Electronics in Costa Rica: Progress, Tensions, and the Path Forward

Executive Summary

Few industries have defined Costa Rica’s productive transformation over the last thirty years like tech manufacturing. Electronics in Costa Rica has been a cornerstone of the sector, helping to attract foreign investment to the country, generate quality employment, and embed Costa Rica in international production networks. Recently, the Organization for Economic Co-operation and Development (OECD) released a report analyzing the state of electronics in Costa Rica. This blog post reviews the OECD’s findings and recommendations. Its central conclusion is that, despite successes in generating output and attracting international capital, electronics faces ongoing challenges related to productivity, innovation, and decent job creation.

Productivity

From 2010 to 2022, labor productivity within the sector grew by roughly 11 percent. However, OECD points out that this growth represents “a relatively low rate of growth when considering the sector’s overall output.” More importantly, median productivity—the figure that separates half of firms from the other half—lags behind average productivity. In other words, only a small subset of firms is achieving high productivity levels. For an industry that is supposed to spearhead Costa Rica’s productive development, at this juncture, this level of growth is disappointing.

Value Added

Electronics and semiconductors have increased their share of national value added among high-tech industries, alongside pharmaceuticals. However, an imbalance remains:

• Industry sales have outpaced value added
• A smaller share of economic activity is being retained in Costa Rica (through wages, local sourcing, and reinvestment)
• Exports continue to drive most industry growth, with global supply chains capturing the majority of industry profits

This presents a lost opportunity for Costa Rican workers and businesses to benefit from investment in high-value industries.

Employment

Employment in electronics in Costa Rica expanded from 2010 to 2020, but at a slower rate than in other tech sectors. The medical device sector was able to onboard significantly more employees during this period, highlighting how electronics has failed to deliver job creation at scale. This failure to create jobs matters: one of Costa Rica’s central goals in growing its tech sector was to translate new output into inclusive benefits.

Industry Composition

Much of the sector’s output is concentrated in a handful of multinational corporations. Some additional details about industry structure:

• The top firms within the sector produce the majority of output, export, and employ workers
• Electronics firms are overwhelmingly concentrated in free-trade zones
• From 2010 to 2021, the number of SMEs in the sector decreased by 23%
• Foreign multinationals maintain few linkages with local Costa Rican suppliers

Taken together, these features have made electronics capital-intensive, but not necessarily job-creating. Furthermore, Costa Rica’s advantage in the sector is somewhat dependent on the spending decisions of foreign firms, while SMEs can play an important role in developing local knowledge networks that lead to innovation.

Competitive Advantages

That said, Costa Rica’s role in electronics supply chains is not accidental. There are clear competitive advantages that the country holds:

• Political stability and policy certainty are valued by investors
• High commercial openness and strong trade infrastructure
• Cheap, reliable workforce to support high-value, precision manufacturing
• Costa Rica has a robust infrastructure, especially with regard to energy and water access
• Proximity to other semiconductor manufacturing hubs in Latin America and North America

These advantages have allowed Costa Rica to develop a stable and prominent position supporting some of the largest tech companies in the world.

Key Challenges

Despite existing strengths, the OECD identified several weaknesses that threaten the future competitiveness of electronics in Costa Rica. Perhaps most importantly, the report cautions that “unless Costa Rica can evolve from offering incentives to articulating a robust innovation ecosystem, the sector’s capacity to contribute to sustainable and inclusive economic growth will be constrained.” By that metric, the three areas requiring immediate attention are:

• Total productivity has improved, but not enough to satisfy the sector’s potential
• Low levels of in-house research and development
• Insufficient intermediate linkages between multinationals and Costa Rican suppliers

Recommendations for Action

The OECD provided recommendations organized into four categories:

1. Semiconductors – develop a national roadmap complete with multi-stakeholder platforms that bring government, industry, and universities together around shared goals
2. Enabling Environment – increase the connectivity between local firms and multinationals, simplify trade facilitation measures, and reduce red tape that prevents Costa Rican firms from participating
3. Human Capital – develop specialized talent domestically, attract talent from abroad when needed, and create policies to prevent trained workers from leaving the country
4. Infrastructure – increase investments in logistics to support the sector’s continued growth and greater participation in regional supply chains

This final point underscores OECD’s central belief: that market forces alone will not take electronics in Costa Rica to the next level. Public policy and coordination will play an important role going forward.

Conclusion

Costa Rica’s electronics sector is facing a crossroads. It has succeeded in putting Costa Rica on the map for foreign electronics investors. However, as currently constructed, the sector struggles to make domestic economic linkages, create employment at scale, and drive R&D investment within the country. The OECD report’s ultimate assessment of electronics in Costa Rica is optimistic, viewing the sector as “a strategic asset whose potential has not been fully realized.” Forwarding that potential will require Costa Rica not only to incentivize investment but also to integrate it into a broader national strategy.