Pursuing the quest of becoming the IC hub in Latin and North America, the Brazilian Government reinforces its campaign, offering interesting incentives in the world's fifth largest country in terms of area and population.

Launched at the beginning of 2007, Brazil's national Growth Acceleration Program -Programa de Aceleração do crescimento (PAC)- aims to further a concentrated investment strategy and consistent incentives by 2010. PAC addresses social and infrastructure development, regulation, financing, taxation, and {other?} specific measurements to accelerate Brazil's sustainable growth. In this context, it plans investments of more than $254.4 billion on infrastructure, including areas of sanitation, habitation, water resources, energy, and transportation. The Brazilian Government boosts foreign investments in this stable macroeconomic environment with its open economy, major internal market, strategic geographical location, and recently awarded 'Investment Grade' by Standard & Poor on April 2008.

The PAC furthers technological innovation in a context of fiscal efficiency and external insertion. The development of ICT and the semiconductor industry provides the Brazilian economy the dynamism for achieving a higher competitive edge. Therefore, the PAC includes cheaper components for civil construction items and capital goods produced in Brazil. In addition, it enables tax exemption for the importation of key high-end technological components such as ICs. Imports for semiconductor components reached $3.3 billion in 2006, increasing from $1.6 billion in 2001, according to Brazilian Electrical and Electronics Industry Association, also known as ABINEE. Imports accounted for $3.4 billion during 2007. Major global smart card IC manufacturers, Infineon Technologies, ST Microelectronis, and NXP Semiconductors, have local offices in Brazil and develop the Latin American industry's development from there, with their headquarters in Europe and offices in the United States. Atmel announced its new office in Brazil for the second half of 2008. More news from Samsung and other companies are also expected.

The Brazilian Government furthers technological innovation and the modernization of its industrial park under the responsibility of the Banco Nacional de Desenvolvimento Econômico e Social (BNDES). Between 2004 and the first quarter of 2007, the National Industrial Park Modernization Program (Modermaq) had approved operations for a total value of $2.2 billion.

At the same time, the new Industrial Entrepôt Customs Regime (RECOF) allows qualified companies tax-free imports and preferred access to internal markets, lowering the costs of goods and enabling lower-end consumer pricing. Additionally, the exchange between Brazil and other countries within the Mercosur such as Argentina is also tax free, which furthers the economic flow and the return on investments.

The government has taken a step further with PAC's implementation for increasing the country's competitiveness. It created the Brazilian Agency of Industrial Development (ABDI) and the National Council of Industrial Development (CNDI) for increasing innovation and high-technology exportation. In this context, the National Microelectronic Program (PNM) was launched, through which the Brazilian Government has already invested more than $6.2 million for the qualification of human resources, specific scholarships, and infrastructure to sustain the development of a local smart chip industry.

As a result, the Incentive Program for the Semiconductor Sector (PADIS) law 11.484 was launched in 2007 and regulated in the forth quarter. It addresses the development of the local semiconductor industry, furthering the companies devoted to design, diffusion, processing, encapsulation, and test of semiconductors in the country with tax reduction, exemption of capital goods, and remittance to foreign countries.

Semiconductor design and manufacturing companies can benefit from the established Brazilian expertise in the software development and engineering areas, as well as in the consumer electronics sectors. However, a competitive state-of-the-art semiconductors industry requires a complex infrastructure that is just starting to be developed.

As a first step of the national plan, the Brazilian Government and its backed entity, the Excellence Center for Advanced Electronic Technology (CEITEC), pursue not only manufacturing but also R&D and design. CEITEC has already opened the following centers across the country: CENPRA and Centro Wernher von Braun (Campinas), LSI-TEC (São Paulo), CEITEC (Porto Alegre), CESAR and LINCS/CETENE (Recife), and CT-PIM (Manaus).

