Artificial intelligence will be a friend, not a foe, to the electronics manufacturing industry in the Philippines and elsewhere in Asia that's enjoying an AI-backed boom, according to the think tank Oxford Economics.
"Of global semiconductor production capacity and supplies of key materials, 75 percent is concentrated in Asia. More notably, for the chips under 10-nanometres that are required to execute advanced AI functions, nearly all fabrication capacity is located in Asia," Oxford Economics lead economist Betty Wang noted in an Oct. 7 report.
With AI now playing a bigger role in electronics, especially integrated circuits (IC), an "explosion" in demand for AI chips and AI computing for data centers and smartphones foreseen by 2030 would benefit many Asian production hubs, including the Philippines.
"Our estimate suggests that a 1-percentage point (ppt) change in the key economies' IC export growth could be associated with a 0.1-ppt change in total Asia export growth... Based purely on the exports basket, Taiwan, the Philippines, and Malaysia look set to gain the most if upside risks materialize," Wang said.
At present, electronics are the Philippines' biggest merchandise export, accounting for close to 60 percent of all goods sold abroad, Oxford Economics data showed.
In particular, semiconductors account for about 45 percent of Philippine exports, while non-semiconductors make up the rest of electronics shipments overseas.
In Asia, the Philippines has the second-largest share of electronics exports to total, next only to Taiwan's 60 percent.
In the AI chip supply chain, the Philippines is a key player in assembly, testing and packaging (ATP), the last step after design and fabrication.
"Mainland China leads in ATP, although the prominence of ASEAN economies such as Malaysia, Vietnam, and the Philippines is growing. Overall, roughly 90 percent of global ATP capacity is situated in Asia," Wang pointed out.
In 2022, the Philippines cornered 6 percent of global ATP capacity, the same as Japan's share and only surpassed by China's 30 percent, Taiwan's 27 percent, South Korea's 9 percent, and Malaysia's 7 percent, according to data from Oxford Economics and the US Semiconductor Industry Association (SIA).