John McCloud is editor of Industry Property Journal, from which this article is excerpted.

Mexicali, Mexico—A joint venture with ING Real Estate will enable a development company founded by semiconductor industry professionals to move ahead with development of a $1 billion high-tech park in this Mexican city in Baja California. Tim Ramsey, executive vice president of construction for Silicon Border Development, the project sponsor, says preparation of the first 500 acres of the 10,000-acre Mexicali Science Park will begin by May, with initial sites ready for construction by early fall. He says several prospective buyers have already stepped forward but tells IPJ he is not free to name them at this time.

The project, touted as the first of its kind in North America, has been in the works for six years. The San Diego-based development company's co-founders, chairman D.J. Hill, a former vice president of National Semiconductor Corp. of Santa Clara, CA, and CEO Ron Jones, former chairman of N-Able Group International of Saratoga, CA, created Silicon Border in 2001 to provide a geographically accessible alternative to the Asian industrial parks that have become the primary location for high-tech manufacturing.

With more and more companies adopting just-in-time supply systems, Hill and Jones reasoned US corporations would benefit by being able to locate manufacturing facilities one to three days by truck or rail from their assembly plants rather than across the ocean.As Ramsey notes, offshore supply chains are vulnerable to any number of disruptions from earthquakes to war. "Even things like SARS or bird flu have shut down factories for days," he notes. By having an alternative source of manufactured parts near to hand, he says companies can better insulate themselves from supply-side interruptions.

However, Silicon Border is not basing the project's success solely on proximity to US markets. According to Ramsey, recent changes in Mexican tax laws exempt large companies from more than 90% of corporate taxes for 10 years based on sufficient capital investment and job creation. He calls the tax benefits effectively identical to those that have prompted US corporations to move or outsource manufacturing operations to Asia.

While tax benefits match those in Asia, Ramsey says Mexican property and development costs are one-tenth to one-fifth those in Taiwan, Korea and other Asian manufacturing centers. He says fully prepped and serviced sites in Mexicali Science Park are offered at $200,000 an acre, compared to about $1 million an acre in Hsinchu Science Industrial Park in Hsinchu, Taiwan.

The price, he adds, is on par with what buyers are paying for standard distribution sites in northern Mexico, even though the park will offer higher-quality infrastructure, including special wiring and plumbing to meet extreme power and water needs, and recreational facilities for soccer, baseball, tennis and golf. In addition, the park will feature a university and technical training and research centers. Ramsey says rights are available for a more than ample supply of water from the Colorado River, while Mexicali has three state-of-the-art power plants with capacity to support millions of sf of future development.

For the park's initial phase, Silicon Border is targeting semiconductor, solar panel and flat-panel television manufacturers and biotech companies. While freedom from supply interruptions is expected to be a draw for all tenants, Ramsey says solar panel and TV manufacturers can also see substantial savings by eliminating the high costs of overseas shipping. The project's location immediately adjacent to the border will enable tenants to tie directly into US distribution networks.

ING will provide the capital for the park's first phase and has agreed to participate in three additional phases within the next 10 years. Silicon Border anticipates a 20-year build-out, during which time it will spend more than $1 billion for infrastructure including commercial services, highways, power generation and water treatment.

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Work Set to Start on $1B High-Tech Park

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