The Brazilian Ministry of Science and Technology invested $130 million from 2005 to 2008 for the first Latin American CMOS commercial semiconductor front-end manufacturing facility inaugurated during the first half of 2008. Built for local wafer fab design and construction, including em-chem facilities and equipment, it offers low operational costs and a flexible and expandable architecture. CEITEC's fab in Porto Alegre already involves 20 international subcontractors and partners, with companies such as X-Fab, ST Microelectronics, Cadence Design Systems Inc., and Freescale Semiconductor, to be a reference in high-quality, innovative, and market-oriented microelectronic solutions. This is a great achievement, since sceptics were betting no fabs would be ever built in Latin America.

X-FAB Silicon Foundries, the global foundry group for analog/mixed-signal semiconductor applications, reached the strategic licensing agreement for semiconductor manufacturing with CEITEC to start operations in the second half of 2008. CEITEC licenses X-FAB's advanced 0.6 micrometer process technology called XC06, providing X-FAB access to the emerging and fast-growing Latin American electronics market. Initially, larger volumes are likely to be manufactured by X-FAB in its facilities in Erfurt, Germany and Lubbock, Texas, USA.

In 2008, EDA software vendor Cadence Design Systems Inc. opened the first of four planned IC design training centers in Brazil in partnership with the Brazilian Government, as part of the four joint centers the company plans to establish. The company has also donated chip design software to Brazilian universities and supported them with specialized training for developing curricula. Cadence expects to train approximately 1,500 Brazilian IC design engineers at the four centers over the next three years. ASSA ABLOY group of companies also supports this initiative through ST Microelectronics IC design prospects and the provision of training support.

IC centers established in Brazil are also supported by the law 11.196/2005 that provides specific federal tax exemptions and incentives for R&D innovation. Additionally, according to the informatics law and PADIS program, companies which invest 5 percent of their gross profit in domestic market research and innovative R&D activities are given access to strong fiscal incentives and significant tax exemptions. 1 percent of these companies' gross profit should be also applied in joint projects with universities or research institutes. The Brazilian Government aims to reduce importations and improve consumer and commercial applications in the domestic Brazilian market and abroad.

Besides the government-sponsored design houses, North American, European, and Asian companies maintain design centers in Brazil. Freescale Semiconductor, the first U.S.-based corporation to establish a semiconductor manufacturing facility and the first one to set up a joint-venture IC design center in China, also focuses on reinforcing its market coverage in Brazil and other countries in Latin and North America. The company designs microcontrollers for automotive and industry automation applications, with more than 60 specialist IC engineers at its center near Campinhas, in the State of Sao Paulo. It also supports CEITEC's initiative by donating Fab equipment and providing Fab engineering training.

Brasemi, the South Korean back-end manufacturer of flash memory chips, announced investments of $32 million in a back-end line manufacturing facility in Vespiano, Minas Gerais in the short term. Additionally, the U.S.-based Symetrix Corp. plans to install a smart card IC and smart card reader factory in Brazil. The company announced the implementation of hitherto technology from Japan. This was well received, given Brazil presents the world's largest Japanese community outside Japan. Brazil has also adopted the Japanese digital TV standard HDTV, although with some "adjustments". With digitally designed software and protocols, this could significantly boost the Brazilian semiconductor industry.

IC manufacturers are still cautious about this initiative, since establishing and training a productive IC factory involves high investments and more than three years for its proper function. However, Brazil is investing and marketing its IT innovation campaign, in which the establishment of a sustainable IC industry composes a key factor. Brazil's IC industry is still in its infancy and lacks semiconductor design and manufacturing expertise. In addition, though Brazil boosts lower labor costs than other countries, they are not comparable to those in China. However, the country aims to build a differentiated market, leveraging its major internal market with over 187 million multicultural inhabitants and its geographical location. The Brazilian Government expects to attract semiconductor market participants along the entire value chain. Together with key partners, the Brazilian Government is working on developing the required capital and IC design talents to be recognized as the IC hub in Latin and North America and a key participant in the world in the future.