Its common name hides components that are essential to the development of technologies that are changing the course of history. As global powers struggle to bring the industry into their territory, Panama has the infrastructure to become a benchmark in the market.
Emanuel Lyons Delvalle, Head of the region’s Chamber of Commerce, Industries and Agriculture, tells us about the global ecosystem of this business that directly impacts such critical industries as telecommunications, automotive or health devices. “The supply chain of these products is the most advanced, and at the same time the most fragile because of how complex their manufacture is,” he explains.
The biggest crisis that the semiconductor (or chips) business has suffered, and that refers to the years of the global pandemic, did not, however, result from this complex production, but from its marketing. “Bottlenecks emerged because much of the manufacturing takes place in Southeast Asia and distribution routes to buyers in the Americas and Europe were disrupted,” the expert said. This conflict caused the United States to take the reins of the industry to bring production closer to its territory, for which it developed the Chips and Science Act initiative, which seeks allies in neighboring countries on the continent, favoring nearshoring and creating an International Technology Security and Innovation Fund (ITSI).
The Panama case as an example and reference
Although the region does not yet have factories, known as fabs in the business, nor assembly, testing and packaging (ATP) plants, Panama has an excellent logistics and service infrastructure to serve the market, as Lyons Delvalle assures us. “We have enviable maritime, land and air connectivity, with the Panama Canal, where 7% of world trade passes, and three international airports less than 80 kilometers from the country’s main economic zone.” In addition, its geostrategic location, with modern port facilities facing the Pacific and the Atlantic, is complemented by legislation that favors direct foreign investment and that facilitates the hiring of qualified personnel.
Academic institutions in the region are directing their investment and research efforts toward improving local industry efficiency through training and education. “Academia, especially the Technological University of Panama, has been developing the Center for Advanced Semiconductor Technologies (Centro de Tecnologías Avanzadas en Semiconductores, C-TASc) for years. Highly qualified personnel are trained and can be part of the chip design stage. Additionally, the SENACYT (Secretaría Nacional de Ciencia, Tecnología e Innovación [National Ministry of Science, Technology and Innovation]) is driving scholarships to train personnel in the assembly, testing, and packaging phases,” adds the Head of the Chamber of Commerce.
Shared Leadership in Latin America
In the Latin America region, we can point to three countries that make up a value chain identified by the U.S. and that are positioning themselves as benchmarks for global trade in collaboration with the North American country:
- Mexico. With its proximity to the United States and 30 years of commercial proliferation, it has robust supply chains that distribute all kinds of products to its main business partner.
- Costa Rica. It has a factory of the US company Intel in which chips are tested (represents about 3% of its GDP), and millions of investments are being made in the coming years.
- Panama. As the expert told us, the region has the logistical, academic, and infrastructure capacity to quickly insert itself into the global supply chain.
The impact of this development on the region has its most revealing figures in the field of training and employment. Lyons Delvalle distinguishes two tangible repercussions: “First, the capacity and talent of workers is elevated. Advanced degrees in science and technology are required to work, implying an increase in the skills of the country’s human talent. Second, it is estimated that, for each job generated by semiconductor factories, 5 or 6 indirect jobs are created from other companies.”
Industry strengths and weaknesses in the region
Between Panama, Mexico and Costa Rica, there are no temptations for unfair competition, but rather regional and industry synergies. “The Chips and Science Act, which provides the nearshoring initiative focused on research and development with $500M, is not looking to give one country the edge over another. It seeks to increase its technical and academic capabilities so that everyone is part of the global chain. Panama can perfectly serve plants in Costa Rica and vice versa thanks to its logistics infrastructure. Part of the ATP process can be done in Central America and then completed in Mexico. The industry is large enough for all participants to make a profit from this activity,” the expert celebrates.
Although the industry seems to have a perfectly calibrated system, it is not without challenges. “Disruptions to the global chain, not only of finished product but of raw materials, jeopardize the stability of the business. In addition, a global shortage of expertise impedes the rapid development of the industry. These challenges are overcome by strengthening supply chains—making them resilient—and increasing students’ academic capacity to make the industry attractive,” concludes Lyons Delvalle.
Article collaborator:
Emanuel Lyons Delvalle heads the Chamber of Commerce, Industries and Agriculture of Panama, where he leads its semiconductor commission. He is also the General Manager of E-Business Distribution, a technology company that sells and integrates telecommunications services, data networks and security systems.
