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Contact the Central American Group to establish a nearshore manufacturing operation in the Green Park Free Zone in Costa Rica
The Central American country hosts the region’s only Intel assembly and test plant. Chip manufacturing in Costa Rica will benefit from Washington’s commitment to sourcing this critical product closer to home.
Intel CEO Pat Gelsinger’s August 9, 2022, agenda indicated that he would be in Costa Rica. The purpose of his trip was to preside over the inauguration of the only semiconductor or chip assembly and testing plant that the world’s leading company owns in the West. The factory for chip manufacturing in Costa Rica was reactivated in 2020. At that time, however, operations were initiated without the participation of the top executive. He had a more critical issue to attend to. That was the Washington signing of the CHIPS Act that the Biden Administration launched to inject 52 billion dollars into developing the chip industry in the United States.
Geographical proximity may benefit chip manufacturing in Costa Rica
The coincidence of agendas was not entirely a fluke. The American company has spent its last years trying to balance the weight of its operations in Asia with that of its other facilities. In addition, the Biden government is promoting the local production of semiconductors as a critical product for the US economy and the nation’s security in the context of tensions with China. Due to the rivalry between the two global economic powers, the Costa Rican economy, located just three hours by plane from Miami, is in a position of potential gain.
The stars have recently aligned for Costa Rica. In 2015 Intel moved manufacturing operations to Asia. This affected 20% of Costa Rican exports. In 2020 the plant in the Central American nation was reactivated with an announced investment of $350 million that ended up tripling to $1 billion. This resulted in a growth in the company’s payroll of 60 % (almost 4,000 workers in 2022). Given the US initiative to source this strategic product closer to home, the capacity projection at the plant will be for whatever future needs may be.
What is coming seems equally advantageous for the country’s economy, which benefited from Intel’s installation in 1997. Although (the law signed by Biden ) is focused directly on the United States, due to its geographical proximity, this could be a significant gain for chip manufacturing in Costa Rica.
The manufacturing tasks of assembly and testing of semiconductors in Costa Rica correspond in the production chain to a stage after the manufacture of silicon wafers developed by Intel in Ohio. This activity could increase with new investments that have been recently announced in other US states before the so-called ‘Chips Law” was enacted.
The US to increase wafer production capacity
If the capacity to produce wafers increases in the United States, the assembly capacity must also increase. Costa Rica has the closest installed capacity to the US for this activity. In addition to Costa Rica, other Intel manufacturing plants are in Malaysia, Vietnam, and the southwestern Chinese city of Chengdu. Pandemic restrictions and global logistics disruptions have given rise to the need to prioritize shorter-distance supply chains.
That is where Costa Rica becomes significant, as President Rodrigo Chaves and the Assistant Undersecretary of State for Economic Growth, Energy and Environment, José Fernández, pointed out in a meeting in September in San José. “We have talked about how Costa Rica could benefit from the Chips legislation,” the US emissary told the press without giving further details or comments on the geopolitical disputes between his government and China.
Now it is known that the battle for tiny silicon components will not cease. Washington recently announced a ban on companies supplying Chinese customers with specific categories of semiconductors made with US technology. This move has dealt a severe blow to China’s industry and its production of weapons and supercomputers. This action is the most recent step in the fight between the two countries. This was further accelerated on August 2 by the surprise visit of Nancy Pelosi, speaker of the US House of Representatives, to Taiwan, the world’s leading producer of semiconductors. China considered this trip to be a serious and overt provocation.
Chips and medical devices are important Costa Rican exports
The Central American nation views the current state of affairs cautiously and optimistically for Costa Rica chip manufacturing. This point is acknowledged by the Minister of Science and Technology, Carlos Enrique Alvarado. The view is the same in the Ministry of Foreign Trade, whose figures indicate that in 2021 integrated circuits generated $518 million of the country’s exports. This figure s represented one out of every $20 of the value of total exports. Current chip production in Costa Rica is reported to be lower than in the 2005-2015 decade. However, it is enjoying a rapid recovery in times of favorable winds for Costa Rica’s economy. The renewed industry for chip manufacturing in Costa Rica is combined hand in hand with the dynamism of other sectors, such as medical devices, which is a leader in foreign sales.
Source: El Pais
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