Dominican Republic assesses readiness to compete in global semiconductor and PCB value chains

Information Technology & Innovation Foundation (ITIF), USA, organized a conference in Washington, USA, on assessing the Dominican Republic’s readiness to compete in global semiconductor and PCB value chains.

Dominican Republic has been one of the world’s fastest-growing economies over the past half century, evolving into Latin America’s seventh-largest economy today. The country boasts a rich advanced-manufacturing sector, fueled by one of the most-robust free trade zone networks in the Americas, which produced $1.2 billion of advanced electronics, and $2.25 billion of medical device exports, in 2022. As global value chains for advanced technology products, such as semiconductors and printed circuit boards (PCBs) reshuffle amidst a quest for near-shoring that enables increased diversification, resilience, and security, the Dominican Republic represents a leading candidate to attract such investments in the Americas.

For those interested, Dominican Republic is very close to Haiti, and lies just below Cuba on the map. Dominican Republic is a few thousand miles away from Miami, USA. It is one of the world’s fastest-growing economies. It offers, perhaps, the most attractive business environment in Latin America. It is now a leading candidate for near-shored investments in advanced manufacturing activity—particularly, for electronics such as PCBs, and the assembly, test, and packaging (ATP) of semiconductors.

L-R: Víctor O. Bisonó Haza, Frances Chang, Jason Marczak, Christopher D. Hess, and David Schild. Standing: Stephen Ezell.

The speakers were: Víctor O. Bisonó Haza, Minister of Commerce, Industry, and MSMEs, Dominican Republic, Frances Chang, Director of International Engagement, CHIPS Program Office, US Department of Commerce, Christopher D. Hess, VP, Global Public Affairs, Eaton, Jason Marczak, VP and Senior Director, Adrienne Arsht Latin America Center Atlantic Council, and David Schild, Executive Director, Printed Circuit Board Association of America (PCBAA).

Stephen Ezell, VP, Global Innovation Policy, and Director, Center for Life Sciences Innovation, Information Technology and Innovation Foundation, was the moderator. Dominican Republic has become a stable economy over the years. It has done many improvements in business and exports.

Well-developed advanced electronics manufacturing base
Dominican Republic has grown at almost 5 percent annual rate over the past half century, transforming it into Latin America’s eighth-largest economy and positioning it to graduate from middle-income to advanced-economy status by 2060.

Dominican Republic’s 86 free zones (FZs), which exempt exporters from paying 100 percent of income tax (and a range of other taxes), make the country a regional powerhouse in the production and export of electronics and medical devices.

25 leading electronics manufacturers operating in the Dominican Republic’s FZs provide a well-developed advanced electronics manufacturing base to serve as a springboard for the country getting into semiconductor ATP and PCB manufacturing. Companies active in the Dominican Republic’s FZs, are led by enterprises such as Eaton, Rockwell Automation, Jabil, Fenix Manufacturing Solutions, and Cutler Hammer Industries. 16 of these 25 electronics companies are headquartered in North America, with 22 of 25 subsidiary of a foreign parent. Collectively, electronics companies operating in Dominican Republic FZs generate 11,120 jobs, 6 percent of all employment in Dominican Republic FZs.

Medical devices/instruments constitute the country’s leading export sector, accounting for $2.25 billon in annual exports, with 5 of the world’s top 10 medical device manufacturers operating in the Dominican Republic. Just behind medical devices comes electronics.

Circuit breakers lead with 62.5 percent of such exports, followed by cellular phones and wireless network equipment at 9.1 percent, and other devices, such as junction boxes, with a 5.3 percent share.

Dominican Republic’s “Bureaucracy Zero” program, which seeks to enhance public administration efficiency through clear and appropriate regulatory frameworks, has recently streamlined 315 procedures operated by 63 government institutions.

Dominican Republic’s flagship workforce training program, the National Institute of Professional Technical Training, or ‘INFOTEP’, equips the country with the mechanism needed to train a larger workforce to support advanced electronics manufacturing.

The current re-organization of the global supply chains present an opportunity for the other countries. The semiconductor industry will also create new opportunities for all of us. There are three high-level phases: R&D, wafer, and ATP. Dozens of countries are developing competitive advantages. In ATP, there are two types of companies. China and Taiwan currently dominate in ATP. We need to get USA even more involved.

There are economic multiplier effects involved. We see significant economic multipliers happening, and in Dominican Republic as well. Its electronics manufacturing springboard gives them opportunity to get into ATP. Semiconductor is really a complex activity. The sophistication of policy-making environment has to be equally sophisticated.

