The increasingly vulnerable nature of global supply chains and the volatile state of geopolitics are leading U.S. semiconductor chipmakers to look for alternatives to fill critical functions in their manufacturing process. Today, they have a new opportunity in a stable and reliable partner close to home – Panama.
Chips are the oil of the 21st century and the U.S. has made their importance to national security a priority through the CHIPS Act. America’s chipmaking manufacturers are moving to expand domestic capacity to help ensure the supply of these strategic goods.
The industry, however, often relies on companies thousands of miles away to complete the final stages of their chip manufacturing, known as Assembly, Testing and Packaging (ATP). Many of these ATP facilities and warehouses are concentrated in East Asia and Southeast Asia.
To diversify risk in the supply chain, while enhancing U.S. national security, Panama can be the go-to solution for U.S. chipmakers, a hemispheric hub for ATP and a global distribution node for the industry.
Panama provides the perfect opportunity for semiconductor companies to create build-to-suit ATP and warehousing facilities fewer than 900 miles from some of the world’s largest semiconductor plants located in the United States. As Panama is directly south of the U.S., it has a time zone advantage, essential for business coordination, that Asian options cannot match.
In addition to proximity, Panama offers U.S. chipmakers several other advantages – chief among them, stability. Panama is a proven strategic partner of the U.S. and more importantly, it is in a region of the world that is not experiencing high-stakes tensions. Investing in Panama as an ATP hub is also a win-win proposition for U.S. states seeking to expand technology exports to the region.
Any ATP distribution hub must have world-class logistics capabilities and Panama excels at this.
The Panama Canal is the world’s most important logistics node, providing valuable access to global supplies. The international community relies on Panama to provide political and economic stability to ensure the waterway’s uninterrupted operation. This in turn drives the country's policy decisions, ensuring predictability and steadiness, making it an appealing destination for long-term investments. The 185 multinational corporates that maintain regional headquarters in Panama testify to this.
Panama also has Latin America’s best air infrastructure, according to the World Economic Forum, with direct commercial and passenger flights to major American cities, and a regional hub for global freight carrier DHL.
In addition to Panama’s pleasant weather climate, the country has an agreeable regulatory climate.
Panama offers a Special Regime of Manufacturing Services for Multinationals that provides a wide range of incentives to foreign investors. This regime aligns well with U.S. objectives of creating economic prosperity at home while supporting partners abroad. For example, it allows American companies to set up manufacturing in Panama while preserving the ability to invoice consumers from their U.S. headquarters. Further stability for investors is ensured by Panama’s laws, which protect foreign investments from regulatory and fiscal changes for 10 years.
Panama has a free trade agreement with the United States and trade agreements involving more than 60 countries, including the EU, Singapore, Israel, and South Korea.
The most important component in all of this, of course, is people. The Panamanian government has set up a network of institutions to support workforce training and human capital development. For example, the Superior Specialized Technical Institute is a state-of-the-art campus that drives public-private partnerships to develop the tech-sector workforce.
The Technological University of Panama, which produces 4,000 high-level graduates per year, has six research facilities, including the Center for Experimental Engineering, the Center for Electrical, Mechanical, and Industrial Research; and a Center for Innovation and Technology Transfer. Similarly, the National Secretariat of Science, Technology, and Innovation promotes the expansion of workforce productivity in partnership with the private and public sectors. Furthermore, Panama continues to actively partner with U.S. academia to expand its capabilities.
As the stakes in the 21st-century chip wars escalate, American companies need reliable, stable, capable, and nearby partners in the semiconductor industry. Panama is the answer.
Ambassador Ramon Martinez is Panama’s chief envoy to the United States.
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