Is the Dominican Republic a Top Contender for US Funding in Electronics Sector?

By Guzmán Ariza, Attorneys at Law

A January 2024 report by the Information Technology and Innovation Foundation (ITIF) highlights the Dominican Republic's attractiveness for the electronics industry. ITIF, a Washington D.C.-based think tank focusing on industry and technology policy, cites the country's business-friendly environment, featuring:

-Political stability: Encouraging long-term investment.
-Cost-competitive manufacturing: Reducing operational costs.
-Liberalized trade regime: Offering duty-free access to vast markets (900 million consumers across 49 countries).
-Extensive free zones (87): Providing dedicated infrastructure and incentives for businesses.
-Strategic Caribbean location: Facilitating efficient trade and logistics.
-World-class logistical infrastructure: Ensuring smooth import/export operations.
-Improving customs landscape: Minimizing processing delays and costs.

Currently, the Dominican Republic hosts 25 electronics companies, generating 11,200 jobs, representing 6% of total employment in its free trade zones. For this specific market, the free trade zone regime is an attraction to set up operations, as it generates a faster return for investors than in other countries, a better location and the ease of doing business.

Notably, 98.8% of Dominican electronics exports go to the United States, demonstrating strong North American market integration.

Based on these strengths, ITIF recommends the Dominican Republic as a prime candidate for funding from the US Department of State's ITSI Fund. This initiative supports the development of the Information and Communications Technology (ICT) and semiconductor sectors globally.

"U.S.-China geopolitical tensions, the search for lower production-cost environments, and a desire to tap into new pools of skilled talent and locate production closer to end users are all factors compelling multinational manufacturers of advanced electronic products to explore new production environments and nearshore part of their operations to the Americas. It’s time for both policymakers in Washington and corporate leaders worldwide to more seriously consider regional partners in the Americas as candidates for greater levers of advanced electronics manufacturing activity. Enrolling Western hemispheric partners in semiconductor supply chains can prove beneficial to the United States, regional partners, and global semiconductor enterprises alike, and the Dominican Republic is poised to join other Latin American countries such as Costa Rica and Mexico as leaders in this regard," the study states.

It further suggests that the Dominican Republic has the "ability to support a high-tech electronics manufacturing industry" and encourages the country for an "expanded use of investment incentives to attract semiconductor industry manufacturing activity". Particularly impactful could be a sector-specific investment tax credit. For instance, as part of the CHIPS Act, the United States offers an investment tax credit of 25 percent for capital expenses for manufacturing of semiconductors and related equipment.

A skilled workforce capable of meeting industry demands, and modern training programs are among the challenges mentioned for the Dominican Republic to climb the value chain in advanced electronics manufacturing. Specifically, the ITIF calls the Dominican Republic to increase the number of individuals holding IPC 610 certifications, the most widely used inspection standard in the electronics industry.