The US restriction on semiconductor trade against China is not likely to affect the Philippine electronics industry, the country’s largest export, on the contrary it will open opportunities for sourcing of wafer fabs in the US since most of the electronics firms in the country are dominated by American firms.
This was the initial analysis of Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI), during a television interview following the US move to require US firms to get license before exporting microchips to China. The move is seen as part of America's bid to slow China's technological and military advances.
“It could actually be beneficial in the sense that we're going to have another source of semiconductor wafers,” said Lachica.
Lachica explained that the Philippine semiconductor industry is dominated by American multinationals. The Philippines imports wafer fabs, consider the heart of microchips, for assembly, test and packaging operations for reexport.
“There's one Korean there's one Dutch semiconductor company, but most of the semicon companies doing assembly, test and packaging are US multinationals, which would stand to benefit from sourcing wafers from the US wafer fabs,” he pointed out.
According to Lachica, the domestic industry was badly hurt due t the supply chain disruption during the pandemic as they were primarily sourcing wafer fabs from China and Taiwan.
With the US trade restrictions on semiconductor exports to China, Lachica said, supply of wafer fabs will shift to the US market.
It may take a couple of years for companies to invest in wafer fabs in the Philippines, but in the meantime, it can source these items from the US. “So, over time, I see this beneficial,” he said.
In addition, Lachica said the Philippines electronics industry has been very resilient even during the pandemic. In fact, last year, the industry recorded $45.9 billion worth of exports, which was higher than pre pandemic levels.
“So, whether there are disruptions, shutdowns or whatever, we figure out a way because it should not be supplied to the global market,” he added. The growth last year was stymied by the lack of semiconductor wafers.
With the pandemic, transitioning to an endemic, Lachica expects less restrictions on wafers and raw material supplies.
In August this year, the industry exported $3.98 billion bringing year to date to $30.49 billion or a mere 1.6 percent higher than the 10 percent growth goal for the year.
“Our goal this year is to grow by 10 percent. It's going to be a stretch but we're not revising our goal,” he added. Growth, he said, is driven primarily by automotive electronics, which grew by about 27 percent and consumer electronics by about 20 percent, and electronic data processing storage drives and electronic products grew by 80 percent.
On the flip side, the industry witnessed an erosion in the demand for office equipment as well as telecommunications and radar products.
But, by and large, Lachica said the industry is expected to post positive growth this year.