Navigating the Growth Trajectory: Integrated Circuit Market in the Philippines

Philippines' Ascent in the Semiconductor Industry
The Philippines is strategically positioning itself as a significant player in the global integrated circuit (IC) design industry by nurturing competitive IC design firms and enticing foreign investment in IC-related businesses. At the core of this endeavor lies the country's thriving semiconductor and electronics sector, which constitutes a substantial portion of its exports, marked by consistent growth.

In the years 2021 to 2022, the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) recorded an impressive 6.88% annual increase in semiconductor and electronics exports, reaching a total of USD 49.09 billion. This sector accounts for a remarkable 62.27% of the Philippines' commodity exports, totaling USD 78.84 billion, a vital contributor to the nation's economic landscape.

According to Makreo Research, Philippines' integrated circuits (ICs) market has exhibited substantial growth from 2018 to 2022, achieving a commendable compound annual growth rate (CAGR) of 7.4%. This expansion is fueled by increasing demand from the consumer electronics and automotive industries, alongside growing investments in various sectors like telecom, healthcare, aerospace & defense, and industrial automation. Furthermore, the availability of educational programs in IC design has contributed to the industry's growth.

The Complex Global Semiconductor Ecosystem The semiconductor industry, valued at over USD 500 billion in worldwide sales in 2022, operates within a highly specialized, geographically dispersed, and intricately linked value chain. This intricate web of activities forms a complex international semiconductor ecosystem that offers numerous benefits to countries involved, such as increased employment opportunities and expanded export potential. The Asia Pacific region has experienced substantial benefits from rising memory sector demand and significant revenue growth, particularly in Mainland China.

Hong Kong stands out as the largest market for the Philippines' electronics exports, absorbing 21.15% of these products. The United States and Mainland China follow closely, receiving 13.61% and 13.17% of these exports, respectively. To counteract the semiconductor production slowdown, SEIPI has set a 2023 export growth target of 5%, focusing on technological advancements in various industries, including automotive, consumer electronics, and office equipment.

Philippines' Dominance in IC Manufacturing The Philippines, a leading global exporter, contributes 2.8% of all integrated circuits (ICs) globally. Renowned IC manufacturers like Texas Instruments, STMicroelectronics, NXP, ON Semiconductor, Analogue Devices, and Maxim maintain a significant presence in the country. The nation's electronic component sector, particularly IC assembly and testing operations, has been pivotal to its economy since the 1970s and forms the backbone of its export sector.

In 2022, the Philippines' exports of "Electronic Integrated Circuits and Microassemblies" (commodity group 8542) reached USD 28 billion, constituting 70% of all semiconductor exports. The majority of electronic industry activities are concentrated in four geographic regions: Metro Manila, Calabarzon, Cebu, and Northern/Central Luzon. Notably, Metro Manila and Calabarzon collectively represent 90% of the electronics industrial activity cluster.

Driving Factors:
Economic growth

• In 2022, Philippine economy recorded one of the strongest growth rates among developing nations while in proceeding year GDP growth is anticipated to slow to 6% due to the difficult external environment.
• According to the Asian Development Outlook published by the Asian Development Bank in April 2023, FY2024 is predicted to rise to 6.2% from 6% in 2023. Growth will be supported by a rebound in retail sales and employment, a continued expansion of the manufacturing industry, and increased public infrastructure spending.
• The growth rate in 2023 and in 2024 will help the Philippines to achieve their goal of becoming an upper-middle-income country.
• The first quarter of 2023 had a 2.0% increase in manufacturing. Food items, at 5.8%, other manufacturing, at 17.6%, transportation equipment, at 21.8%, beverages, at 8.4%, and basic metals, at 6.8% were the main drivers of growth.

