THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY ROADMAP
PRESENTATION OUTLINE Where the industry Where it is now Where it is going has been Industry Challenges How to get there
WHERE THE INDUSTRY HAS BEEN The electronics industry has been around for four (4) decades, beginning in the 1970s and has contributed immensely in terms of investments, exports, employment, technology and knowledge transfer. 2.272.452.68 3 2.16 US$ Billions Investments 2 1.47 1.29 1.24 1.21 1.08 0.79 For the last 2 decades the 0.78 0.75 1 0.72 0.67 0.420.47 0.44 industry already contributed 0.270.23 0.22 0.04 0 US$22 B worth of investments 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 US$ Billions 40 Exports 22 24 24 27 27 30 31 29 31 25 27 30 24 23 For the last 2 decades the 22 18 industry was able to export a 20 13 total of US$422 billion export 9 7 10 4 goods 3 2 2 - 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 Employment 2.1 million workers ranging from HS graduates to MS/PhDs benefit from the electronics industry
WHERE THE INDUSTRY HAS BEEN The Philippine electronics industry is still the biggest contributor to the total Philippine exports, ending 2012 with a 43% share, equivalent to US$23 billion dollars. With electronics Without electronics Source: NSO 2012 Data
SEMICONDUCTOR MANUFACTURING SERVICE (SMS) 1 2 3 4 SEMICONDUCTOR FOUNDRY PACKAGING/PRODUCT OUTSOURCED DESIGN OPERATIONS DESIGN SMS NEW MANUFACTURING PACKAGING DESIGN, RESEARCH AND DEVELOPMENT ASSEMBLY EFFICIENCIES IN MATERIALS SCIENCE, TECHNOLOGY, TEST DEVELOPMENT, INVENTORY MANAGEMENT PROCESS EFFICIENCIES, PRE-MANUFACTURING NEW ALGORITHMS, TEST DEVELOPMENT EMBEDDED SOFTWARE DEVT Software Wafer Package Distri Ramp To Produc Silicon Technology Selection/ Fab Technology bution Production tization Application Product Application R&D ELECTRONICS MANUFACTURING SERVICE (EMS) 7 5 6 CUSTOMER OEM R&D OUTSOURCED SERVICE MARKETING EMS MARKETING RESEARCH CUSTOMER SERVICE LOGISTICS MANAGEMENT STRATEGY AND DEVELOPMENT ASSEMBLY AND FINAL TESTING SYSTEMS INTEGRATION SHIPMENT AND DISTRIBUTION PRE-MANUFACTURING DESIGN, TEST DEVELOPMENT After Sales Distribution Product Or Shipment Production Logistics Service Direct Order Component Management Fulfillment Design Sourcing/strategic Repair and PCB Assembly Purchasing Warranty Component Procurement Assembly Other After Sales Support Warehousing Full System Assembly Source: 2002 Competitive Cable/harness Kitting Landscape Study, Deloitte & Tusch Assembly
A Developing Supply Chain for HDD (a representative of EMS “ Box ” or assembly) Base Magnet Actuator Motors & Cover Spacer Diodes Coils Ring PCB/ PCBA Carriage Connectors ICs Assembly Plastic Molded Parts Capacitors Transistors Resistors Metal Packaging Magnetic Pressed Screws Materials Head Parts For all electronics storage applications (e.g. tablets, camera, smart phones, etc.)
