Electronics industry sees exports growth slowing in 2018

After achieving 11 percent growth in 2017, the highest exports growth in the domestic electronics history, the industry sees a slower 6 percent growth in 2018 on challenging global environment, with exports expected to accelerate to $40 billion by 2025 yet on higher foreign direct investments (FDI) inflow.

Dan Lachica, president of Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), explained that the conservative growth forecast this year is largely due to threats of FDIs skipping the Philippines in favor of Vietnam. The protectionist policy of the US President Donald Trump will also contribute to global challenges as well as some concerns in EU.

Lachica, however, said the growth is still robust and a healthy progression but group wanted to set a conservative target to make sure they deliver the numbers.

Senen Perlada, director of the Export Marketing Bureau of the Department of Trade and Industry, also supported the growth forecast of SEIPI noting that although the private sector may be “sandbagging”, it is better to be cautiously optimistic.

Electronics exports in 2017 grew highest in years 11 percent to $32.7 billion from $29.4 billion in 2016. Semiconductor accounts for 70 percent of the industry’s total exports. The total electronics industry exports account for 52 percent of the country’s total $68.7 billion total merchandize exports

Lachica cited reports that the trend for FDIs in the electronics sector is favoring Vietnam but the Department of Trade and Industry said that FDI investments in Vietnam only serve one company making it also risky. The Philippine electronics industry though is more diverse.

In addition, he cited the continuing protectionist policy of the Trump administration and some challenges in the EU markets. But growth will be driven by the GSP privileges in the US and EU.

To sustain growth, SEIPI yesterday unveiled the industry roadmap dubbed Product and Technology Holistic Strategy (PATHS), which identifies the top products and technologies that the industry should be focusing on in the next five years in order to develop a niche in the global market, as well as the right conditions necessary to make this goal happen.

PATHS is just awaiting approval from the Department of Trade and Industry and is expected to be launched in the first quarter this year.

Initially, the industry roadmap forecasts of additional $1.5 billion in 2020 from the estimated investments in 2017 of a little less than $1 billion. By 2025, FDIs in the industry could reach $3 billion and $5 billion in 2030. Export values are expected to reach $40 billion in 2025 and $50 billion in 2030.

By 2020, the industry is also expected to employ 5.5 million direct and indirect jobs from the current 3.2 million employment level.

The PATHS, which will be funded by DTI and administered by the Department of ICT, sees opportunities where the Philippine domestic industry can move up the value chain by producing new products that can be produced locally through an expanded capability of the semiconductor sector.

These niche products include smart sensors for multiple applications, smart phones, IC designs, 3D printers, ICT devices for smart agriculture, autonomous vehicle, among others. Some of the parts for automotives can also be produced here like control systems.

To improve the local industry’s capabilities, PATHS has recommended three strategies and recommendations: creation of IC design center, lab scale wafer fabrication facility, and R & D laboratory.

Investments for these facilities would be smaller compared to the billion-dollar requirement for a commercial scale wafer fab. Investments will also take longer because it will take 3-5 years for the implementation of infrastructure.

But once the roadmap is approved by the DTI, which will fund the project, they will proceed with the signing of agreements and contracts this year with possible investors in these facilities.