The Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) is sticking to its 10 percent growth target for 2022, but players are expected to see smaller margins because of rising costs.
“We expect a 10 percent increase in our export performance this year but then again the margins would be smaller because of the higher costs,” said Seipi President Danilo Lachica in a televised interview.
In an interview with BusinessMirror in December 2021, Lachica said he expects the industry to grow by 10 percent in 2022 on the back of robust demand.
After six months and with the ongoing war between Russia and Ukraine, which according to Lachica “has totally upset the applecart in terms of fuel supply and coal supply shortage”, the Seipi president emphasized that the demand has always been there since electronic exports play into the global market.
“Even during the pandemic, the demand is always there and it was really a matter of being able to come up with the supply especially in the context of shortage of semiconductive waivers but this demand that we supply comes at the cost, literally higher cost,” added Lachica.
Lachica broke down the profile of the industry, saying “70 percent comes from semiconductors meaning the innovative circuits that are packaged and shipped out, 30 percent comes from 9 other sectors including computer or consumer products, office equipment, telecommunication products, renewable energy, et cetera.”
The Seipi chief emphasized that the driving factors “would be mostly from the semiconductor components and also demand for medical electronics, telecommunications, industrial products” which, he said, are spurred by use of daily computing big data, artificial intelligence (AI), Internet of Things (IoT), and Industrial Revolution (IR) 4.0
Still, Lachica said, the semiconductor industry is not spared from challenges that it has to face. With this, the Seipi chief urges the government to review the incentives rationalization and to promote the ease of doing business, as well as “reconcile policies that have to a certain extent really provide to be helpful to the industry.”
Lachica also emphasized that although the demand has always been there for electronic exports, the semiconductor industry is also suffering from higher costs of logistics, power, operating, and utilities.
However, the Seipi chief emphasized that with the high costs, while the semiconductor industry should theoretically pass on the costs to the consumers, he said that as long as the market is competitive across Asean neighbors, and the margins are being managed, the company will “absorb a lot of these costs to the extent that they can”.
In relation to the capital flight from potential investors over fears considering that we are putting in place the rationalization of incentives, Lachica reiterated that “there were about $400 million more that could probably be moved to the other side.” However, Lachica said that “we’re trying to mitigate that.”
Earlier, the Seipi president said the country lost $3.6 billion investments which five companies have brought to Vietnam, Thailand, and China instead of the Philippines due to issues on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, particularly the rationalization of incentives.
The Seipi chief said that they are already trying to line up meetings with the new government including the President and cabinet members to explain the industry’s situation and the real threats that they are facing “especially in the life of that challenging environment that we face today.”
Image credits: Nonie Reyes