WHERE IT IS NOW Majority are Japanese, Korean There are about 420 electronics firms present in and American firms the Philippines as of Q1 of 2013 Source: CDC, PEZA and BOI Semiconductor Manufacturing Service (SMS) - C omponents / Devices (Semiconductor) Electronics Manufacturing Service (SMS) -Computer Related Products / EDP -Office Equipment -Consumer Electronics -Telecommunications Where the industry Where it is now Where it is going -Communications / Radar has been -Control & Instrumentation How to get there -Medical / Industrial Instrumentation -Automotive Electronics Source: NSO 2012 Data
WHERE IT IS NOW Semiconductor (Components / Devices) Computer Related Products / EDPs Office Equipment Consumer Electronics Telecommunications Communication/Radar Control & Instrumentation Medical / Industrial Instrumentation Automotive Electronics Aerospace Solar / PV
WHERE IT IS NOW LEVEL OF TECHNOLOGY VS ASIA China: Design Centers, IC foundries, electronic equipment factories Taiwan: IC mfg, solar Philippines: Assembly, Packaging and Test Thailand: Assembly and Test, potentially taking business away from RP as it has lower mfg costs, solar, automotive Malaysia: High-tech manufacturing, wafer foundries, R&D, structured supply chain, solar Vietnam: Production of parts and Singapore: Targets sectors with higher components, smart phones technologies, particularly wafer fab (not in direct competition with RP), solar
WHERE IT IS NOW % Share % Share of Electronics 2001 to 2013 (Jan to August only) 2001 70% In US$ Billion 2002 69% 2003 67% 2004 68% 2005 66% 2006 64% 2007 62% 2008 59% 2009 58% 2010 60% 2011 50% 2012 43% 2013 (Jan-Aug) 34% Share of electronics exports to total Philippine exports has been declining in the past 4 years Source: NSO
EXPORTS BY SECTOR January – August 2013 Positive: IMI, Daeduck, Furukawa, Koyo, Morirok BAG Electronics, Sharp u, Kymco, Kedica, Standard, Gemphil, Te mic Automotive, Fujitsu Negative: Epson, Canon, Brother Shin-Etsu, Azbil, MOOG, Knowles Source: Figures – NSO, Companies - SEIPI
EXPORTS BY SECTOR Negative: January – August 2013 TI, SEMPHIL, ROHM, Sanyo, STMicro, Toshiba, HGST, Amertron, PD, OSPI, PSI, Tong Hsing, SDP Excelitas, Ibiden Ionics EMS Remec, Continental, Opt Prima Tech, Gotoh, NANBU Phils., MEC & Beta Elec., Terumo is Phils. Source: Figures – NSO, Companies - SEIPI
EXPORTS January 2012 – August 2013 YTD: US$ 13.7B MoM: July 2013 vs. August 2013 (0.45%) YoY: August 2012 vs. August 2013 (0.36%) 2012 2013 Source: NSO
The positive growth was brought about by 6 major commodity IMPORTS groups with positive Y-o-Y change: iron & steel, electronic products, transport eqpt., other food & live animals, telecom eqpt. & electrical machinery and plastics. YTD: US$ 8.7B January 2012 – July 2013 MoM: June 2013 vs. July 2013 48.4% YoY: July 2012 vs. July 2013 33.1% 2012 2013 Source: NSO
INVESTMENTS EMPLOYMENT 1H 2012 vs. 2013 2007 – 1H 2013 Source: PEZA
WHERE IT IS NOW In spite of the decline % share in total exports. The electronics industry remains to be a great contributor to the Philippine economy in terms of: If the electronics industry ceases to produce output, purchase inputs and distribute its products, GDP will drop by 28% P1 increase in export sales generate at least 0.12 cents additional indirect taxes in the economy. In 2012, the industry ’ s total direct tax contribution was about US$690 million P1 billion increase in investments create about 620 to 1,408 additional quality jobs in the economy A P1 increase in export sales generate 0.11 cents to 0.25 cents additional household income in the economy US$1 billion of investments create US$10.5 billion of exports from 2010 to 2012. Source: University of Asia and the Pacific
WHERE IT IS NOW The semiconductor and electronics industry still has the highest % impact on the country ’ s Gross Domestic Product Impact of the Hypothetical Loss of Selected Industries on Gross Domestic Product % Drop in GDP Agriculture, Forestry 12.1% and Fishery Private Services 14.9% Semiconductor and 28% electronics industry Source: University of Asia and the Pacific
INDUSTRY CHALLENGES: COSTS WAGES (IN US$) POWER Source; ECOP 2013 2013 KPMG Study 200% INCREASE IN IMPORT / EXPORT CHARGES STORAGE RATES EXISTING PROPOSED RATE (PhP) RATE (PhP) Foreign Imported 541.45 1,624.35 Box (45 footer) Foreign Exported 134.40 403.20 Box (45 footer) Foreign Transhipped 12.22 36.66 Box (45 footer) Philippine Ports Authority
INDUSTRY CHALLENGES: COSTS IMPORTED RAW MATERIALS Total imports of the Phil. Electronics industry last 2012 is US$16 billion TOP IMPORTED MATERIALS ORIGIN Lead frames Taiwan, Malaysia, China Molding Compound Japan Die Attached Epoxy China Tape and Reels Malaysia Gold Wire China Coil Print Vietnam ESD Shoes Singapore Finger cots Singapore
INDUSTRY CHALLENGES: LEVEL OF TECHNOLOGY The Philippine electronics industry through the years has not gone beyond assembly and testing. Majority of our companies ’ operations are in the form of raw materials processing, assembly and testing. Hence, the industry becomes highly susceptible to global demand fluctuations. The need to move gradually towards valued-added activities (i.e R&D) are being expressed VS Source: 2002 Competitive Landscape Study, Deloitte & Tusch
INDUSTRY CHALLENGES: MARKETS Global competition and new innovations are driving prices down (shrinking margins). Companies must continually become more cost- efficient to remain profitable. Short Product Lifecycles: With quickly changing consumer tastes and preferences, EMS companies and contract manufacturers need to have effective New Product Introduction (NPI) processes in place.
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