Can Panama Build a Semiconductor Hub? OECD Maps a Road to Innovation, Skills and Investment

Panama is aiming to enter one of the world's most strategic industries at a time when governments are racing to make semiconductor supply chains more resilient. However, instead of competing directly with global chip manufacturing giants, the country is pursuing a more realistic strategy focused on semiconductor design and assembly, testing and packaging (ATP). According to a comprehensive OECD assessment prepared with Panama's Ministry of Commerce and Industries, the National Secretariat of Science, Technology and Innovation (SENACYT), the Technological University of Panama and several national and international research institutions, Panama has the potential to become a regional semiconductor hub if it strengthens its workforce, research capacity, infrastructure and investment environment. The report makes it clear that success will depend less on generous incentives and more on long-term policy execution, making it highly relevant for governments, development partners and private investors. Building on Logistics Strength Rather Than Manufacturing Scale Panama's biggest competitive advantage is not manufacturing but logistics. The Panama Canal, world-class ports, international airports and multiple special economic zones already connect global supply chains, giving the country an attractive platform for semiconductor-related services. The OECD argues that Panama should capitalize on these strengths by targeting design and ATP activities instead of expensive wafer fabrication plants that require billions of dollars in investment and decades of industrial experience. The country's economy, however, remains dominated by services, which contributed 70.4% of gross value added in 2023, while manufacturing accounted for only 4.9%. Panama had just 918 medium-high and high-technology firms in 2022, representing only 1.2% of all registered businesses, with most operating in software and consulting rather than electronics manufacturing. Yet these firms provide higher wages, stronger profitability and more formal employment than traditional industries, suggesting that expanding advanced manufacturing could improve productivity and diversify the economy beyond logistics and finance. Skills and Innovation Will Decide Panama's Success The report identifies human capital as Panama's biggest challenge. The country currently lacks the engineers, technicians and researchers needed to support a semiconductor industry. Educational outcomes remain weak, with only 16% of students reaching minimum mathematics proficiency and 38% achieving minimum science proficiency in the latest PISA assessment, far below OECD averages. The talent pipeline is equally limited. Only 294 students graduated in electronics at the upper-secondary level in 2020, while STEM graduates represented just 14.8% of university graduates in 2023. Panama's high-tech workforce accounts for less than 1% of total employment, highlighting the shortage of specialized skills. Research and innovation also require significant strengthening. Panama invests only about 0.2% of GDP in research and development, compared with 0.56% across Latin America and much higher levels in OECD countries. To address this gap, the government has established the Center for Advanced Semiconductor Technologies (C-TASC) with planned investments of USD 36.5 million over five years. The centre is expected to support applied research, technology commercialization, workforce training and collaboration between universities and industry. Why the Report Matters for Governments and Development Partners For policymakers, the OECD argues that semiconductors should not be treated as a stand-alone industrial project but as part of a broader economic transformation strategy. Panama has already allocated USD 104.9 million for its semiconductor strategy during 2025-2029, with more than USD 75 million dedicated to workforce development. The report recommends improving STEM education, expanding vocational training, strengthening English-language skills, supporting apprenticeships and creating closer partnerships between universities and businesses. The findings also provide a clear investment roadmap for international development partners such as the World Bank, Inter-American Development Bank, CAF and bilateral donors. Rather than financing individual factories, development institutions can generate larger long-term impacts by supporting education reforms, digital infrastructure, renewable energy, research institutions, innovation financing and technology transfer programmes. These investments would strengthen Panama's competitiveness not only in semiconductors but also in advanced manufacturing, artificial intelligence, medical technology and other knowledge-based industries. Private Sector Opportunities Depend on Long-Term Reforms The report highlights significant opportunities for multinational companies, technology firms, investors and domestic entrepreneurs. Panama already offers attractive tax incentives through regimes such as SEM, EMMA and several special economic zones, while its strategic location makes it an attractive regional base for semiconductor-related operations. However, the OECD warns that overlapping investment regimes and complex administrative procedures can discourage investors. Simplifying regulations through a digital one-stop investment platform would improve investor confidence and reduce business costs. The report also calls for stronger support for start-ups and small businesses through dedicated semiconductor investment funds, venture capital networks, business incubators and technology transfer programmes. Reliable electricity, water security, broadband connectivity and climate-resilient infrastructure will also be essential because semiconductor production depends on uninterrupted utilities. The OECD concludes that Panama's semiconductor ambitions represent far more than an attempt to attract a new industry. They offer an opportunity to diversify the economy, create high-value jobs, strengthen research and innovation, and integrate the country into global technology supply chains. If reforms in education, infrastructure, governance and innovation are implemented consistently, Panama could establish itself as an important regional technology hub. If they are delayed, the country risks investing in institutions and incentives without developing the skilled workforce and business ecosystem needed to sustain a competitive semiconductor industry. summary in 2 lines The OECD concludes that Panama can build a competitive semiconductor ecosystem by focusing on chip design and assembly, testing and packaging, but only through sustained investments in skills, research, infrastructure and coordinated policymaking. The report urges governments, development partners and private investors to prioritize long-term capacity building over short-term incentives, positioning semiconductors as a catalyst for economic diversification, innovation and high-value job creation.