Electric Vehicles and Government Support
The proliferation of electric vehicles (EVs) in the Philippines and the wider region has emerged as a driving force behind the semiconductor industry's expansion. The nation actively seeks investments in EV-related technologies to join the global value chain, including the production of eco-friendly vehicles, IT integration into vehicles, and precision metal component manufacturing. These endeavors position the Philippines to cater to the growing demand for sustainable transportation solutions in the global EV market.

Government Initiatives for Industry Growth
The growth of the semiconductor industry in the Philippines is also attributed to proactive measures taken by the local government. The Department of Trade and Industry has established initiatives aimed at supporting electronics industry growth, including special economic zones and tax incentives for companies operating in the sector, creating an environment conducive to semiconductor industry expansion.

Philippines' Bright Future in the Semiconductor Industry
The Philippines has emerged as a formidable contender in the global integrated circuit (IC) design and semiconductor industry, backed by a thriving ecosystem and a commitment to sustained growth. As it forges ahead, several key takeaways come to the forefront.

First, the Philippines' semiconductor and electronics sector has demonstrated remarkable export growth, with a 6.88% annual increase from 2021 to 2022, contributing significantly to the nation's economic vitality. The industry has established its presence on the global stage, comprising a complex and interconnected value chain with international reach, reflecting the intricate nature of semiconductors themselves.

Moreover, the concentration of IC manufacturing giants in the Philippines underscores its pivotal role in the global IC landscape. The nation exports a substantial portion of ICs worldwide, and its electronic components sector, particularly IC assembly and testing, forms the backbone of its export industry.

The future prospects of the Philippines in the semiconductor industry look promising. An expanding IC market, fueled by growing demand in consumer electronics, automotive, and various other sectors, coupled with the availability of educational programs in IC design, positions the country for continued growth.

Furthermore, the increasing demand for electric vehicles in the Philippines and the region stands as a significant catalyst for semiconductor industry expansion. The nation's proactive efforts to attract investments in EV-related technologies are a testament to its commitment to sustainability and its ambition to play a pivotal role in the global EV market.

Lastly, the support from the local government, with initiatives such as special economic zones and tax incentives, underscores the Philippines' commitment to nurturing a favorable environment for semiconductor industry growth.

In conclusion, the Philippines is on a trajectory to solidify its place in the global semiconductor and IC design arena. With a robust foundation, export prowess, and proactive initiatives, the nation's future in this industry holds great promise, offering not only economic benefits but also contributing to technological advancements and sustainable solutions on a global scale.

The study conducted by Makreo Research on the “Integrated Circuit Market in the Philippines (2018-2028): Size, Share, and Growth Forecast for Analog, Digital, and Mixed/Micro Circuits" provides a comprehensive analysis of the market, encompassing a wide range of factors. The report takes into account both qualitative and quantitative factors, indicating a well-rounded approach to analysis. The inclusion of both qualitative and quantitative factors in the study ensures that readers gain a more complete understanding of the Philippines Integrated Circuit Market. It goes beyond mere numbers and incorporates insights into consumer behavior, industry trends, and market dynamics. This holistic approach enhances the overall analysis and makes the study a valuable resource for individuals or organizations interested in exploring the semiconductor, integrated circuit , Digital IC’s, Analog IC’s, Mixed IC’s, Investment scenario, in Philippines. Moreover, the report's focus on past and present performance, as well as potential growth opportunities in the future, enables readers to identify key areas of interest and investment.

Key Questions Addressed

1. What has been the historical economic performance of the Philippines, and what are the expectations for future growth?
2. How has the Philippines' Integrated Circuit industry fared in the past, and what is the current situation?
3. What are the primary challenges currently facing the industry?
4. How does the demand and supply landscape look in the country?
5. Which sectors make the most significant contributions to the Philippines' Integrated Circuit market?
6. Who are the prominent market players, and what is their current performance status?
7. What are the notable business achievements of these market players?
8. What is the current financial standing of these market players?
9. What does the investment environment look like?
10. Are there any significant mergers and acquisitions in the industry?