Panama’s Emerging Semiconductor Industry

Panama Embraces Opportunity to Join Booming Semiconductor Industry in the Americas

By: Mariela de la Guardia – Partner

Semiconductors are essential components in all electronic products, making them crucial players in the global economy. Recognizing their significance, the United States has identified seven countries to develop the semiconductor industry outside its borders. Among the chosen nations in Asia are Taiwan, Vietnam, Malaysia, and the Philippines. In the Americas, Mexico, Costa Rica, the Dominican Republic, and Panama have been invited to participate.

The United States has placed its bet on these four Latin American countries to relocate and establish semiconductor production to the American continent. Through the International Technology Security and Innovation Fund (ITSI Fund), it aims to invest $500 million in these countries to manufacture and guarantee a secure and reliable semiconductor supply chain over a five-year period.

Panama’s Proactive Approach

Panama has developed a comprehensive plan and a friendly ecosystem to promote innovation, design, and development across the entire industry, ranging from human resource preparation in universities to infrastructure, investment promotion, and the legal framework changes required to drive this investment.

The National Secretariat of Science, Technology and Innovation (SENACYT) and the Technological University of Panama (UTP) recently signed a Memorandum of Understanding with Arizona State University to establish a training framework and center of excellence for human resource development in Panama. This North American university is a leading educational institution in training engineers specialized in this industry.

Similarly, the Technological University of Panama has created a semiconductor innovation and development center, and several other universities are adapting their curricula to incorporate relevant subjects into their academic programs.

Pending Tasks

To further enhance the investment climate and propel the semiconductor industry forward, Panama has identified several pending legal tasks:

1. Enact a special law to attract investments related to the semiconductor industry, granting tax benefits and exemptions.
2. Modify its Intellectual Property Law to include integrated circuits, as Panama is committed to under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
3. Review import tariffs to incentivize the entry of materials and raw materials for the manufacture of chips, printed circuit boards, and others.
4. Analyze international agreements.

Additional Challenges and Opportunities

In addition to the aforementioned legal tasks, the Panamanian government faces the challenge of fostering technological entrepreneurship, developing human talent, adapting spaces and infrastructure in its free trade zones and special economic areas, among others. It is crucial to establish regional innovation and technology centers to enable the development of these skills throughout the country.

Creating an investor network for entrepreneurship is essential, and most importantly, the commitment of future administrations to ensure the continuity of this investment is paramount.

Attracting this industry to Panama can bring about job creation, particularly for young people, stimulate the economy, promote the exchange of knowledge and technology. Experts aspire for Panama’s semiconductor industry to exceed 6% of the Gross Domestic Product (GDP).

Leveraging Panama’s Strengths

Currently, an opportunity exists for Panama to support Costa Rica with the supply chain and distribution through its logistics hub. In a few months, the testing, packaging, and assembly phase can be implemented, paving the way for design and manufacturing in the not-too-distant future.

Panama holds advantages over other countries in the region, which should be leveraged to its favor. The inclusion of Panama as a beneficiary of the ITSI Fund by the United States represents an opportunity for growth, and there is confidence in the country’s ability to achieve it. Panama needs to “get its act together” as there is still a significant journey ahead.