Philippines charts roadmap for electronics sector

The Philippines Department of Trade and Industry is drawing up a comprehensive roadmap for the local electronics sector which will cover all the industry players, from big-name multinational companies down to small local outfits that have carved a niche in original design manufacturing

The Philippines Department of Trade and Industry (DTI) is drawing up a comprehensive roadmap for the local electronics sector which will cover all the industry players, from big-name multinational companies down to small local outfits that have carved a niche in original design manufacturing.

One of the initial goals is to increase the total value of original design manufacturing done in the Philippines from $US500 million to $5 billion by 2008 by increasing the number of exporters from the small and medium enterprise (SME) sector.

Once finished, the roadmap will be presented to President Gloria Macapagal-Arroyo in a Cabinet meeting this month, Armi Ballesteros, officer-in-charge of DTI's Electronics and ICT Department, told Computerworld Philippines in an interview.

Late last year, the Semiconductor and Electronics Industries of the Philippines (SEIPI) presented its own roadmap that targets a $100 billion export industry by 2008 from about $24 billion last year.

SEIPI, spearheaded by big-name tech firms like Intel and Texas Instruments which have manufacturing presence in the Philippines, accounts for about 70 % of the country's total electronics exports. The group also aims to create a million technical jobs for Filipinos to support its industry projections DTI is now assisting the smaller players from the Electronics Industries Association of the Philippines (EIAPI) to chart their own roadmap. By incorporating their plans with that of SEIPI's, the government is looking to come up with a comprehensive roadmap that will cover both segments.

Established in 1985, EIAPI is the country's foremost organisation of original design manufacturers (ODMs). It is composed of some 40 companies plus professionals and academic institutions engaged in original product development.

Its capabilities to date include analogue and digital circuit design, embedded systems development, firmware and middleware development, PCB layout, manufacturing, industrial and mechanical enclosure design.

Issues In her presentation during a recent EIAPI forum, Ballesteros enumerated a number of issues raised by the association members in discussions with DTI.

These include the high cost of electricity (critical to production), lack of qualified local engineers, limited access to foreign markets, limited product incentives and high cost of materials needed for building prototypes of their designs.

To actually build working models of their designs, local companies usually source materials from abroad unlike bigger multinational tech firms that have a definite — and worldwide — supplier base.

"We need to have a directory of local suppliers for the non-MNCs. This way, we can actually determine the level of sophistication (of local suppliers)," Ballesteros explained. By building a supplier base, DTI's aim to help ODMs ascertain what can be sourced locally to allow them to cut their costs.

During the forum, some EIAPI members noted the lack of tax incentives for companies that are not registered with either the Board of Investments (BOI) or Philippine Export Zone Authority (PEZA).

PEZA-registered companies, or those located in designated economic zones, are afforded tax incentives as part of the government's thrust to bring in foreign investments. Aside from tax breaks, incentives apply when these investors bring in supplies from abroad — a benefit which is not enjoyed by smaller local exporters.

"We are thinking of 'doable' projects, just like those in other countries, such as pooling all supply requirements of those in this sector to cut on costs," Ballesteros said. In creating "synergies" between SEIPI and EIAPI members, the underlying goal is to allow for ways which would expose smaller Filipino ODM firms to foreign markets.

"Liberalization forces companies to look for outside markets and increases competition," said BOI chairman Gregory Domingo, who encouraged EIAPI to participate in industry exhibits outside the country.

SEIPI itself acknowledged that the country should be progressing from mere contract manufacturing to higher-value original designing. Most of SEIPI member-firms are primarily engaged in manufacturing. Intel, for example, assembles its computer chips in the Philippines.

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