WASHINGTON – As one of the world’s fastest-growing economies, and arguably home to Latin America’s most attractive business environment, the Dominican Republic is a leading candidate for nearshored investments in advanced manufacturing activities for the U.S. and regional markets—particularly electronics like printed circuit boards (PCBs) and the assembly, test, and packaging (ATP) of semiconductors—according to a new report by the Information Technology and Innovation Foundation (ITIF).
Particularly as the U.S. government stimulates semiconductor-sector growth across North America through the CHIPS and Science Act, the Dominican Republic has a unique opportunity to establish a presence for itself in global semiconductor and PCB value chains that are projected to grow 40 percent to become a $1 trillion industry by 2030, the report finds.
“Global production chains in advanced-technology industries are undergoing a dramatic reordering,” said Stephen Ezell, vice president of global innovation policy at ITIF and author of the report. “Between geopolitical tensions with China, the search for lower production-cost environments, a desire to tap into new pools of skilled talent, and to locate production closer to end users, the Dominican Republic offers a stable political economy and one of the most attractive environments for foreign direct investment in the Western hemisphere.”
To start, the Dominican Republic offers a cost-competitive manufacturing environment. For example, the World Bank finds that the hourly labor cost in the Dominican Republic is just six percent of the U.S. rate, approximately half that of Costa Rica or Mexico, and even less than in China. Not to mention, notable global electronic manufacturers such as the Eaton Corporation and Rockwell Automation are housed in the Dominican Republic.
In addition, a key driver of the Dominican Republic’s economic growth is the country’s 87 free zones that underpin advanced manufactured goods production—notably of electronics products. These free zones support 820 companies and employ close to 200,000 workers. The Dominican Republic’s second-largest export (after medical devices) is electronics, accounting for $1.2 billion in 2022. On top of that, the Dominican Republic’s liberalized trade regime permits exporters duty-free access to more than 900 million consumers across 49 countries—made in large part thanks to the Dominican Republic-Central America-United States Free Trade Agreement, its Economic Association Agreement with the European Union, and its membership in the initial World Trade Organization (WTO) Information Technology Agreement. The Dominican Republic sits in an enviable geographical position in the Caribbean and offers world-class logistical infrastructure.
Yet despite all the benefits the Dominican Republic offers for increased semiconductor manufacturing, there are some areas where the country lags. If the Dominican Republic is truly to move up the value chain in advanced electronics manufacturing, it will need to educate and field a skilled workforce. Thankfully, the Dominican Republic already possesses a technical education ecosystem and demonstrates the ability to support the workforce of a high-tech electronics manufacturing industry.
The report concludes with several policy recommendations to help advance the Dominican Republic’s ambition to compete in semiconductor and PCB value chains:
- The Dominican Republic should be considered a leading candidate as a designated recipient of funding from the U.S. Department of State’s International Technology Security and Innovation (ITSI) Fund.
- The government of the Dominican Republic should develop an explicit semiconductor value proposition and broader competitiveness strategy, which addresses topics such as expanding the pool of scientists and engineers, how the government can better support applied industrial R&D activity, and how it can further improve regulatory, tax, customs, and incentive programs to attract globally mobile investment in the sector.
- The Dominican Republic should launch an awareness campaign reaching out to global investors in advanced electronics industries highlighting the country’s free zones and tax policies.
- The Dominican Republic should help address the global semiconductor workforce gap by expanding the availability of degree programs in electrical engineering, computer science, and related courses, including in collaboration with leading U.S. universities in these fields.
- The Dominican Republic needs to increase the number of individuals holding IPC 610 certifications.
- The Dominican Republic could consider the use of investment incentives to attract semiconductor industry manufacturing activity.
- The Dominican Republic should set up a “one-stop-shop” to facilitate the regulatory clearance of all permits and approvals, such as environmental review permits, that would be required to launch a semiconductor ATP or PCB facility in the country.
- The Dominican Republic should join the expanded Information Technology Agreement (ITA-2) and join discussions toward promulgating an ITA-3.
- The Dominican Republic should champion robust digital trade regulations. For example, one way to do so would be by joining the WTO’s Joint Initiative on E-commerce.
- Brazil and Ecuador have entered into bilateral protocols relating to trade rules and transparency with the United States. The Dominican Republic should explore the possibility of entering into an exchange of views for a similar protocol with the United States.
“As leading semiconductor manufacturers evaluate where to situate a multi-billion dollar fab or ATP investments, they may consider as many as 500 discrete factors, ranging from countries and states’ talent; tax, trade, and technology policies; labor rates; laws; custom policies; and more”, said Ezell. “Since the ease and certainty of doing business in a country matters greatly, the Dominican Republic is well poised. But, there’s still work to do.”
Read the report.
