Research Tijuana and Mexico are, in fact, one of the fastest growing US Imports from Mexico: regions in the world for solar module exports to the United Solar Modules (USITC; HTS 8541.4060.20) States, expanding in 2011 to over US$513 million – third only to $600 China and Malaysia. Surprising to many, in 2011, Mexico exported 12 times more solar panels to the United States $500 US$ Millions than Germany, Spain, France and the United Kingdom combined, in terms of value.2 $400 $300 In the evolving world of cleantech and green energy, there’s no alternative better than up-to-date information. This briefing is $200 meant to provide potential investors with a quick, fact-based introduction to help explain why – in 2012 – Tijuana is not only $100 still the number-one city in Mexico for maquiladora (IMMEX) manufacturing companies3, but also a natural place to choose $- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 for finding a brilliant production platform for your business. “…The [Tijuana] market allows us to proactively manage distribution and supply to our customer base in the United States; and, on top of that, the economic benefits are very substantial – we found a reduction on the order of 60%...” - Scott Sporrer Vice President and General ManagerBaja California Governor Osuna Millan and Tijuana Mayor Bustamante hear Siliken Renewable Energyfrom Alfredo Puche, Siliken CTO and VP, on tour of Siliken’s Tijuanamanufacturing operation (2011, photo courtesy of State of Baja California) www.TijuanaEDC.org || contact@tijuanaedc.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788
  3. 3. Why Mexico and Why Tijuana? The Experts Agree… As cleantech manufacturing incentives become harder to find, it’s important to note that nearshore production in KPMG Competitive Mexico provided one of the lowest-cost country sites Alternatives 2012 among fourteen in KPMG’s 2012 Competitive Alternatives Cost Index for study. This study evaluated “26 significant business cost Manufacturing components that are most likely to vary by location”, finding (as seen at right) that Mexico provides manufacturers with a 21% cost advantage compared to the China 74.2 U.S., as well as significant cost advantages compared to other global locations. For instance, this same analysis Mexico 79.0 found that a Mexico location provided nearly the same cost Brazil 93.0 advantage as China, and three-times the cost advantage UK 94.5 of Brazil, as compared to the U.S. 4 Canada 95.0 While many regions reuse old phrases to promote France 96.1 themselves as possible locations for globally-expanding, cleantech companies, Tijuana offers a unique combination US 100.0 of benefits that no other international city can, including: 100.1 Germany An existing base of companies that make up one of the largest concentrations of high-tech 0 25 50 75 100 125 manufacturing employment in North America; A “next-door”, nearshore location to the U.S. with quick logistical access to the West Coast, and adjacent to several major international seaports and airports; Using sample data derived from industry representatives and the A trained, quality-conscious and highly Tijuana EDC, significant savings can be bilingual workforce – in a low union, business-friendly environment; gained for both smaller and larger cleantech manufacturing operations in Strong intellectual property-rights Tijuana: protections guaranteed via NAFTA; and Description Tijuana, Lower-cost (as seen in the sample at right5), Employees U.S. Cost Mexico Cost just-in-time production capabilities. Number of Employees 140 140 Direct 101 101 Indirect 25 25“…We see that for clean tech and specifically Administrative 14 14 Hours/Work Week 40 48for solar, this region is becoming a Mecca… Hours per Year 2,080 2,496There’s good access to markets, there’s a Labor Cost per Hour Direct Labor Cost/Hr $ 12.97 $ 2.95good labor force and there’s a cost advantage Indirect Labor Cost/Hr $ 21.71 $ 12.35to be working in Tijuana – labor costs are Admin. Labor Cost/Hr $ 24.47 $ 22.65actually now, especially in China, equal to the Factory Cost Labor $ 12.97 $ 2.95labor cost in Tijuana.” Overhead $ 7.90 $ 4.64 General & Administrative $ 3.87 $ 3.70 - David Hester Factory Cost/Hr $ 24.74 $ 11.29 President Total Factory Operating Cost $ 5,196,584 $ 2,846,436 Kyocera Mexicana Potential Annualized Savings $2,350,148 www.TijuanaEDC.org || contact@tijuanaedc.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788
