Largest exporter and importer

As the new year rolls in, it is worth mentioning how some Philippine industries fared well last year, in particular our electronics and semi-conductor industry.  For a few consecutive years, this industry was waning slowly after being hailed as the sunshine industry for several years.  It has finally rebounded, not radically but nevertheless it has regained some of its lost glory.

The Philippine Statistics Authority has yet to release the final figures for 2017, but from January to September last year, data shows that the electronics and semi-conductor industry exported a total of $24 billion.  This represents the largest export share in Philippine export commodity, a 50.5 percent share of the total Philippine exports to date. How does this compare with 2016?  Year-to-date, this is a 10.3 percent increase, a significant one indeed.

In terms of import, SEIPI (Semi-conductors and Electronics Industry of the Philippines) reported that they are the largest importer at 25 percent of total Philippine imports.  Be that as it may, this industry does not intend to continue with this trend.  Instead, they are working at localizing some of these imports.

These figures may augur well for the industry, but SEIPI business lead Jaja Gaid is quick to point out that the Philippine is not quite there among the leaders in the region as far as the industry is concerned.  Some of the countries in the region, though, are coming in with hefty investments like Taiwan, and Japan remains to be one of our active trading partners.  Ms. Gaid shared that SEIPI was represented in the international electronics forum in France last October where the city mayor articulated their interest in a possible partnership.

Also, in 2017, PEZA reported investments in manufacturing of over P46.6 billion, and we all know that the biggest locator in PEZA is from the electronics sector. 

Going back to our point of localizing some of our imports vital to the electronics industry, SEIPI wants to do this through the development of our SMEs. If we can only localize some 10 percent of these imports, Ms. Gaid said, this could translate to $2 billion in parts and materials, not to mention the fact that it will definitely stimulate activity in various parts of the country.  SEIPI’s manufacturing clusters are scattered all over:  in Baguio, Clark, Subic, Bulacan, Tarlac, Cebu, Cavite, Batangas and Laguna.  Localizing some of the parts should give our MSMEs a much bigger role in the global supply chain, and it’s about time.

How do they intend to go about this?  One is by networking, but here we have to be extra careful to check our limitations as to quality standards, technology readiness, even market proximity. As of now, our local suppliers only supply packaging materials and mechanical parts, and it is about time that we raise the bar and broaden this in order to meet the needs of the industry because the market out there is huge.  For the semi-conductor industry, there is a $436 billion market.  Semi-conductors, devices and electronics comprise 70 percent of our exports in this sector.  Only $20 billion is from semi-conductors and $8 billion from electronics, a very small percentage of the global market of $1.7 trillion.  We are nowhere near China’s share, but looking at the half-full glass, there is more room for growth for the Philippines. We are becoming a bit more competitive, but we have to watch out in the next few years for Vietnam, our biggest rival in ASEAN because of enviable incentives it currently enjoys.

The point, Ms. Gaid is quick to point out, is to embrace our limitations and develop our own niche market. It is pointless, for instance, to compete with Thailand in car production. This country now hosts production facilities for many brands and, in addition, they also have a big domestic market for their vehicles.  However, we can look into the components of electric vehicles for instance, or the upcoming self-driving vehicles which employ sophisticated sensor technology.  There is a niche for us and we simply have to find it and develop it to its fullest.

Among the challenges we need to face is the transfer of entirely new technologies.  Also included here is the government’s crucial role in all of these—we need to improve the ease of doing business and close the gaps in infrastructure.  We need to develop new materials, develop research and development centers as well as IT design centers. Very important too is the Lab Scale Wafer application, according to Ms. Gaid.  I mentioned Vietnam as our closest rival in the region because of their incentives from the government.  In Vietnam, they have full foreign ownership, low corporate taxes and low power rates as well.  In contrast, foreign investors here face steep corporate taxes unless they are PEZA-registered.  The Philippines also has the highest power rates in the region, next only to Japan.  Equally important, Vietnam does not have half as much holidays as we have here. What is amazing is the fact that while we already have the most number of paid holidays in the Philippines, there are still pending laws in Congress for even more holidays, this on top of expanded maternity and paternity leaves.  I’ve actually heard foreign businessmen joke about this in cocktail parties. This populist move, decried by the ECOP (Employers Confederation of the Philippines) as oppressive to businesses, is also a big turn-off to foreign investors.     

The Semiconductors and Electronic Industries in the Philippines (SEIPI) continues to be one of the most dynamic and responsive organizations in the country and continues to lead its member companies towards progress.  We hope they will pursue their plan to localize whatever parts as soon as possible so our MSMEs will finally be given the chance to have a bigger part of the global supply chain.  This can only redound to a better Philippine economy.

Mabuhay!!!  Be proud to be a Filipino.

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