Building new medical business opportunities on the border

Juárez, Mexico — It's taken some time, but the Mexican border city of Juárez has become a medical manufacturing base for plastics processor Seisa Group.

Juárez, a city of 1.5 million, is usually known more for its massive factories making electronics and auto parts.

But Seisa President Julio Chiu, a veteran of more than 30 years in manufacturing along the U.S.-Mexico border, would like to change that.

Leading a visitor on a tour of the company's Juárez factories, he talks about why he believes the border area including El Paso, Texas, and southern New Mexico can build a health care manufacturing cluster.

The region of 2.5 million people is a sizable industrial area. It has a little less than 230,000 manufacturing jobs, the same number as the Detroit metro area and a little less than the Houston region.

“The key is the ecosystem that we already have in existence in the area,” Chiu said. “We have three medical schools on both sides of the border. We have the Medical Center of the Americas.

“We have technology innovation centers, and we have a very strong manufacturing base on the southern part of the border,” he said.

Chiu, a banker turned manufacturing executive, is also chairman of the Paso del Norte Biomedical Cluster, which formed this year to build stronger links between manufacturers and health care institutions across the border.

Chiu believes Seisa Group, which is headquartered in El Paso, Texas, shows the potential for medical manufacturing locally.

Since it switched its focus to health care more than a decade ago, the plastics and contract manufacturer has grown from 11 injection molding machines in 2006 to 40 presses today.

It has three extrusion lines, assembly, clean room manufacturing and research and development on minimally invasive devices, mainly catheters. It said it counts some of the world's largest medical device companies as customers.

It's not where Seisa started. It began in 1983 mostly doing assembly and contract manufacturing operations in electronics and textiles, more traditional industries locally.

But Chiu said after he began to see in the late 1990s that Mexico would lose competitiveness and jobs in those industries to Asia — which did happen, to the tune of 80,000 lost jobs in Juárez — he began to shift his company to medical, which today makes up 90 percent of its manufacturing.

He saw the medical industry as one where intellectual property concerns and regulatory requirements would make it less likely to move manufacturing to Asia.

The switch has led to some global expansions. In 2006, at the request of health care customers, Seisa opened a small medical device assembly operation in Slovakia. This year, it's adding five injection molding machines there.

In Juárez, it's now investing $3.5 million in upgrading its injection molding operations, and is expanding its mold making department there and in El Paso from a maintenance shop to a complete mold making operation.

Seisa has also expanded capabilities in research and development. It bought a small three-person consulting company in Minneapolis in 2009 with expertise in minimally invasive devices like catheters.

“Modern medicine is non-invasive,” he said. “In order to do that, you have to have that technology. That's what we went out and sought.

“We combined their know how with ours in scaling it in to manufacturing,” he said. “That's when we began to move in this direction.”

He said, for example, that Seisa recently worked with a California-based medical startup to develop a delivery system with a catheter.

“They had a very good idea, they had put it into some prototypes but they were having a tough time maturing that prototype, freezing the design of the prototype and taking it into a scalable manufacturing process,” he said. “That's what we did.

“We helped them with that and they turned around and sold it to a major medical device company,” said Chiu, who has an engineering degree from the University of Texas at El Paso and an MBA from the University of Rochester in New York.

Seisa hopes that sort of product development and R&D work will be a larger source of revenue.

“We see it as beginning to be a good, respectable source of income for us,” he said. “We think we can grow it.”

Chiu, who has dual Mexican and U.S. citizenship, thinks other manufacturing companies in Juárez need to move more into design and development, and he thinks the biomedical cluster group, which has 16 members, can jump start that.

“One of the goals we have in the cluster is to invite all the CEOs of those companies to come and see first-hand that they can do more than just manufacture and assemble, that the capability for design and development exists,” he said.

“That's what Mexico needs to do more of — convince the companies they can do that,” he said.

Juárez has some operations for some large medical device companies, like Cordis, which employs 3,000 there, and Johnson & Johnson, according to local economic development stats. And companies like auto parts maker Delphi are beginning to do that type of development work in Juárez, he said.

Local contract manufacturers need to boost their knowledge of the technology behind what they make, Chiu said.

“The challenges are basically that we need to educate people on what is behind the manufacturing they already know how to do,” he said. “For example, in our case, what was the science behind catheters, what was the science behind interventional cardiology components. That's the challenge.”

He estimates that up to 15,000 people work in medical device manufacturing in the region, out of the 227,000 manufacturing jobs.

Right now, medical is dwarfed by other industries in Juárez, according to statistics from the Borderplex Alliance, an El Paso-based regional economic development group.

The largest maquiladora manufacturing employers in Juárez are in automotive — Delphi, with 16,500 people, and Lear, with nearly 8,000, and in electronics — Taiwan's Foxconn, employing 6,000 and Scientific Atlanta, with 5,000 people, the Alliance said.

But Chiu, who is one of the co-chairs of Borderplex 2020, the Alliance's regional economic development plan, sees the potential for a medical cluster similar to other parts of North America.

“You have all the elements that you require to put something together, which is no different than what Minneapolis did, what Utah has done, what Northern California, Boston have done,” he said.

He does see one potential advantage for the border that the other areas don't have — Juárez could be better positioned to develop less expensive medical devices for emerging markets like Mexico.

“We can be very competitive in design, we can be very competitive in tailoring products to markets,” he said. “I think we're kind of a late bloomer but I think that things are beginning to come together.”