Philippines electronics manufacturing industry dates to the 1970s when the country’s stable political environment and affordable, English-speaking workforce started to attract multinationals.

Starting from the assembly of basic chips, the industry has grown to produce advanced components like microprocessors, CD-ROMs, and computers. It became so vital to the country’s economy that companies in the industry established the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) in 1983 to support its members and promote the industry.

This articles contains about insights and strategies for effectively sourcing from the Philippines electronics manufacturing industry.

Understanding the Market Landscape

The Philippines boasts a robust electronics manufacturing industry, driven by factors such as skilled labor, strategic location, and government support. Major players in the industry include multinational corporations, local electronics manufacturers, and SMEs specializing in various segments like semiconductors, consumer electronics, and industrial components.

Together with Malaysia and Vietnam, the Philippines is one of the leading electronics manufacturers in Southeast Asia. Over the past 40 years, the country has welcomed notable industry players, such as Texas Instruments, Toshiba, and ON Semiconductor Corporation.

The country’s experience in electronics manufacturing has also spurred the growth of domestic Electronics Manufacturing Services (EMS) companies that provide advanced electronic components to the global market across various sectors, including semiconductors, industrial electronics, consumer electronics, and telecommunication equipment.

The rising tension between the US and China has made the “China + 1” strategy increasingly important for electronics companies. Due to its robust electronics manufacturing base and close relationship with the US, the Philippines is set to become one of the largest beneficiaries of this trend.

Identifying Potential Suppliers

Once you’ve defined your sourcing requirements, begin the process of identifying potential suppliers in the Philippines. Utilize online directories, trade associations, and industry networks to compile a list of reputable manufacturers and suppliers. Reach out to these companies to gather information about their products, services, and manufacturing processes. Evaluate their capabilities, certifications, and track record to shortlist the most suitable partners for your sourcing needs. Here’s a step-by-step guide to help you identify and assess potential suppliers effectively:

1. Market Research

Start by conducting comprehensive market research to understand the landscape of the Philippines electronics industry. Identify key players, major manufacturers, and suppliers operating in the market. Utilize industry reports, market analysis, and trade publications to gather valuable insights into the industry’s dynamics, trends, and key players.

2. Online Directories and Databases

Explore online directories and databases that list electronics manufacturers and suppliers in the Philippines. Websites like Alibaba, TradeAsia, and Global Sources feature profiles of suppliers, their products, and contact information. Use relevant search filters to narrow down your options based on your specific requirements.

3. Trade Associations and Events

Connect with trade associations and industry organizations in the Philippines that focus on electronics manufacturing and related sectors. Attend trade shows, exhibitions, and networking events where you can meet potential suppliers, learn about their offerings, and establish contacts. Trade associations often provide directories of member companies, making it easier to identify reputable suppliers.

4. Supplier Referrals and Recommendations

Reach out to colleagues, industry contacts, and business associates for supplier referrals and recommendations. Personal referrals from trusted sources can help you identify reliable suppliers with a proven track record of quality and reliability. Leverage professional networks, forums, and online communities to seek recommendations and gather insights from other professionals in your industry.

5. Online Research and Company Websites

Conduct online research to identify potential suppliers by searching for relevant keywords related to electronics manufacturing in the Philippines. Visit supplier websites to learn more about their company background, product offerings, manufacturing capabilities, and certifications. Look for case studies, client testimonials, and portfolio samples to assess their experience and expertise.

6. Supplier Verification and Due Diligence

Before engaging with potential suppliers, conduct thorough verification and due diligence to ensure their credibility and reliability. Check for business registration, licenses, and certifications to confirm their legitimacy. Evaluate their financial stability, production capacity, and quality control processes to assess their ability to meet your sourcing requirements.

7. Request for Information (RFI) and Initial Contact

Reach out to selected potential suppliers by sending a Request for Information (RFI) or initial inquiry detailing your sourcing needs, specifications, and expectations. Use this opportunity to gather additional information about their capabilities, pricing, lead times, and terms of engagement. Maintain open communication and clarify any questions or concerns to facilitate a productive dialogue.

