By Kyle Aristophere T. Atienza, Reporter
THE Philippines’ largest organization of electronics companies said on Sunday that Manila’s growing collaboration with Washington in semiconductor development will boost the resilience of the global supply chain and help move Philippine companies up the value chain.
“This will give our country the opportunity to go beyond and higher in the value chain, aside from strengthening the collective supply chain resilience of the electronics industry,” Anacelle Toledo, industry analyst at the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), said in an e-mail.
“This alliance also opens the country to more electronics investments,” SEIPI added.
Earlier this month, the US State department announced that it will collaborate with the Philippines “to explore opportunities to grow and diversify the global semiconductor ecosystem” under the CHIPS Act’s International Technology Security and Innovation Fund, a $52-billion subsidy program for US semiconductor manufacturers and researchers.
The initial phase, which was made public during President Ferdinand R. Marcos, Jr.’s weeklong trip to the US, will involve a comprehensive assessment of the Philippines’ semiconductor ecosystem and regulatory framework, as well as workforce and infrastructure needs.
In a meeting with the US Semiconductor Industry Association (SIA), Mr. Marcos said the Philippines is ready to “absorb and support the additional corresponding capacity for assembly, packaging, and test” as the US increases its front-end wafer capacity for advanced technologies and products under the CHIPS Act.
He proposed that the US support the planned establishment of a wafer fabrication facility in the Philippines that can support SEIPI’s proposed science and technology center.
“Another viable alternative is to have a Philippine-based US semiconductor company build a proof-of-concept wafer fab near their facility with the participation of promising candidates such as Texas Instruments and Analog Devices,” he added.
SEIPI, in its e-mail to BusinessWorld, said it is working on the proposed Product and Technology Holistic Strategy (PATHS) roadmap to help the electronics sector and is seeking to collaborate with the government in “establishing a lab-scale wafer fabrication facility to support our proposed Science and Technology Center.”
“We’re optimistic that these opportunities and initiatives will advance the Philippines’ role in the semiconductor industry.”
The US, through the CHIPS Act, is seeking to incentivize chipmakers to relocate from China back to the US or to other friendly countries. It is also concerned about the vulnerability of Taiwan’s advanced chip industry to disruption from China.
Taiwan, which makes over 60% of the world’s semiconductors and almost 90% of the most advanced chips, has been beset by increasing pressure from China, which considers the island a rogue province that it hopes to reunify with.
Semiconductors accounted for the largest share of Philippine electronic exports in 2022, accounting for about 47.4% of the export basket.
Philippine electronics imports increased 9.58% to $2.34 billion in March, with China accounting for 19.21% of the total, according to SEIPI.
China was followed by Taiwan at 15.17%, Japan and South Korea at 10.74% each, and the US at 9.44%.
SEIPI President Dan Lachica said electronic exports could decline 10-12% this year, against the 5% growth previously forecast for 2023, amid global recession, high interest rates, and geopolitical uncertainties.
He cited the ongoing war between Russia and Ukraine and the conflict between Israel and Hamas. “There’s an inventory correction as well. In other words, there was a build up of inventory, but the demand was lower than expected, so now you have excess inventory that should be used up before you go back to normal production,” Mr. Lachica told OneNews Channel’s The Big Story last week.
An economist earlier warned that the price of Philippine semiconductor exports could significantly fall “once increased domestic production begins.”
The country should “extensively” use semiconductors, which account for the largest share of Philippine exports, in producing “higher value-added products” instead of playing a bigger role in the US semiconductor value chains, the expert said.
But Terry L. Ridon, a public investment analyst, said the expansion of semiconductor manufacturing in the Philippines through collaboration with the US is compatible with the domestic push for the “development of heavy industry.”
“Pursuing the development of heavy industry is not incompatible with the push to expand semiconductor manufacturing in the Philippines,” he said in an e-mail. “Both should be pursued at the same time, as both have varying inputs and markets which should serve our national goals to various degrees.”
Mr. Ridon said expanding the sector with foreign help would “create more jobs and result in greater export earnings.”
Citing national security, Washington last month reduced the types of semiconductors that US companies can sell to China, in a move that further tightened a set of similar export controls that President Joe Biden first introduced in October 2022.
In response, China, which accounted for 36% of US semiconductors sales last year, accused Washington of “weaponizing trade and tech issues.”
“The Philippines should play a broader role in semiconductor production as a result of the US shift away from China, as the US remains determined to protect its competitive advantage in semiconductor development,” Mr. Ridon said. “However, it will not come to fruition unless and until lingering concerns on governance are resolved, such as bureaucratic delay, countless permits and corruption.”