Chipping into the future: Bangladesh’s semiconductor prospects

The semiconductor industry has become a strategic pillar of the global digital economy, supporting artificial intelligence (AI), smartphones, telecommunications, electric vehicles, industrial automation, and modern defense systems.

As technological competition intensifies and countries seek to diversify their supply chains, Bangladesh has a significant development opportunity: to transition from a predominantly labor-intensive economy to knowledge-intensive, high-value industries.

Although Bangladesh’s semiconductor sector remains relatively small, growing interest in chip design, testing, packaging, and engineering services offers potential for export diversification.

However, realizing this potential requires coordinated policy, specialized human capital, research capacity, and reliable infrastructure.

The global semiconductor market is expanding due to rising demand for AI computing, data centers, smart devices, 5G, and industrial automation.

This expansion creates opportunities for emerging economies to enter selected segments of the semiconductor value chain without immediately building costly fabrication plants.

Chip design, outsourced semiconductor assembly and testing (OSAT), and advanced packaging are promising sectors.

Bangladesh’s principal advantage is its potential to supply technically trained workers at relatively low cost.

The country can pursue semiconductor development as part of its post-LDC-graduation export diversification strategy.

Expanding into chip design, verification, testing, and related engineering services could create higher-skilled jobs and reduce dependence on traditional export sectors.

Nevertheless, the country’s ambition to reach $1 billion in semiconductor exports by 2030 should be treated as a policy target rather than a guaranteed outcome.

Achieving this target will depend on investment, productivity, international partnerships, and the expansion of commercially viable capabilities.

Major challenges
First, human capital shortages are a fundamental constraint. Semiconductor engineering requires specialized knowledge in very-large-scale integration, electronic design automation, integrated circuit architecture, verification, physical design, and testing.

General engineering degrees alone do not ensure industry readiness.

Universities need stronger practical laboratories, industry-aligned curricula, and opportunities for applied research.

Second, infrastructure and research limitations constrain technological upgrading.

Semiconductor activities require specialized software, testing equipment, reliable power, high-quality digital infrastructure, and quality-control systems. Advanced fabrication is particularly capital-intensive and technically complex.

Third, intense international competition creates barriers to market entry.

Countries such as India, Vietnam, Taiwan, South Korea, and China have more established ecosystems, including specialized suppliers, research institutions, infrastructure, and investment networks.

Bangladesh must therefore compete on technical quality, reliable delivery, engineering specialization, and sustained innovation rather than on low labor costs alone.

Global supply-chain restructuring creates opportunities, but it also requires companies to meet demanding international standards.

Fourth, policy implementation and institutional coordination remain significant challenges.

The government has introduced tax incentives for semiconductor-related raw materials and activities in the FY2026-27 budget.

These include exemptions from several import-related taxes and duties on specified inputs until June 2031, while a 1% import duty remains in effect.

However, fiscal incentives cannot replace predictable regulation, efficient customs administration, intellectual property protection, and access to finance. A gap between policy announcements and their implementation could undermine investor confidence.

Policy recommendations
First, Bangladesh should prioritize IC design, verification, embedded systems, testing, and select packaging activities.

This approach would align investment with existing capabilities and avoid prematurely pursuing advanced fabrication plants that require substantial capital and technical infrastructure.

A phased strategy should set measurable targets for employment, exports, technology transfer, and research output.

Second,universities, industry, and government agencies should jointly develop specialized chip architectures, electronic design automation (EDA) tools, and verification and testing methodologies.

Industry internships, professional certifications, international training, and diaspora-led mentoring can help bridge the gap between academic knowledge and workplace requirements.

Funding should be tied to demonstrable learning outcomes and to industry participation.

Third,the government and private investors should establish semiconductor laboratories and shared testing facilities accessible to universities, startups, and smaller firms.

Competitive research and development grants should support work on low-power chips, AI hardware, IoT applications, and semiconductor reliability.

A national Center of Excellence could coordinate research, skills development, and technology transfer.

Fourth,the country should ensure transparent, time-bound incentives, streamlined customs procedures, stable tax arrangements, and stronger intellectual property protections.

Investment support should distinguish between productive technology development and activities that receive incentives without building sustained domestic capability.

Fifth, Bangladesh should pursue joint ventures, engineering contracting relationships, university partnerships, and collaborations with established semiconductor firms.

These partnerships should include training, knowledge transfer, and opportunities for domestic firms to move toward higher-value activities.

International market access should be supported through quality certification and export facilitation.

Conclusion
The semiconductor industry offers Bangladesh a strategic opportunity to diversify exports, create high-skilled jobs, and strengthen technological capabilities.

Emerging local companies, engineering talent, and government policy initiatives support this prospect. Yet significant obstacles remain in specialized education, infrastructure, research and development, international competitiveness, and policy implementation.

Bangladesh should therefore pursue a realistic, design-first, and capability-oriented strategy.

By integrating human capital development, research investment, reliable infrastructure, and international collaboration, the country can gradually strengthen its position in the global semiconductor value chain.

The central challenge is not merely entering the semiconductor industry but building the institutions and capabilities needed for sustained technological competitiveness.

(The writer: Former Additional Secretary to the Government. Currently, Associate Professor of Public Policy, Bangladesh Institute of Governance & Management– Affiliated to the University of Dhaka)