A sector conducive to growth
ACCOUNTING FOR SOME 70% OF THE PHILIPPINES' ANNUAL EXPORT SALES ($27 BILLION), ELECTRONIC AND SEMICONDUCTOR PRODUCTS REMAIN KEY TO THE COUNTRY'S INDUSTRIAL OUTPUT

UNDER THE MICROSCOPE Semiconductor and Electronics Industry in the Philippines, Inc. (SEIPI) keeps a close eye on the sector.

Nearly 30 years ago investors turned to the Philippine semiconductor and electronics industry at a time when global competition dictated an urgent need to lower production costs without sacrificing quality. Almost immediately the Philippines gained a reputation for quality assembly and test manufacturing of everything from smoke detectors and karaoke machines to Pentium components and cell phones and any other type of electronics equipment that require highly technical, labor intensive activities.
Currently, electronic components and semiconductor devices are the Philippines’ top export products, accounting for more than 70% of the country’s total export sales per year, or some $27 billion (according to SEIPI). Worldwide, semiconductor sales reached a record $204 billion for the year 2000 and were headed for a growth rate of 22% before sales began to slip this year, making double-digit growth seem unlikely as 2001 comes to a close.

While the Philippine semiconductor and electronics sector is in a better position to weather the global pause, industry associations that support manufacturers are being called on to double their efforts to come up with a viable response to the trend.
In the Philippines the task of tackling industry concerns and issues falls squarely on the shoulders of the Semiconductor and Electronics Industry in the Philippines, Inc. (SEIPI), an association of some 160 local and foreign semiconductor and electronics manufacturers that serves as their representative and advisor in dealings with the government and private institutions.

Saturnino G. Belen CEO of Fastech Synergy and Chairman of SEIPI

SEIPI chairman Saturnino G. Belen says that, as far as the association is concerned, it is business as usual and SEIPI will continue working towards its top five objectives: promoting networking and the sharing of information among members; developing industry linkages with foreign and local industry groups and companies; advocating quality, productivity and innovation; urging the development of support industries; and promoting the Philippines and the industry in partnership with the government.
Mr. Belen cautions about overreacting to the current slowdown in the industry, describing it as a simple adjustment following a boom year. “2000 was a record year, especially in the first quarter, as people were postponing orders at the end of 1999 because of Y2K concerns,” he explains. “Nobody wanted to be caught with a lot of inventories because they were not sure if a lot of companies were Y2K compliant.”

HI-TECH The Philippine electronics sector remains buoyant.

Orders starting rolling in at the start of 2000 after it became clear that the Y2K transition was without any big hitches, thus the huge first quarter sales. “Then people became bullish, thinking the U.S. economy was still growing. And so the second quarter was even stronger than the first because a lot of dot.com companies were ordering servers and communication infrastructure systems, “ Mr. Belen explains.
On top of that, cellular telephone sales nearly doubled last year from 250 million to 420 million units. “Suddenly, in the third quarter of last year they put on the brakes. By the fourth quarter it was pretty evident that a lot of people had excess inventories,” recalls Mr. Belen, who is also CEO of Fastech Synergy, a leading provider of semiconductor assembly and test services that is listed on the main board of the Singapore Stock Exchange.

Fastech is also one of the few semiconductor component manufacturing companies to post gains in the first half of 2001, reporting a net income of $1.76 million from a turnover of $14.24 million by the end of June. Its customer base of companies includes names like Philips and Fujitsu.
“We were really committed to growing on account of our Singapore listing,” notes Mr. Belen. “And we were able to grow in sales by an almost even rate compared to the first quarter of 2000, which was a very good quarter, but our income was cut by about 50% because our operating expenses were higher. What we are trying to do now is concentrate on making sure that our cost structure is responsive to the current environment. Having said that, we are gratified that we are still making money when a lot of companies were announcing losses for the first quarter.”