Bangladesh is carving its niche as South Asia’s next semiconductor manufacturing hub in a transformative shift within the global semiconductor landscape. The nation’s competitive advantage stems from an expansive talent pool of 750,000+ ICT professionals, coupled with operational cost efficiencies that outperform established Asian tech hubs by up to 30%.
Following the proven semiconductor success models of Vietnam, Malaysia, and India, Bangladesh aims to transition from innovation-driven startups to industrial-scale chip production capabilities.
Building an Industry from scratch
The establishment of a semiconductor industry demands integrating multiple critical development dimensions. The industry’s success hinges on infrastructure development and supply chain integration. Critical to this foundation are reliable water supply, uninterrupted power distribution, and sophisticated logistics networks.
“When semiconductor companies consider expansion today, they still restrict their search to locations that meet their basic requirements. However, simply meeting these requirements is not enough to guarantee investment. Instead, semiconductor companies now focus on three S’s—sustainability, supply chain security, and subsidies—as they select new sites,” – highlighted McKinsey’s January 2024 report, ‘Exploring new regions: The greenfield opportunity in semiconductors.’
Drawing parallels with global success stories such as Taiwan’s Hsinchu Science Park and Germany’s Silicon Saxony, Bangladesh’s emerging high-tech zones need to be equipped with similar integrated ecosystem approaches.
Government support
Financial incentives, such as tax breaks, subsidies, and regulatory support, reduce startup entry costs and attract foreign direct investment (FDI).
Rodriguez-Pose and Glauco Arbix’s 2001 research on the Brazilian automobile industry suggested an innovative model for understanding the impact of investment incentives. The model is based on the effect of subsidized investment on local and global efficiency.
An article by Boston Consulting Group emphasized “Targeted government action” to “foster investments that diversify the global manufacturing footprint and sources of supply for key materials.”
India’s Production Linked Incentive (PLI) scheme is a notable example that offers significant tax benefits to companies willing to establish semiconductor manufacturing in India. Incentives encourage industry growth by lowering initial setup costs, a crucial factor for third-world economies aiming to draw high-tech investments.
Creating an industry ecosystem
Building a robust semiconductor industry requires developing a highly integrated ecosystem beyond conventional manufacturing. To support scaling, emerging markets can develop industrial ecosystems that include R&D centers, shared facilities, and logistical hubs. This collaborative environment promotes innovation, cost reduction, and resource-sharing among small and large industry players.
World Semiconductor Trade Statistics (WSTS) data indicates that regions with cohesive semiconductor ecosystems show a better annual growth rate, outperforming the growth in fragmented markets.
Export strategies
For enduring growth and competitive advantage, emerging markets must implement export-oriented strategies and secure trade agreements that broaden access to international markets. Free trade agreements (FTAs) are pivotal in positioning local manufacturers within global supply chains by reducing tariffs, streamlining regulatory protocols, and creating a predictable trade environment conducive to cross-border collaboration.
Along with bilateral and multilateral trade alliances, sector-specific partnerships that cater to high-demand markets in electronics and computing are also required. Studies reveal that semiconductor-exporting countries with specialized trade agreements contribute significantly to a global industry.
Skill development
Collaboration between industry and academia is crucial for developing a thriving semiconductor ecosystem. Regions with robust academic-industry alliances, such as Taiwan and South Korea, demonstrate notably higher rates of patent generation and technological innovation.
Hands-on training in integrated circuit design and fabrication processes ensures graduates possess the requisite expertise to join the semiconductor workforce. This workforce-readiness strategy boosts job placement rates and cultivates a steady talent pipeline to fuel industry growth. A recent example is Japan sending engineers to be trained at Tenstorrent, a RISC-V and AI processor company, as reported in the EE Times (Electronics Engineering Times magazine). This mutually beneficial arrangement enabled upskilling while leveraging government support.
Effective lobbying
Investment companies and lobbying are essential in laying the groundwork for a semiconductor industry, particularly by mobilizing capital, attracting foreign investors, and advocating for supportive industry policies. Investment companies fuel growth by providing seed and venture capital, enabling startups to scale operations, expand R&D, and build critical infrastructure. They also assist in mergers and acquisitions, strengthening the local industry’s capabilities and competitiveness. Early-stage funding from these firms is essential in fostering innovation and establishing a resilient supply chain.
Investment lobbying is complementary. Lobbyists work with policymakers to develop a conducive environment for semiconductor growth. They push for trade policies, tax incentives, and subsidies that reduce local and international semiconductor companies’ entry barriers and operational costs. They shape favorable trade agreements and promote intellectual property protections. These efforts create financial and regulatory support for emerging markets to build a globally competitive semiconductor industry.