  4. 4. Access to Suppliers, Customersand Free Trade PreferencesMentioning Tijuana’s location next to oneof cleantech’s biggest global markets ismore than just recycling a common phrasefor many nearshore locations – it actuallygoes to the root of Tijuana’s competitiveopportunities. Three major seaports andfour major airports like LAX, SNA, SAN,and TIJ are close by – not to mentionbeing next to end markets means lowerinventories, and cost-saving logisticalbenefits by trucking finished product intothe U.S. market in as little as a fewhours. Whether your products need to goto Southern California or New England,trucking from Tijuana takes within one- tofive-days – keeping costs low, and reducing your firm’s carbon footprint at the same time).30%+ tariffs or high duties a concern for U.S. or European solar markets? Take advantage ofTijuana’s zero-percent tariffs for qualified products manufactured or assembled in Tijuana: ourcleantech companies get preferred access to suppliers and customers via free trade agreementswith the United States, Canada, the European Union, Japan, and many of Latin America’smost important markets among them. Tijuana: A Bright Spot In North America’s Solar Zone Tijuana doesn’t just offer one of North America’s best low-cost manufacturing locations for cleantech products – it’s also at the very center of some of the highest average annual solar radiation in North America, and within 700 miles of nearly 22,800MW of utility-scale solar projects under development…6 www.TijuanaEDC.org || contact@tijuanaedc.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788
  5. 5. Tijuana’s Cleantech Manufacturers: World Class Quality 2012 industrial surveys show that not only do nearly 90% of Tijuana’s major technologymanufacturers with 250+ employees operate under ISO 9000/9001 or other quality standards – atleast 18 major companies are also ISO 14000 certified – underscoring both the world class quality of manufacturing in Tijuana, but also the growth of industrial environmental culture, as well. Some of these Tijuana cleantech leaders include: A Binational Region With a Bright Future in Solar and Cleantech It’s important to mention the more than 35,000 students enrolled in Tijuana’s universities (many in engineering studies). It’s also important to emphasize that three of Tijuana’s universities – UABC, UTT, and ITT – already offer degrees or technical programs specifically for cleantech, including environmental technology Tijuana’s eco-vision goes beyond engineering, renewable energy and solar technologies. solar…come visit Northwest Mexico’s But this document wouldn’t be complete without also only Gold LEED-certified building – mentioning Tijuana’s partnership with San Diego, designed by Tijuana architects…and California, just across the border and part of the home to the Tijuana EDC. greater Cali-Baja Mega Region. Being in this unique binational region means that cleantech companies not only benefit from what Tijuana has to offer, but also what one of the largest cleantech clusters (and centers of innovation) in the United States offers, too: San Diego, and its tens of thousands of university graduates (UCSD, SDSU, USD, and more); a diverse eco-system of research institutes; management talent; and a broad range of entrepreneurial businesses active in green energy and environmental businesses. Indeed, the future does look bright – in Tijuana. For more information about this Analysis, or about investing in the City of Tijuana, contact the Tijuana Economic Development Corporation at 1-855-55-TJEDC from the US or Canada – or email us at contact@tijuanaedc.org 1 Based on Tijuana company data, and State-level solar module manufacturing capacity data provided by GTM Research 2 US import data for HTS 8541.4060.20 solar panels from U.S. International Trade Commission website (http://dataweb.usitc.gov/), accessed June 2012 3 INEGI firm data for Industria manufacturera, maquiladora y de servicios de exportación (IMMEX) industry, accessed June 201 2 (http://ow.ly/buiEb) 4 “Competitive Alternatives: KPMG’s Guide to International Business Location – 2012 Edition”, p. 7 (http://www.competitivealternatives.com/). 5 Cost estimate based on average 2009 US and Tijuana manufacturing industry wages; source: the Tijuana EDC. 6 Solar Energy Industries Association, “Utility‐Scale Solar Projects in the United States Operating, Under Construction, or Under Development” (http://www.seia.org/cs/Research/Major_Solar_Projects_List), May 9, 2012 www.TijuanaEDC.org || contact@tijuanaedc.org Call toll free from the US: 1-855-558-5332 (1-855-55-TJEDC) || ph (011-52) 664-681-8344 | fx (011-52) 664-681-8788

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