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A Snapshot of the Philippine Semiconductor and Electronics Industry
IntroductionThe electronics and semiconductor industry is now worth more than a trillion dollars with an average annual growth of 17.1 % over the last 4 years. Exports from emerging economies are growing at an even faster rate.
Competitive factors among countries are being redefined. In the past, technological superiority defined the major players. Today, design, price competitiveness, and a differentiating strategy that reflect the characteristics of the export markets have to be equally in place. Taiwan and China are the leading sources among low cost countries. The Philippines is fifth with 6.7 percent.
The Philippine Electronics Sector continues to be a major contributor to the Philippine economy. In 2007, 62% or $31 billion worth of exports is derived from the electronics sector generating 460,000 direct jobs according to the Semiconductor and Electronic Industries of the Philippines Inc. (SEIPI) report. This is a significant number of jobs. If the current status of the industry is not sustained or further improved, it could place these jobs in jeopardy.
Examples of the local industry’s capabilities are Semiconductor Manufacturing Services (SMS), Electronic Manufacturing Services (EMS), Original Design Manufacturing (ODM), and Original Equipment Manufacturing (OEM).
Problems affecting competitiveness
The World Economic Forum’s 2007-2008 Global Competitiveness Report ranks the Philippines 71st out of 131 countries. The country also received poor assessments on the quality of its public and private institutions (ranked 95th), with high business costs of terrorism, low public trust of politicians, excessive red tape, and concerns related to the diversion of public funds and the wastefulness of government spending. The quality of infrastructure is another major source of disadvantage, as the country receives poor marks for its transportation and communication infrastructure.
The main challenges the industry faces
Declining standard of education
The quality of math and science education, for instance, was ranked 109 out of 131 countries. Related to the above figure is the availability of scientific research institutions. Out of 131 countries, the Philippines ranked 83rd next to its peers, Malaysia (ranked 17th) and Thailand (44th).
Graduates lack technical competence required by the industry
Current curriculum is board-exam driven. To satisfy market demand, a shift towards an industry-driven curriculum should be adapted. The country does not produce sufficient M.S. and PhD graduates as required to perform R&D activities.
Lack Industry and university interaction
Industry and university interactions in the Philippines are also minimal. The country ranked 65th (out of 131) in terms of collaboration between universities and business for R&D. The gap between the scientific community and the business sector remains to be unsolved.
The Philippines’ electricity cost
The Philippines’ electricity cost is perennially cited as one of highest in Asia. As of recent date, the Philippines is the second highest in Asia after Japan. Industry is paying for the unused electrical capacity (PPA). As a result of the PPA, a large percent of the electronics industry‘s manufacturing cost is due to electricity.
Taxes and incentives
Tax is recognized as one of the most important factors on where to invest. Currently, the Philippines is at a disadvantage as it has one of the highest corporate income taxes in Asia.