8. Supplier Assessment and Shortlisting

Evaluate potential suppliers based on criteria such as manufacturing capabilities, product quality, reliability, financial stability, and compatibility with your business requirements. Create a shortlist of top candidates that best align with your sourcing objectives and standards.

Products Manufactured in the Philippines

The Philippines is a top global exporter of electronics, with a particular strength in semiconductors. It also excels in producing telecommunication electronics, industrial electronics, and consumer electronics.

Semiconductors

The Philippines stands to benefit from the US-China tensions as semiconductor manufacturers look for other countries to avoid the impact of new restrictive US regulations such as the CHIPS Act.

In January 2023, the Semiconductor Industry Association (SIA), which represents 99% of the US semiconductor industry, recognized the Philippines’ role in reducing costs for US manufacturers in basic activities such as assembling, testing, and packaging semiconductors.

With more than 30-40 years of experience working with notable companies such as IMI, Inari Amertrond, and Cirtek, the Philippines is well-placed to provide these services with expertise and quality.

Industrial Electronics

Industrial electronics comprise components like drives, sensors, and industrial robotics used in industrial settings. The Philippines boasts notable industrial electronics producers, such as DAC Industrial Electronics and RS Philippines, which provide simple components such as sensors. More advanced and sophisticated products are also being produced such as industrial robots and automation control equipment.

Telecommunication Equipment

Between 2011 and 2021, the Philippines’ telecommunication export value increased by 156% from US$ 529 million to US$ 1.35 billion, according to the United Nations Conference on Trade and Development (UNCTAD).

Telecommunication equipment includes hardware such as routers, cables, and mobile devices. In January 2023, Nokia announced a major investment in the Philippines’ telecommunication sector to create a nationwide broadband network and a 5G network in Metro Manila.

Consumer Electronics

Philippines’ largest EMS manufacturers, including Inari and Cirtek, are particularly active in the consumer electronics sector. IMI, the country’s largest EMS manufacturer, is making consumer electronics for electric vehicles (EVs), which could potentially make the Philippines a leading EMS manufacturer for EV consumer electronics.

Benefits of Sourcing Electronics in the Philippines

The Philippines’ 40-year record in the electronics sector, skilled and English-speaking workforce, and relatively liberal foreign investment policies offer various benefits for companies seeking to source electronics.

Skilled Workforce

The Philippines boasts a skilled workforce proficient in the English language, a critical factor for foreign investors. According to the 2022 EF English Proficiency Index, the Philippines ranks second only to Singapore in terms of English skills. This high level of English proficiency facilitates effective communication between staff and employers, enhancing work productivity.

Additionally, UNESCO data reveals that the Philippines has the third-highest educational attainment rate in Southeast Asia, behind only Singapore and Malaysia, in terms of years of schooling.

A Large Workforce at Competitive Costs

With a labor force of nearly 50 million, the Philippines possesses the third-largest labor pool in Southeast Asia, following Indonesia and Vietnam. Moreover, the country’s competitive wages are comparable to those of Vietnam, Cambodia, and Indonesia, while also being about 30% lower than that of Malaysia.

Strategic Location

The Philippines enjoys a strategic location in the Asia-Pacific region, with easy and rapid movement to the most dynamic economic centers worldwide. Major cities such as Tokyo, Beijing, Ho Chi Minh City, Jakarta, Singapore, and Bangkok are all within 10 hours of flight time. Furthermore, the country is positioned between the strategic Malacca Strait, the busiest shipping lane globally, and the US, the world’s largest economy.

Free Trade Agreements

As a member of the Regional Comprehensive Economic Partnership, a free trade bloc comprising ASEAN member states, Australia, China, Japan, South Korea, and New Zealand, the Philippines benefits from free trade agreements in the Asia-Pacific region.

However, negotiations for an EU-Philippines FTA remain stalled due to the country’s ongoing drug war and its resultant high civilian casualties. Despite this, the absence of an FTA has not hindered the development of significant economic ties between the two sides, with a 2021 total bilateral trade volume of US$ 15 billion, making the Philippines one of the EU’s top 40 trading partners.

