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THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY ROADMAP Disclaimer: This study is for information only. It does not imply recommendation or endorsement by the BOI/DTI. Any views or opinions presented in this study are solely representative of the industry associations involved and do not necessarily represent those of the BOI/DTI. Use of any part or excerpts of this report should be with the permission of the author.

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Page 1: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS

INDUSTRY ROADMAP

Disclaimer: This study is for information only. It does

not imply recommendation or endorsement by the

BOI/DTI. Any views or opinions presented in this study

are solely representative of the industry associations

involved and do not necessarily represent those of the

BOI/DTI. Use of any part or excerpts of this report

should be with the permission of the author.

Page 2: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

PRESENTATION OUTLINE

Where the industry has been

Where it is now Where it is going

How to get thereIndustry Challenges

Page 3: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

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.

Investments

Exports

Employment

0

1

2

3

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

0.040.22

1.29

2.16

1.081.47

0.670.79

1.24

0.720.270.23

0.440.78 0.75

1.21

0.420.47

2.272.452.68

US$

Bill

ion

s

-

10

20

30

40

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

2 2 3 4 7 913

18

25 2722

24 2427 27 30 31

29

22

31

24 23

US$

Bill

ion

s

For the last 2 decades the industry already contributed US$22 B worth of investments

For the last 2 decades the industry was able to export a total of US$422 billion export goods

2.1 million workers ranging from HS graduates to MS/PhDs benefit from the electronics industry

Page 4: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

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

Page 5: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

NEW MANUFACTURING TECHNOLOGY, PROCESS EFFICIENCIES, TEST DEVELOPMENT

PACKAGING DESIGN,TEST DEVELOPMENT,PRE-MANUFACTURING

ASSEMBLY EFFICIENCIESINVENTORY MANAGEMENT

MARKETING RESEARCHSTRATEGY AND DEVELOPMENT SYSTEMS INTEGRATIONPRE-MANUFACTURINGDESIGN, TEST DEVELOPMENT

LOGISTICS MANAGEMENTASSEMBLY AND FINAL TESTINGSHIPMENT AND DISTRIBUTION

CUSTOMER SERVICE

RESEARCH AND DEVELOPMENTIN MATERIALS SCIENCE, NEW ALGORITHMS, EMBEDDED SOFTWARE DEVT

Software

Silicon Technology

Application

WaferFab Technology

Package Selection/Application

Productization

R&D

Ramp ToProduction

Distribution

Product

Product OrComponentDesign

LogisticsManagement

ProductionShipmentDistributionDirect OrderFulfillment

After SalesService

SEMICONDUCTOR MANUFACTURING SERVICE (SMS)

ELECTRONICS MANUFACTURING SERVICE (EMS)

Sourcing/strategic Purchasing

Procurement

Warehousing

Kitting

PCB Assembly

Component Assembly

Full SystemAssembly

Cable/harness Assembly

Repair andWarranty

Other After Sales Support

SEMICONDUCTOR DESIGN

1FOUNDRY

OPERATIONS

2PACKAGING/PRODUCT

DESIGN

3

OUTSOURCEDEMS

6

OUTSOURCEDSMS

4

OEM R&DMARKETING

5CUSTOMER

SERVICE

7

Source: 2002 Competitive Landscape Study, Deloitte & Tusch

Page 6: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

ICs Connectors

Magnet

Capacitors Transistors

Actuator

Packaging

Materials

Diodes

Base

&

Cover

Plastic

Molded

Parts

Screws

Coils

Resistors

PCB/

PCBA

Metal

Pressed

Parts

Spacer

Ring

Motors

Magnetic

Head

Carriage

Assembly

For all electronics storage applications (e.g. tablets, camera, smart phones, etc.)

A Developing Supply Chain for HDD (a representative of EMS “Box” or assembly)

Page 7: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE IT IS NOW

Where the industry has been

Where it is now Where it is going

How to get there

Semiconductor Manufacturing Service (SMS)- Components / Devices (Semiconductor)

Electronics Manufacturing Service (SMS)-Computer Related Products / EDP-Office Equipment-Consumer Electronics-Telecommunications-Communications / Radar-Control & Instrumentation-Medical / Industrial Instrumentation-Automotive Electronics

