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Contact the Central American Group to establish a facility in the chip industry in Costa Rica.
The global coronavirus pandemic has caused noticeable disruptions in global supply chains, as well as has accentuated the trend of “nearshoring.” This set of circumstances represents an opportunity to strengthen the chip industry in Costa Rica.
Silicon chips are of fundamental importance in the manufacture of items such as cell phones, computers, automobiles, medical devices, and sophisticated components used in the aerospace industry. The fact that there has been a disruption of the supply of these critically important manufactured products means that the chip industry in Costa Rica has the further opportunity to ramp up its capacity.
The chip industry in Costa Rica is complex
“The design and manufacture of semiconductors are among the most complex engineering processes that humanity performs. It is in this activity that hundreds of millions of transistors are packed in areas of a few square millimeters,” asserts Timothy Scott, Manager of Government Affairs and Public Relations of Intel Costa Rica, in a report on this topic that was recently published.
The pandemic has caused a prolonged disruption in global supply chains, especially those that incorporate Asia into the mix. It has also contributed to triggering increased demand for chips due to the greater implementation of virtuality in work and communications. Nearshoring has also gained in popularity. It is composed of a trend of transnational companies to relocate operations closer to their main consumer markets. This move into greater proximity to customers is becoming necessary to better manage the risks associated with logistical and geopolitical disruptions. These circumstances open opportunities for countries like Costa Rica to attract more technology companies that initiate new projects or execute expansions of existing operations. These circumstances can prove to be a boon for the chip industry in Costa Rica.
It all started with Intel
The Costa Rican economy took a turn towards greater modernity starting in 1997 when Intel installed its computer chip manufacturing plant. This milestone prompted many other world-class technology companies to focus on the Central American nation. Today Costa Rica has 104 companies active in the digital technologies sector alone, according to the nation’s investment promotion agency, Cinde. Leaders in the chip industry in Costa Rica are Intel and Zollner. Both are located in Cartago and are dedicated to providing electronic manufacturing services for the medical, automotive, aerospace, and electronics industries.
Intel will invest US $350 million in Costa Rica over the next three years to restart assembly and testing operations in the country. The plant began operations during the second half of this year and will eventually generate 200 new jobs in total. For its part, Zollner expects a 20% growth in production. The automotive and medical technology industries will drive these gains. In 2022, The Zandt, Germany-based manufacturer will open a new plant of approximately 50,000 square feet in La Lima de Cartago. The company expects to double the number of Costa Rican personnel to over 600 workers.
The electrical and electronics sector exported products worth US $ 155 million in the first quarter of 2021. Compared with the same period of the previous year, it grew by 19%. This placed it as the third-highest growth sector after medical equipment and precision and metalworking.
Cinde focuses on “Smart Manufacturing”
As Cinde, points out, any market demand that can be met or generate efficiencies from the country represents an opportunity to attract investment in the chip industry in Costa Rica. The investment promotion agency is developing a marketing approach focused on what it calls smart manufacturing, which could be an opportunity for the chip and other industries in the country.
“In the United States and Europe, there is a continuing discussion on the topic of moving the production of the goods for consumption to points that are in proximity to markets. This makes the current situation a fortuitous moment to develop investment attraction policies that allow these companies to view the country as an optimal destination for capital,” attests Ronny García, a professor and researcher at the School of Electronics Engineering at Tecnológico de Costa Rica (TEC).
Given current circumstances, Costa Rica has managed to position itself as an attractive destination for technology companies not only in advanced manufacturing but also in life sciences and other fields. Chip manufacturers in Costa Rica, as well as others, can benefit from the country’s political and institutional stability, as well as its free zone regime that has clear and stable rules.
Despite these positives, the country must provide an environment in which manufacturers can implement proactive strategies that can enable them to mitigate economic disruptions. The competition between countries to attract investment is fierce and Costa Rica has room to improve in terms of ease of doing business, education, infrastructure, business rules and regulations, and costs.
Just as the pandemic has triggered global demand for chips and accentuated nearshoring, it has also hit Costa Rica and the rest of the world hard in the areas of employment, health, education, and public finances. Improving the functioning of the State and tackling the problems that challenge the country’s competitiveness will be key to being able to move forward in taking advantage of the opportunities for the chip industry in Costa Rica.
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