President Luis Abinader is setting bold goals for the Dominican Republic, aiming to position the country as a player in the global semiconductor industry. This vision mirrors the ambitious initiatives of former President Leonel Fernández in the late 1990s, who transformed Santo Domingo into a modern metropolis by building the Santo Domingo Metro. Now, Abinader seeks to lay the groundwork for his country to join the competitive world of microchip manufacturing.
The Global Semiconductor Landscape
In the early days of the computer industry, the United States controlled 100% of semiconductor manufacturing. Over the years, that dominance waned as production shifted to Asia, where countries like Taiwan, South Korea, China, and Japan now dominate the market. Today, 80% of the world’s semiconductors come from Asia, with Taiwan alone producing over 60% of the global supply.
This reliance on Taiwan poses risks, especially given the geopolitical tensions in the region. Taiwan’s semiconductor industry is under constant threat of disruption due to its complex relationship with China, which aspires to assert greater control over the island.
Why the Dominican Republic?
President Abinader envisions the Dominican Republic as an ideal hub for semiconductor manufacturing through a blend of nearshoring and “friendshoring.”
- Nearshoring: The DR’s proximity to the United States and Europe reduces costs and improves efficiency.
- Friendshoring: Shared values and policies with countries like the US create a secure and predictable trade relationship.
These factors make the Dominican Republic a compelling option for companies seeking alternatives to the Asian semiconductor supply chain.
Building the Foundation
To turn this vision into reality, President Abinader has tasked the Ministry of Industry & Commerce with creating a National Strategy for the Promotion of the Semiconductor Industry. His Decree 324-24 calls for establishing a “safe, competitive, and trustworthy” semiconductor sector to attract investment and foster innovation in free zones, local industries, and academic institutions.
However, the journey will be far from easy. Developing a semiconductor industry requires significant financial resources, a skilled workforce, and advanced infrastructure. A single semiconductor fabrication plant can cost over $20 billion, requiring stable power, clean water, and robust supply chains for materials and equipment.
Lessons from Taiwan
Taiwan’s transformation into a microchip powerhouse offers valuable insights. In the 1970s, Taiwan’s economy relied heavily on sugar and textile exports. Visionaries like Shih Chin-Tay changed the narrative, convincing the government and private sector to invest in the semiconductor industry. By the 1980s, Taiwan had established its first chip manufacturer, the United Microelectronics Corporation (UMC).
Today, Taiwan leads the world in chip production, with its companies manufacturing 90% of the most advanced semiconductors. This success was built on decades of investment in research, development, and infrastructure.
Opportunities for the Dominican Republic
While the Dominican Republic is years away from full-scale chip manufacturing, it can take smaller steps toward building its capabilities. One option is to focus on preparing raw materials used in semiconductors, a crucial intermediate step.
The US CHIPS Act, which allocates $52 billion over five years for semiconductor research and development, highlights the global race to bolster chip manufacturing. However, even that substantial investment pales compared to Taiwan’s annual $40 billion spent on capital equipment and R&D.
Read: Dominican Republic Economic growth is The Highest in Latina America & Caribbean
A Strategic Move
Geopolitical realities are driving the need for diversification in chip production. The Center for Strategic & International Studies (CSIS) warns that a potential blockade of Taiwan by China could disrupt global semiconductor supply chains, causing economic chaos. To mitigate this risk, efforts are underway to shift some of Taiwan’s manufacturing capacity to the Americas.
The Dominican Republic, with its strategic location and close ties to the United States, is well-positioned to play a role in this transition.
Challenges Ahead
Despite its potential, the Dominican Republic faces significant challenges. The country severed diplomatic ties with Taiwan in 2018, choosing instead to align with China. However, this shift has yielded minimal tangible benefits, and now the Dominican Republic must navigate its path carefully to capitalize on opportunities in the semiconductor industry.
President Abinader’s vision is ambitious but necessary in a world where technological advancement and supply chain security are increasingly intertwined. With the right investments, partnerships, and policies, the Dominican Republic could carve out a role in this critical global industry.