Source: NSO 2012 Data

There are about 420 electronics firms present in

the Philippines as of Q1 of 2013

Source: CDC, PEZA and BOI

Majority are Japanese, Korean and American firms

Page 8: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

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

Page 9: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

LEVEL OF TECHNOLOGY VS ASIA

Philippines: Assembly, Packaging and Test

China: Design Centers, IC foundries, electronic equipment factories

Singapore: Targets sectors with higher technologies, particularly wafer fab (not in direct competition with RP), solar

Vietnam: Production of parts and components, smart phones

Malaysia: High-tech manufacturing, wafer foundries, R&D, structured supply chain, solar

Thailand: Assembly and Test, potentially taking business away from RP as it has lower mfg costs, solar, automotive

Taiwan: IC mfg, solar

WHERE IT IS NOW

Page 10: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE IT IS NOW% Share of Electronics 2001 to 2013 (Jan to August only) % Share

2001 70%

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

In US$ Billion

Source: NSO

Page 11: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

EXPORTS BY SECTORJanuary – August 2013

Source: Figures – NSO, Companies - SEIPI

Positive:

IMI, Daeduck, Furukawa, Koyo, Moriroku, Kymco, Kedica, Standard, Gemphil, Te

mic Automotive, Fujitsu

BAG Electronics, Sharp

Shin-Etsu, Azbil, MOOG, KnowlesEpson, Canon, Brother

Negative:

Page 12: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

EXPORTS BY SECTORJanuary – August 2013

TI, SEMPHIL, ROHM, Sanyo, STMicro, PD, OSPI, PSI, Tong Hsing, SDP

Toshiba, HGST, Amertron, Excelitas, Ibiden

Ionics EMS Remec, Continental, Optis Phils.

Source: Figures – NSO, Companies - SEIPI

Prima Tech, Gotoh, NANBU Phils., MEC & Beta Elec., Terumo

Negative:

Page 13: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

2012 2013

EXPORTSJanuary 2012 – August 2013

Source: NSO

YTD: US$ 13.7B MoM: July 2013 vs. August 2013 (0.45%)

YoY: August 2012 vs. August 2013 (0.36%)

Page 14: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

2012 2013

IMPORTSJanuary 2012 – July 2013

Source: NSO

YTD: US$ 8.7B MoM: June 2013 vs. July 2013 48.4%

YoY: July 2012 vs. July 2013 33.1%

The positive growth was brought about by 6 major commodity groups with positive Y-o-Y change: iron & steel, electronic

products, transport eqpt., other food & live animals, telecom eqpt. & electrical machinery and plastics.

Page 15: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

INVESTMENTS1H 2012 vs. 2013

Source: PEZA

EMPLOYMENT2007 – 1H 2013

Page 16: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE IT IS NOWIn 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

Page 17: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE IT IS NOWThe semiconductor and electronics industry still has the highest % impact on the country’s Gross Domestic Product

Source: University of Asia and the Pacific

Impact of the Hypothetical Loss of Selected Industries on Gross Domestic Product

% Drop in GDP

12.1%

14.9%

28%

Agriculture, Forestry and Fishery

Private Services

Semiconductor and electronics industry

Page 18: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

INDUSTRY CHALLENGES: COSTSPOWER WAGES (IN US$)

200% INCREASE IN IMPORT / EXPORT CHARGES

Source; ECOP 20132013 KPMG Study

STORAGE RATES EXISTING RATE (PhP)

PROPOSEDRATE (PhP)

Foreign Imported Box (45 footer)

541.45 1,624.35

Foreign Exported Box (45 footer)

134.40 403.20

Foreign TranshippedBox (45 footer)

12.22 36.66

Philippine Ports Authority

Page 19: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

INDUSTRY CHALLENGES: COSTS

IMPORTED RAW MATERIALS

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

Total imports of the Phil. Electronics industry last 2012 is US$16 billion

Page 20: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

INDUSTRY CHALLENGES: LEVEL OF TECHNOLOGY

VS

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

Source: 2002 Competitive Landscape Study, Deloitte & Tusch

Page 21: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

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.

