Can Costa Rica Become a Semiconductor Hub Amid Global Supply Chain Shifts?

Costa Rica has strong potential in the global semiconductor industry due to its stability, trade openness and past success with firms like Intel, but its ecosystem remains small and heavily dependent on a few multinationals. To grow, it must build local suppliers, improve skills, and upgrade infrastructure to become a more resilient and competitive player.

Costa Rica is quietly positioning itself in one of the world's most strategic industries: semiconductors. A new OECD study, developed with Costa Rican institutions like the Central Bank, COMEX and PROCOMER, shows that the country has built a strong base but still has a long way to go. At a time when global chip supply chains are being reshaped due to geopolitical tensions and disruptions, Costa Rica is emerging as a promising alternative location for investment.

Semiconductors power modern life, from smartphones to cars and medical devices. But production is heavily concentrated in a few regions, making the world vulnerable to shocks. Costa Rica sees an opportunity here. With political stability, open trade policies and experience in high-tech manufacturing, it is trying to attract more semiconductor activity and strengthen its role in global supply chains.

Intel's Legacy and a Fragile Ecosystem

Costa Rica's semiconductor journey began in the late 1990s with Intel's arrival. The company became the backbone of the country's electronics sector, creating jobs, boosting exports and bringing advanced technology. Over the years, other multinational firms followed, but Intel has remained the dominant force.

This dependence has created both strength and risk. When Intel moved part of its operations abroad in the mid-2010s, the local industry suffered a sharp decline. When it was later reinvested, the sector rebounded. These ups and downs highlight a key issue: Costa Rica's semiconductor ecosystem is still too concentrated and relies heavily on a few large players rather than a broad base of firms.

Growth That Hasn't Fully Delivered

The broader electronics sector, which includes semiconductors, has not grown as strongly as expected. While there have been periods of expansion, especially with new foreign investments, overall performance has lagged behind other high-tech industries like medical devices. Productivity growth has been modest, and most of the economic gains are captured by large companies.

Small and medium-sized firms, which are crucial for innovation and resilience, have seen their role shrink over time. This lack of diversity makes the sector less dynamic and more vulnerable to external changes. In contrast, industries like medical devices have grown faster by building stronger local networks of firms and suppliers.

Strong Global Links, Weak Local Base

Costa Rica is well-connected to global semiconductor supply chains. It exports chip-related products and maintains close trade ties, especially with the United States. However, it depends heavily on imports for components and manufacturing equipment, leading to a trade imbalance.

This reveals a deeper challenge: the country lacks a strong domestic supplier base. Many of the inputs needed for semiconductor production come from abroad, limiting the benefits that stay within the local economy. While there are connections with industries like energy, logistics and medical devices, these links are often dominated by foreign firms, reducing opportunities for local businesses.

Talent and Infrastructure Hold the Key

One of Costa Rica's biggest challenges is developing the right skills. The country has a relatively educated workforce, but there are not enough graduates in the science and engineering fields to meet industry demand. Dropout rates are high, and many skilled workers leave the country for better opportunities abroad. Employers also point to gaps in English and advanced technical skills.

Infrastructure is another mixed picture. Costa Rica stands out for its renewable energy and sustainable water systems, which are attractive for semiconductor companies. But transport and logistics remain weak. Poor road connectivity and limited port capacity increase costs and slow down operations, making it harder for the country to compete globally.

A Turning Point for Costa Rica

The OECD report makes it clear that Costa Rica is at a critical moment. It has successfully entered the semiconductor industry, but its position is still narrow and fragile. To move forward, the country needs to diversify its ecosystem, support local firms, invest in skills and improve infrastructure.

There is also a need for better coordination among government agencies, industry and academia. Efforts like the Semiconductor Roadmap aim to align strategies, but their success will depend on strong execution.

If Costa Rica can address these challenges, it has the potential to become a more important player in the global semiconductor market. If not, it risks remaining on the sidelines of an industry that is shaping the future of the global economy.