Minister França encourages domestic semiconductor production

The Minister of Foreign Affairs Carlos França has defended the creation of special tax zones to attract semiconductor manufacturers to Brazil, in a moment of shortage of the product in the world market.

The incentive would be given through the creation of export processing zones (ZPE) – tax exemption areas that have exchange autonomy and simplified administrative rules. França said the topic is being discussed within the government, and Economy Minister Paulo Guedes is enthusiastic about the idea.

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“I think the creation of such an environment in Brazil would not only strengthen the existing industry in the country but would also attract new investors to the domestic market, at a time when leading companies in the world market seek to diversify and decentralize their Productions,” the minister noted during a seminar on international semiconductor chain, held at the Ministry of Foreign Affairs on Wednesday (April 27). The problem draws the government’s attention as it affects practically all industry sectors and puts pressure on prices in the domestic market.

The problem impairs, for example, Brazilian car production, which has been suffering successive drops due to the lack of semiconductors, according to the National Association of Automotive Vehicle Manufacturers (Anfavea). With a supply lower than demand, prices have risen sharply in the vehicle market. The entity has been pressing for the adoption of policies to increase the internal production of the component.

Brazil produces only 10 percent of the national demand for chips and semiconductors. According to data from the Brazilian Semiconductor Industry Association (Abisemi), there are 20 companies operating in the sector in the country, whose revenue in 2021 was BRL 4.5 billion ($ 906 million dollars).

Aiming to increase this production, the Brazilian National Congress last year approved the extension until 2026 of the credit incentives provided for in the Program to Support Technological Development of the Semiconductor Industry (Padis).

“This is a State policy,” said the Minister of Science, Technology and Innovation Paulo Alvim, who also participated in the seminar. He explained that the demand shock caused by the COVID-19 pandemic has led many countries to adopt incentives for domestic production. “We have to face [the shortage of semiconductors] not only as a threat but also as an opportunity for our country,” he said.

According to Alvim, Brazil has been working “hardly together with the business sector” to propose public policies to encourage chip production. He also highlighted the portfolio’s investment in training human resources for this industry of around BRL 800 million ($ 161 million dollars) in 50 Brazilian universities with researchers in the area.

Another area clearly affected by the global dispute over chips is telecommunications, whose new 5G technology requires the production of very high-tech semiconductors, noted Communications Minister Fábio Faria. He encourages partnership with large international companies to increase national production.