Panama is aiming to enter one of the world's most strategic industries at a time when governments are racing to make semiconductor supply chains more resilient. However, instead of competing directly with global chip manufacturing giants, the country is pursuing a more realistic strategy focused on semiconductor design and assembly, testing and packaging (ATP). According to a comprehensive OECD assessment prepared with Panama's Ministry of Commerce and Industries, the National Secretariat of Science, Technology and Innovation (SENACYT), the Technological University of Panama and several national and international research institutions, Panama has the potential to become a regional semiconductor hub if it strengthens its workforce, research capacity, infrastructure and investment environment. The report makes it clear that success will depend less on generous incentives and more on long-term policy execution, making it highly relevant for governments, development partners and private investors.

Building on Logistics Strength Rather Than Manufacturing Scale

Panama's biggest competitive advantage is not manufacturing but logistics. The Panama Canal, world-class ports, international airports and multiple special economic zones already connect global supply chains, giving the country an attractive platform for semiconductor-related services. The OECD argues that Panama should capitalize on these strengths by targeting design and ATP activities instead of expensive wafer fabrication plants that require billions of dollars in investment and decades of industrial experience.

The country's economy, however, remains dominated by services, which contributed 70.4% of gross value added in 2023, while manufacturing accounted for only 4.9%. Panama had just 918 medium-high and high-technology firms in 2022, representing only 1.2% of all registered businesses, with most operating in software and consulting rather than electronics manufacturing. Yet these firms provide higher wages, stronger profitability and more formal employment than traditional industries, suggesting that expanding advanced manufacturing could improve productivity and diversify the economy beyond logistics and finance.

Skills and Innovation Will Decide Panama's Success

The report identifies human capital as Panama's biggest challenge. The country currently lacks the engineers, technicians and researchers needed to support a semiconductor industry. Educational outcomes remain weak, with only 16% of students reaching minimum mathematics proficiency and 38% achieving minimum science proficiency in the latest PISA assessment, far below OECD averages.

The talent pipeline is equally limited. Only 294 students graduated in electronics at the upper-secondary level in 2020, while STEM graduates represented just 14.8% of university graduates in 2023. Panama's high-tech workforce accounts for less than 1% of total employment, highlighting the shortage of specialized skills.

Research and innovation also require significant strengthening. Panama invests only about 0.2% of GDP in research and development, compared with 0.56% across Latin America and much higher levels in OECD countries. To address this gap, the government has established the Center for Advanced Semiconductor Technologies (C-TASC) with planned investments of USD 36.5 million over five years. The centre is expected to support applied research, technology commercialization, workforce training and collaboration between universities and industry.

Why the Report Matters for Governments and Development Partners

For policymakers, the OECD argues that semiconductors should not be treated as a stand-alone industrial project but as part of a broader economic transformation strategy. Panama has already allocated USD 104.9 million for its semiconductor strategy during 2025-2029, with more than USD 75 million dedicated to workforce development. The report recommends improving STEM education, expanding vocational training, strengthening English-language skills, supporting apprenticeships and creating closer partnerships between universities and businesses.

The findings also provide a clear investment roadmap for international development partners such as the World Bank, Inter-American Development Bank, CAF and bilateral donors. Rather than financing individual factories, development institutions can generate larger long-term impacts by supporting education reforms, digital infrastructure, renewable energy, research institutions, innovation financing and technology transfer programmes. These investments would strengthen Panama's competitiveness not only in semiconductors but also in advanced manufacturing, artificial intelligence, medical technology and other knowledge-based industries.

Private Sector Opportunities Depend on Long-Term Reforms

The report highlights significant opportunities for multinational companies, technology firms, investors and domestic entrepreneurs. Panama already offers attractive tax incentives through regimes such as SEM, EMMA and several special economic zones, while its strategic location makes it an attractive regional base for semiconductor-related operations. However, the OECD warns that overlapping investment regimes and complex administrative procedures can discourage investors. Simplifying regulations through a digital one-stop investment platform would improve investor confidence and reduce business costs.

The report also calls for stronger support for start-ups and small businesses through dedicated semiconductor investment funds, venture capital networks, business incubators and technology transfer programmes. Reliable electricity, water security, broadband connectivity and climate-resilient infrastructure will also be essential because semiconductor production depends on uninterrupted utilities.

The OECD concludes that Panama's semiconductor ambitions represent far more than an attempt to attract a new industry. They offer an opportunity to diversify the economy, create high-value jobs, strengthen research and innovation, and integrate the country into global technology supply chains. If reforms in education, infrastructure, governance and innovation are implemented consistently, Panama could establish itself as an important regional technology hub. If they are delayed, the country risks investing in institutions and incentives without developing the skilled workforce and business ecosystem needed to sustain a competitive semiconductor industry.