Asian Companies Continue to Flock to Tijuana Area

What Asian crisis? Companies from Japan, Taiwan and South Korea continue to pour into Baja California, setting up factories in Tijuana and environs to satisfy the strong U.S. market for their consumer electronics and appliances.

Boosted by the Asian arrivals, Baja’s foreign-owned factories, called maquiladoras, numbered 1,045 in November, up 12% from a year earlier. More than 221,000 people now work at these plants, a 6% bump. Foreign companies use maquiladoras to take advantage of Mexico’s low-cost labor and favorable duty treatment to produce goods mostly destined for the U.S. market.

About a third of all Mexican maquiladoras are in Baja, and about two-thirds of Baja’s are in Tijuana. Total capital invested in Baja maquiladoras this year is $1.6 billion, or 6% more than last year, according to the Baja California economic development office, which tracks factory activity.

The growth has slowed somewhat from the 20%-plus pace seen earlier in the 1990s, when Japanese, then South Korean and Taiwanese television, computer monitor and appliance companies made Tijuana one of the world’s hottest industrial real estate markets.

Indeed, Tijuana now produces about 12 million TV sets a year, or about half the number that Americans buy annually.

As Tijuana matures as an industrial hub, the area is seeing the arrival of more basic industrial concerns. Corning-Asahi-Samsung, a joint venture among the three namesake companies, set up shop recently to supply TV-monitor manufacturers with raw glass.

Another is the recent decision of Mitsui Steel to build a plant on the Otay Mesa area of San Diego, where it will make metal components for computers and appliances that until now have been imported from Asia. Sumitomo Metals of Japan, a maker of metal chasses for computers and appliances, is also shopping for a plant site in the Tijuana area.

The planned 80,000-square-foot Mitsui plant won’t be reminiscent of the old-style smelters and smokestacks of Pittsburgh. It will be a clean, highly automated metal-fabrication factory.

Joe Smith, a John Burnham & Co. broker who helped arrange the deal, said Mitsui’s entry is a sign that the San Diego-Tijuana region is “developing a truly integrated manufacturing base.”

More than booming U.S. consumerism is luring the foreign companies. In two years, most will face much stiffer “local content” rules to win favorable duty status in the United States, Canada and Mexico--the North American Free Trade Agreement zone. Local content refers to how much of a product’s value derives from the market in which it is sold.

Big local players such as Sanyo, Matsushita, Sony and Samsung, which once assembled products largely from components shipped in from Asia, must produce most of those parts in North America by 2001 or face onerous tariffs.

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Chris Kraul covers border and other Latin American trade issues and can be reached at (619) 544-6040 or chris.kraul@latimes.com.