Case study: Vietnam
Vietnam’s semiconductor industry grew largely through export-driven policies and trade agreements. By attracting global companies like Samsung, the country secured significant FDI, built a local talent pool, and developed a strong manufacturing foundation. Trade agreements like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) have been critical in ensuring that Vietnam’s semiconductor products gain easy access to global markets, bolstering its competitive edge.
Case study: Malaysia
Malaysia’s semiconductor sector success is largely attributed to its skilled workforce and structured industry clusters. Partnering with educational institutions, Malaysia created specialized training programs for VLSI and microelectronics, preparing a ready workforce for the high-tech industry. Managed by organizations like the Malaysian Investment Development Authority (MIDA), Malaysia’s industrial clusters offer a coordinated network of suppliers, manufacturers, and service providers that support operational efficiency and innovation.
Case study: India
India’s ambition to become a semiconductor hub depends on aggressive government incentives. The Production Linked Incentive (PLI) scheme, launched in 2020, offers significant subsidies and tax breaks to companies setting up semiconductor facilities. India also emphasizes infrastructure investments and planning for new industrial parks for high-tech industries.
Examples from the three countries give us some key enablers for the semiconductor industry.
Bangladesh’s position
Bangladesh’s semiconductor industry is in its early stages, emphasizing electronics manufacturing, assembly, and workforce development. Bangladesh has a promising talent base with around 5,000 EEE/ECE graduates each year, including over 1,500 with VLSI (Very Large Scale Integration) skills.
There are lucrative tax incentives as well. Businesses located in Dhaka Division and Chattogram Division, but excluding the districts of Dhaka, Narayanganj, Gazipur, Chattogram, Rangamati, Bandarban, and Khagrachari, are offered a five-year tax exemption, which begins in the month of commencement of commercial production at the following rate.
Tax exemption
Bangladesh provides a comprehensive framework to attract foreign investment, featuring the Foreign Private Investment (Promotion & Protection) Act of 1980, which protects foreign investments from nationalization and expropriation. The country ensures equal treatment for local and foreign investors and facilitates the issuance of work permits for foreign nationals. Investors can transfer shares from foreign shareholders to local entities and remit royalties and technical assistance fees without restriction.
Bangladesh allows full capital, profits, and dividends repatriation, accommodating 100% Foreign Direct Investment (FDI), joint ventures, and various technology transfer arrangements. Access to local banks for working capital, legal protection of intellectual property rights, and supportive bilateral and multilateral investment agreements collectively enhance the appeal of Bangladesh as an attractive destination for foreign investment, especially in the semiconductor sector.
Bangladesh’s universities produce many EEE/ECE graduates annually, some with basic semiconductor and VLSI skills. To build an industry-ready workforce, Bangladesh must implement more advanced training programs and foster partnerships with foreign companies for knowledge transfer.
The return of Non-Resident Bangladeshi (NRB) engineers is essential, as their experience from established tech hubs can drive local innovation. Bangladesh can offer lucrative compensation packages to encourage this reverse brain drain and ensure NRB engineers are respected and have proper authority and leadership positions within organizations.
Facilitating global collaboration
The Bangladesh Semiconductor Industries Association (BSIA) has been established to promote the growth of the country’s semiconductor sector. This association unites manufacturers, technology providers, and academic institutions. It aims to facilitate research and development initiatives, advocate for supportive policies, and enhance skill development programs.
Bangladesh has implemented comprehensive policies and international agreements to streamline foreign entry, work permits, and long-term residency options. Visa-on-arrival privileges are extended to citizens of over 60 countries, simplifying the process for international investors and specialists. The government has also expedited work permit issuance, particularly for high-growth sectors like IT and semiconductors.
Bangladesh also boasts a well-developed network of embassies and consulates in over 50 countries, encompassing major semiconductor hubs. These diplomatic ties foster knowledge exchange and investment, such as collaborations with Japan and South Korea on technology transfer and workforce training.
However, it is important to note that Taiwan, a significant semiconductor powerhouse, does not have a direct visa application process, which could pose a potential challenge in forging comprehensive global partnerships.
Planning to host SEMICON Southeast Asia in Bangladesh soon would provide a unique platform to engage global semiconductor leaders, investors, and innovators in a cost-competitive environment. The event could catalyze foreign investments and partnerships.
The semiconductor industry is expanding globally, which will certainly dictate the global economy in the age of Industry 5.0. Hence, Bangladesh must strategize its game to enter the global semiconductor industry, and now is the best time to start.
AKM Uday Hasan Bhuiyan is an engineering manager-I at Neural Semiconductor Limited, where he leads the digital design team, specialising in digital verification, design for testability, physical design, etc. With over seven years of experience in the semiconductor industry, particularly in advanced lower node technologies, he participated in the end-to-end development of complex chip designs for leading semiconductor manufacturers. He managed high-performing teams, driving the delivery of high-performance semiconductor solutions.
