INDUSTRY ROADMAP PRESENTATION OUTLINE Where the industry Where it - - PowerPoint PPT Presentation

THE PHILIPPINE SEMICONDUCTOR

and ELECTRONICS

INDUSTRY ROADMAP

PRESENTATION OUTLINE

Where the industry has been Where it is now Where it is going How to get there Industry Challenges

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

1 2 3 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

0.04 0.22 1.29 2.16 1.08 1.47 0.67 0.79 1.24 0.72 0.270.23 0.44 0.78 0.75 1.21 0.420.47 2.272.452.68

US$ Billions

• 10

20 30 40

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

2 2 3 4 7 9 13 18 25 27 22 24 24 27 27 30 31 29 22 31 24 23 US$ Billions

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

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

NEW MANUFACTURING TECHNOLOGY, PROCESS EFFICIENCIES, TEST DEVELOPMENT PACKAGING DESIGN, TEST DEVELOPMENT, PRE-MANUFACTURING ASSEMBLY EFFICIENCIES INVENTORY MANAGEMENT MARKETING RESEARCH STRATEGY AND DEVELOPMENT SYSTEMS INTEGRATION PRE-MANUFACTURING DESIGN, TEST DEVELOPMENT LOGISTICS MANAGEMENT ASSEMBLY AND FINAL TESTING SHIPMENT AND DISTRIBUTION CUSTOMER SERVICE RESEARCH AND DEVELOPMENT IN MATERIALS SCIENCE, NEW ALGORITHMS, EMBEDDED SOFTWARE DEVT

Software Silicon Technology Application Wafer Fab Technology Package Selection/ Application Produc tization R&D Ramp To Production Distri bution Product Product Or Component Design Logistics Management Production Shipment Distribution Direct Order Fulfillment After Sales Service

SEMICONDUCTOR MANUFACTURING SERVICE (SMS) ELECTRONICS MANUFACTURING SERVICE (EMS)

Sourcing/strategic Purchasing Procurement Warehousing Kitting PCB Assembly Component Assembly Full System Assembly Cable/harness Assembly Repair and Warranty Other After Sales Support

SEMICONDUCTOR DESIGN

1

FOUNDRY OPERATIONS

2

PACKAGING/PRODUCT DESIGN

3

OUTSOURCED EMS

6

OUTSOURCED SMS

4

OEM R&D MARKETING

5

CUSTOMER SERVICE

7

Source: 2002 Competitive Landscape Study, Deloitte & Tusch

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

• f EMS “Box” or assembly)

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

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

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

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

EXPORTS BY SECTOR

January – August 2013

Source: Figures – NSO, Companies - SEIPI

Positive:

IMI, Daeduck, Furukawa, Koyo, Morirok u, Kymco, Kedica, Standard, Gemphil, Te mic Automotive, Fujitsu BAG Electronics, Sharp Shin-Etsu, Azbil, MOOG, Knowles Epson, Canon, Brother

Negative:

EXPORTS BY SECTOR

January – August 2013

TI, SEMPHIL, ROHM, Sanyo, STMicro, PD, OSPI, PSI, Tong Hsing, SDP Toshiba, HGST, Amertron, Excelitas, Ibiden Ionics EMS Remec, Continental, Opt is Phils. Source: Figures – NSO, Companies - SEIPI Prima Tech, Gotoh, NANBU Phils., MEC & Beta Elec., Terumo

Negative:

2012 2013

EXPORTS

January 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%)

2012 2013

IMPORTS

January 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.

INVESTMENTS

1H 2012 vs. 2013

Source: PEZA

EMPLOYMENT

2007 – 1H 2013

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 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

INDUSTRY CHALLENGES: COSTS

POWER WAGES (IN US$) 200% INCREASE IN IMPORT / EXPORT CHARGES

Source; ECOP 2013 2013 KPMG Study STORAGE RATES EXISTING RATE (PhP) PROPOSED RATE (PhP)

Foreign Imported Box (45 footer)

541.45 1,624.35

Foreign Exported Box (45 footer)

134.40 403.20

Foreign Transhipped Box (45 footer)

12.22 36.66 Philippine Ports Authority

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

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

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.

WHERE THE INDUSTRY IS GOING: INDUSTRY TARGETS

SHORT TERM (2016)

Investment: U$2.5 B Exports: U$28 B

Employment: 506K (D) 3.5 M (I)

Total: 4 million workers

SHORT TERM (2016)

Investment: U$3 B Exports: U$37 B

Employment: 1M (D) 7 M (I)

Total: 8 million workers

MEDIUM TERM (2022)

Investment: U$3 B Exports: U$37 B

Employment: 1M (D) 7 M (I)

Total: 8 million workers

LONG TERM (2030)

Investment: U$5 B Exports: U$52 B

Employment: 1.7M (D) 12 M (I)

Total: 14 million workers

MEDIUM TERM (2022)

Investment: U$5 B Exports: U$52 B

Employment: 1.7M (D) 12 M (I)

Total: 14 million workers

LONG TERM (2030)

Investment: U$10 B Exports: U$112 B

Employment: 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

WHERE THE INDUSTRY IS GOING: HOW TO GET THERE DoSEMI (Drive-up our Semiconductor & Electronics Manufacturing Index)

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 sector Avoid 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 technicians Development 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

WHERE THE INDUSTRY IS GOING: WHERE THE GOVERNMENT CAN HELP

SUPPORT NEEDED DOST Partner with the industry for R&D lab development Intensive promotion of DOST-SEI scholarship so that more engineers can graduate with MS and PHDs Continuation 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 courses Upgrade the education system to cater to the requirements of the industry DTI / PEZA A yearly target electronics investment roadshow especially in Korea and Japan Work 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 months Funding for industry players to join exhibits abroad and vice-versa

WHERE THE INDUSTRY IS GOING: ACADEME LINKAGE

• Immerse students in electronics firms and allow

them to be familiar with the electronics industry

• Enable graduating students to work in electronics

firms (similar to a doctor’s residency) / OJT

• Update curriculum of Science and Technology

courses to address industry needs

• Partner with TESDA in formulating training

regulations for electronics skills and include it as part of K12

• Immerse faculty in industry
• Create Regional Centers of Excellence
• Distance learning
• Upgrade international rankings of Philippine

universities in Asia

• Participate in inter-school partnerships

(Harvard, MIT, Stanford)

WHERE THE INDUSTRY IS GOING: R&D CAPABILITY

• Design Center
• Prototype Lab
• Materials Lab
• Incubation Facility
• Scientists
• Financing
• Environment

INDUSTRY RECOMMENDATION:

TALENT DEVELOPMENT CONDUCIVE BUSINESS ENVIRONMENT R&D CAPABILITY DEVELOPMENT INDUSTRY / COUNTRY PROMOTION & LOCAL SME DEVELOPMENT

Continuation of scholarship program for operators and technicians Logistics costs, power, wag es, and incentives Incubation labs, and more MS/PHDs Aggressive investment mission abroad and funding capitalization for SMEs

END

THANK YOU AND GOD BLESS