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Tijuana Has Become TV Manufacturing Capital of World

July 18, 1995

TIJUANA, Mexico (AP) _ The whirring, clicking and stamping that fills Samsung Mexicana’s giant blue and gray plant has helped to make this border city the TV manufacturing capital of the world.

Samsung is just the tip of the iceberg. All the biggies of TV manufacturing _ Sony, Matsushita, Sanyo, Panasonic, Hitachi _ have built plants here to take advantage of Mexico’s cheaper costs.

Collectively, they produce some six million televisions a year, mostly for sale in Latin America and the United States, where competition is very stiff and having production plants in Mexico could make a big difference.

The competitiveness in the industry was underscored by Zenith Electronics Corp.’s decision Monday to sell control of the company to South Korea’s LG Group in a deal worth $350 million.

Zenith, the last U.S.-owned television maker, was weakened financially in the battle with its rivals. It had moved much of its assembly operations in 1993 from Springfield, Mo., to another part of Mexico _ Reynosa.

But Tijuana is the magnet. Following closely behind the TV manufacturers are Korean, Japanese and Taiwanese suppliers, who are being forced to relocate here to prevent local companies from swiping their business.

The flurry of activity has rained millions of investment dollars and thousands of jobs on Tijuana, where industrial land prices have shot past those of San Diego.

``The sweatshop economy has evolved,″ said Jose Galicot, a prominent Tijuana developer. ``Tijuana needs a future and the future is becoming industrialized.″

For several decades now, Tijuana’s low-cost labor and easy access to the United States and Pacific Ocean have lured maquiladoras _ foreign-owned manufacturers that make everything from shoes to pens.

That trend has been fueled by the North American Free Trade Agreement, which gives U.S. tariff breaks to items made locally, and by the weak peso and strong Asian currencies.

Among the recent TV manufacturing deals:

_ In May, Matsushita Television Co. moved its North American headquarters from Illinois to Otay Mesa, a San Diego border district. The company plans to add two more plants in Tijuana.

_ Samsung is building a $500 million plant here, its second in Tijuana, which will eventually create 4,000 jobs.

_ JVC is constructing a $36 million plant to produce television chassis. It will employ 600. JVC’s administrative offices will be in San Diego.

Sony led the charge when it opened a plant in San Diego in 1972 and later built one in Tijuana. It has steadily made the San Diego-Tijuana region its TV manufacturing base for the Americas.

As Sony has grown _ it now employs about 6,000 people between the two cities and has pumped about $550 million into the region _ so has the entire industry.

``There is a kind of snowball effect once you begin to have the infrastructure,″ said Steve Burke, Sony’s vice president for business planning and general affairs.

From the foam to the plastic casing to the molds for the plastic casing, all the elements to build a TV set are now home grown.

``Critical mass has been reached,″ said Joe Smith, a real estate broker with John Burnham & Co. ``All the guys are now in the same neighborhood. You don’t have to send out to Los Angeles or Malaysia to gets goods and services.″

Samsung’s second plant, which is under construction, is a sign of the industry’s evolution here. For the first time, TVs will be built from top to bottom in Mexico, including the high-skill, high-wage picture-tube construction.

To lure Samsung away from San Diego and the Mexican cities of Sonora and Monterrey, Tijuana guaranteed Samsung one million gallons of water a day to clean and cool the glass to make the tubes.

The promise is bold for a city whose anemic water delivery network has failed in the past and still leaves 15 percent of the population without drinking water.

Some wonder whether the TV manufacturing juggernaut has been achieved through reckless expansion. Tijuana, whose population is somewhere between one million and two million, is growing at a rate of 4.8 percent _ almost double that of Mexico.

Many Tijuana roads are unpaved or too narrow and rutted to handle the traffic, and street cleaning is a recent concept.

Yet manufacturers remain drawn to Tijuana’s cheap and educated labor pool and its enviable location.

Real estate broker Smith, who increasingly spends his days showcasing Tijuana properties to Asian manufacturers, recalls a Japanese supplier who told him that for the cost of one Japanese worker, he could hire four U.S. workers or 20 Mexican workers.

``Tijuana is going to grow fast, but the cost of growing without infrastructure is going to be paid in quality of life,″ Mayor Hector Osuna Jaime said.

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