Costa Rica, a Central American country, has increasingly become an essential hub for semiconductor production. Thanks to a clear policy, strategic incentives, and support from the United States, the country has emerged as an attractive alternative to the Asian semiconductor market. Taiwan, long recognized for its significant technological potential, is found in semiconductors, the backbone of its economy. In the 1980s, after transitioning from a model of import substitution (ISI) to an open-market economy, Taiwan realized it needed a value-added product to compete globally. Without hesitation, the island nation began focusing on semiconductor production.
Today, semiconductors are among the most traded goods worldwide. They are crucial for manufacturing microchips and devices such as mobile phones, computers, and servers—foundational elements of the ongoing digital and technological revolution worldwide.
Taiwan produces approximately 63% of the semiconductors consumed globally. The rest of the world’s semiconductor demand is met by countries like South Korea, Japan, and, more recently, Costa Rica, which has entered this competitive market through a partnership with the United States. The collaboration aims to “create a more resilient, secure, and sustainable global semiconductor supply chain.”
2023: Costa Rica’s “Silicon Jungle”
Costa Rica has earned the nickname “Silicon Jungle” on the global stage, a title that reflects the country’s growing prominence as an attractive destination for semiconductor investment. This transformation is partly due to the nation’s abundant reserves of silicon, a metalloid derived from silica with properties between carbon and germanium. Costa Rica’s rise as a “Silicon Jungle” reflects its strategic positioning and commitment to becoming a global player in the semiconductor ecosystem.
However, Costa Rica’s emergence as a critical player in the semiconductor industry is more than just a matter of seizing an opportunity in technology markets. The country has a well-established history in developing high-tech industries, particularly in the medical devices sector, which became the nation’s leading export sector in 2017, according to LatinNews.
The semiconductor story in Costa Rica began more than two decades ago. In 1996, U.S. tech giant Intel opened its first plant in the country. Although Intel later moved its operations to Asia due to the competitive advantages of Taiwan, Japan, and other countries, the company returned to Costa Rica in 2023, announcing a significant $1.2 billion investment to expand its operations there.
“Costa Rica has a proven track record as a country capable of developing a highly skilled workforce that consistently takes on increasingly sophisticated processes,” said Marianela Urgellés Batalla, General Manager of the Costa Rican Investment Promotion Agency (Cinde) and a former Intel employee, in an interview with FDI Intelligence.
Plan 10234: A Strategic Policy Framework
To reach this point, Costa Rica has implemented a series of strategic policies, including laws designed to incentivize investment in the semiconductor industry and a collaborative educational program with U.S. universities to train thousands of Costa Ricans in semiconductor production. A central piece of this strategy is Law 10234, which was enacted in early 2023.
The law declares the semiconductor industry’s national interest and outlines a roadmap to attract more foreign direct investment (FDI). But this is not merely a law with technical jargon; Costa Rica is actively putting this plan into action through four key pillars: 1) Development of talent, which includes new educational programs, language skills initiatives, and efforts to attract workers with specialized qualifications; 2) Modernization of incentives, designed to adapt financial and fiscal benefits to meet new international standards; 3) Attraction of investment, including targeted marketing campaigns directed at semiconductor sector suppliers; and 4) Regulatory framework, which aims to streamline procedures and simplify bureaucratic processes to facilitate trade and investment.
U.S. Involvement and Investment
The United States has closely observed Costa Rica’s rise in semiconductor production, recognizing the potential to reduce its dependence on Asian chip producers. The U.S. seeks to foster semiconductor production in the Western Hemisphere, aiming to diversify its supply chain and create a vibrant local market. This aligns with broader trends such as nearshoring and friendshoring, which aim to build a more reliable and geographically closer supply chain.
“Costa Rica is seen as a partner by the United States to ensure that the semiconductor supply chain can keep pace with the ongoing digital transformation,” stated Cynthia Telles, the U.S. Ambassador to Costa Rica, in a press release issued in July 2023. As part of this partnership, the U.S. has allocated resources from the ITSI fund for Costa Rica, a fund managed by the U.S. Department of State’s Bureau of Economic and Business Affairs.
In addition to these funds, in 2023, the U.S. government awarded $13.8 million to Arizona State University to help train young Costa Ricans in semiconductor manufacturing. The goal is to build a workforce capable of supporting Costa Rica’s growing semiconductor sector and solidify the country as a strategic player in the global market.
Challenges and Competitiveness
Despite Costa Rica’s progress, there are still challenges to overcome. The country faces significant competition from Asia, where producers benefit from lower production costs and cheaper labor. Like many regions, Costa Rica is also grappling with increased organized crime, which can complicate the efforts to upskill its youth and maintain the stability needed to develop a world-class workforce.
Nonetheless, Costa Rica’s position as a semiconductor production hub is a testament to its ongoing innovation and potential as an alternative for semiconductor manufacturing in Latin America. With its robust educational programs, strategic government policies, and growing partnerships with major global players like the U.S., Costa Rica has demonstrated its ability to capitalize on its geographical and economic advantages.
The emergence of Costa Rica as a semiconductor powerhouse provides an inspiring example for the rest of Latin America. It highlights the possibilities for regional diversification and the strategic exploitation of competitive advantages, such as proximity to the U.S. market and a well-trained workforce. As global semiconductor demand rises, Costa Rica’s role in shaping a more secure and sustainable supply chain will grow significantly. The “Silicon Jungle” of Costa Rica may soon become an essential node in the global technology network, reshaping the semiconductor production and distribution landscape.