Investment Facilitation Policies

The Philippines has enacted investment facilitation policies that will help to reduce bureaucratic procedures in governmental services, including the 2018 Ease of Doing Business and Efficient Government Service Delivery Act. This Act aims to decrease the time businesses must spend on administrative tasks while increasing transparency within governmental departments and companies.

Moreover, since 2021, the Philippines has allowed 100% foreign ownership in public services such as telecommunications, airlines, shipping, and railways, making it one of the few countries in the world to do so. However, ownership restrictions still exist in areas such as ports, electricity, and water distribution.

The Philippines’ relatively lenient foreign ownership policies and efforts to reduce red tape are highly advantageous for foreign investors seeking entry into the country’s electronics market. With a skilled workforce, a large and affordable labor pool, and an advantageous location, the Philippines presents significant investment opportunities.

Challenges in Sourcing Electronics from the Philippines

While the Philippines offers many advantages as a sourcing destination for electronics, there are also some challenges that must be taken into account by potential investors. These include issues with infrastructure, corruption, and dependence on China.

Infrastructure

Former President Duterte initiated an ambitious “Build, Build, Build” infrastructure program in 2017. The program has cost about 7.3% of the country’s GDP in 2022 or an average of US$ 32.8 billion every year from 2017 to 2022.

Despite so massive a program, only 10% of the projects were completed by the end of Duterte’s presidency in 2022. In addition, although the Philippines has an extensive network of seaports, they are small in size. The Philippines’ largest Port of Manila is only ranked 31st by the World Shipping Council, behind countries such as Vietnam, Malaysia, and Indonesia. Furthermore, according to a survey from the World Economic Forum, the Philippines ranks as the third worst in terms of road connectivity in Southeast Asia.

The low port capacity and road connectivity mean that it will be challenging to move goods from factories to export ports rapidly.

Corruption

The Philippines ranks as the fourth most corrupt country in Southeast Asia, according to the Corruption Perception Index by Transparency International. The Bureau of Customs, a crucial governmental organ for many foreign investors, is perceived as one of the most corrupt by the US State Department. High levels of corruption pose a significant challenge for foreign investors in the country.

Dependence on China

Despite being one of Southeast Asia’s major manufacturing hubs of electronics, the Philippines still relies heavily on China for sub-components and raw materials such as integrated circuits and petroleum. This trend, however, has not shown any sign of abating, between 2021 and 2022, the Philippines’ electronics imports grew by 14.5%.

According to a 2019 report by the Electronic Engineering Times, the Philippines’ electronics contain about 80% sourced from abroad. These two factors make the Philippines’ electronics industry highly reliant on Chinese sources.

Semiconductor and Electronics Companies in the Philippines

The semiconductor and electronics industry plays a significant part of the country’s economy and is a vital component of the global supply chain. This industry offers a wide range of services, from design to distribution, and has attracted many foreign investors due to its affordable, English-speaking, and qualified workforce.

In particular, the top EMS companies in the Philippines are highly desirable due to their extensive experience in EMS manufacturing and their willingness to modernize their production systems to meet the growing demand for cutting-edge products like electric vehicles (EVs).

IMI

One of these leading EMS providers is IMI, which has been in operation since 1980 and has manufacturing, engineering, and sales facilities in ten countries worldwide. The company has focused its strategy on developing EV-related products, such as automotive cameras, EV charging stations, and power systems.

Cirtek Electronics

Another top player in the Philippine electronics manufacturing sector is Cirtek Electronics, which has been able to adapt to the ever-changing demands of customers since its inception in 1984. The company offers a wide range of products and services, from components for telecommunication devices to assembly, testing, and repair.

Inari Amertron

Finally, Inari Amertron, a result of an acquisition by a Malaysian company, has two major plants in the Philippines and is set to become one of the most cutting-edge EMS providers in the industry by leveraging Fourth Industrial Revolution technologies like the Internet of Things and machine learning.

Sourcing from Philippines with AsiaCommerce

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