Dominican Republic offers stable investment climate. It has cost-competitive electronics manufacturing environment. FZ environments are also available. Data is very important for designing chips. It already has several IT Agreements (ITA) in place. ITA 3 is now under discussion.

Strategic investment destination
Víctor O. Bisonó Haza, Dominican Republic, spoke in Spanish, with English translations. We are making history as a strategic investment destination. Global semiconductor industry is expected to cross $1 trillion 2030. We are also interested in PCBs and ATP. Dominican Republic now is poised to become a strategic destination for the USA.

This is of vital importance for us. Only two countries in Latin America so far have ATP facilities. Dominican Republic has enjoyed solid political and economic stability for decades. USA is a main destination for our exports. We have all necessary requirements to become a top partner with the USA for this region. We have a feasibility report on semiconductors. We will take the necessary steps to make Dominican Republic a leading destination, especially for ATP companies.

Progress made under CHIPS Act
Frances Chang, CHIPS Program Office, talked about the progress made under the CHIPS Act. We had fallen behind in manufacturing. CHIPS Act was enacted to reverse the trend. It also helps to diversify the global semiconductor supply chain. In Feb. 2023, the first opportunity was launched. We announced the first preliminary memorandum of terms (PMT) with BAE Systems, and then, with Microchip. We will continue making announcements throughout 2024.

CHIPS R&D program also has NSTC as pivotal. Its main purpose is to ensure USA drives semiconductors, going forward. There are manufacturing incentives as well. In Oct. 2023, we announced an agreement with Natcast. Natcast, the expected operator of the CHIPS for America National Semiconductor Technology Center (NSTC), has announced industry veteran, Deirdre Hanford, as the first CEO.

We have three objectives: communicate importance of chips. CHIPS For America has met this. We also have NAPMP. We have made clear our priorities. Regarding global demand and supply, additional capacity will be required all across the value chain. We must build a resilient semiconductor supply and value chains. We have also invited complementary investments. Importance of cooperation with global partners is also key.

There had been severe disruptions with Covid-19. With the CHIPS Act in place and functioning, we will have a much more diverse and secure semiconductor supply chain in the future.

Nearshoring trends
Jason Marczak, Adrienne Arsht Latin America Center Atlantic Council, said we have a Caribbean initiative going on. We have near-shoring trends going on around us. We have a window of opportunity. Latin America and Caribbean can become a major destination for safe and secure supply chains. We can add over $70-80 billion over the next few years.

In Dec. 2023, we launched a group for near-shoring. Atlantic Council’s Adrienne Arsht Latin America Center (AALAC) convened the inaugural meeting of its Near-shoring Working Group—a non-partisan, multi-sectoral group of policy professionals representing the United States and seven additional countries who will help translate near-shoring from rhetoric into reality, with a focus on Central America and Mexico. Some other countries include Costa Rica, Panama, Guatemala, etc. Near-shoring potential for the various countries are currently differing. Dominican Republic has, for long, received investments.

Dominican Republic has also made a drive for educating its workforce. We also need to build vocational and more educational programs for semiconductors. There are profound opportunities in the Dominican Republic that we need to invest in.

Improving collaborations
Christopher D. Hess, VP, Global Public Affairs, Eaton, said we have been talking to various governments across the world. We are seeing the convergence of electrification and mechanical in automotive. We are seeing increasing demands for our products. Dominican Republic plays major role in supplying the equipment to customers. We are now looking to improve collaborations, and lives of people who work with us. We also need a framework of government collaboration.

As we are trying to re-shore in this geopolitical environment, we are constantly looking at where we can do this more efficiently. Our mobility business is in nearly every truck. We are also present in every airline. We also need to collaborate, and we have already found this in Dominican Republic.

Dependence on other countries creates risks
David Schild, Executive Director, PCBAA, said there is tremendous focus on semiconductors. We cannot keep saying that ‘chips don’t flow.’ We are also looking at raw materials and copper that makes PCBs.

PCB worldwide production revenue was estimated to be over $60 billion in 2021. In past 20 years, PCB production moved away from United States at an alarming rate, primarily to Asia, as overseas costs were driven down by foreign government subsidies. This dependence on other countries creates risks for both business and national security.

About 90 percent of microelectronics supply chain is currently in Asia, and 56 percent of that is in Mainland China. We are hoping to build a more diverse supply chain. People want to move to a more resilient supply chain. We are also losing out on knowledge, as research and knowledge is co-located with production. We are also losing out on the IP. The USA must also invest more in advanced electronics manufacturing, along with other countries. We hope that we can set the record straight in the future.