Page 22: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE THE INDUSTRY IS GOING: INDUSTRY TARGETS

SHORT TERM (2016)

Investment: U$2.5 BExports: U$28 BEmployment: 506K (D)

3.5 M (I)

Total: 4 million workers

SHORT TERM (2016)

Investment: U$3 BExports: U$37 BEmployment: 1M (D)

7 M (I)

Total: 8 million workers

MEDIUM TERM (2022)

Investment: U$3 BExports: U$37 BEmployment: 1M (D)

7 M (I)

Total: 8 million workers

LONG TERM (2030)

Investment: U$5 BExports: U$52 BEmployment: 1.7M (D)

12 M (I)

Total: 14 million workers

MEDIUM TERM (2022)

Investment: U$5 BExports: U$52 BEmployment: 1.7M (D)

12 M (I)

Total: 14 million workers

LONG TERM (2030)

Investment: U$10 BExports: U$112 BEmployment: 3M (D)

21M (I)

Total: 24 million workers

Scenario A: Status Quo (just business as usual)

Scenario B: Optimum business conditions for industry, with government support and

academe partnership

Page 23: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE THE INDUSTRY IS GOING: HOW TO GET THERE

DoSEMI (Drive-up our Semiconductor & Electronics Manufacturing Index)

Page 24: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE THE INDUSTRY IS GOING: WHERE THE GOVERNMENT CAN HELP

SUPPORT NEEDED

DOE / ERC Electricity roadmap that would ensure lower power cost in the long run with right amount of supply.Promote use of renewable energy sources (such as solar)

DOLE Maintain peaceful and collaborative industrial relations with the labor sectorAvoid redundancy in requirements with other government agencies (e.g. annual mechanical and electrical permits similar to PEZA)

DOF / BIR Main incentives that have already been given to the industry Elimination of equipment donation taxes

TESDA Continuous scholarship grants for the industry’s operators and techniciansDevelopment of training regulations for different types of operators and technicians

BOC Elimination of unnecessary added fees such as barrier seals, computation on surety bonds, OT charges

DOT Promotion of the country as an investment site and for the quality of life. Include Philippine electronics pavilion when participating in trade fairs abroad.Green lane at the airport for very high executives corporate executives of electronics firms visiting the Philippines

DOJ Ensure peace and order and security of expatriates

Page 25: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE THE INDUSTRY IS GOING: WHERE THE GOVERNMENT CAN HELP

SUPPORT NEEDED

DOST Partner with the industry for R&D lab developmentIntensive promotion of DOST-SEI scholarship so that more engineers can graduate with MS and PHDsContinuation of SETUP program for the development of Small Medium Enterprises (local suppliers)

DPWH Improve roads, ports, airports and mass transportation

CHED Update curriculum of Science and Technology coursesUpgrade the education system to cater to the requirements of the industry

DTI / PEZA A yearly target electronics investment roadshow especially in Korea and JapanWork on the Philippines becoming an ATA Carnet Signatory. This is an international customs and export-import document used to clear customs without paying duties and import taxes on merchandise that will be re-exported within 12 monthsFunding for industry players to join exhibits abroad and vice-versa

Page 26: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE THE INDUSTRY IS GOING: ACADEME LINKAGE

Immerse students in electronics firms and allow them to be familiar with the electronics industryEnable graduating students to work in electronics firms (similar to a doctor’s residency) / OJTUpdate curriculum of Science and Technology courses to address industry needsPartner with TESDA in formulating training regulations for electronics skills and include it as part of K12Immerse faculty in industryCreate Regional Centers of Excellence Distance learningUpgrade international rankings of Philippine universities in Asia Participate in inter-school partnerships (Harvard, MIT, Stanford)

Page 27: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

WHERE THE INDUSTRY IS GOING: R&D CAPABILITY

Design Center

Prototype Lab

Materials Lab

Incubation Facility

Scientists

Financing

Environment

Page 28: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

INDUSTRY RECOMMENDATION:

TALENT DEVELOPMENT CONDUCIVE BUSINESS ENVIRONMENT

R&D CAPABILITY DEVELOPMENT

INDUSTRY / COUNTRY PROMOTION & LOCAL SME

DEVELOPMENT

Continuation ofscholarship program for operators and technicians

Logistics costs, power, wages, and incentives

Incubation labs, and more MS/PHDs

Aggressive investment mission abroad and funding capitalization for SMEs

Page 29: THE PHILIPPINE SEMICONDUCTOR and ELECTRONICS INDUSTRY … Industry Roadmap.pdf · the philippine semiconductor and electronics industry roadmap ... fab technology ... semiconductor

END

THANK YOU AND GOD BLESS

Disclaimer: This study is for information only. It does not imply recommendation or endorsement by the BOI/DTI. Any views or

opinions presented in this study are solely representative of the industry associations involved and do not necessarily represent those

of the BOI/DTI. Use of any part or excerpts of this report should be with the permission of the author.