'Resurgent' PH electronics industry seen in 2-3 years
02/27/2012
MANILA, Philippines - A "resurgent" electronics industry is seen in the Philippines within the next 2 to 3 years, according to Singapore-based DBS.
In a report, DBS said the electronics investments in the Philippines in 2010 and 2011 point to a resurgent electronics industry in the next 2 to 3 years. Electronics investments reached $2.5 billion in 2011, from $2.3 billion investments in the previous year.
"According to Semiconductor and Electronics Industries of the Philippines Inc (SEIPI), each US dollar of investment will generate $2 of additional exports. Assuming that these investments start to operate at capacity in two years, this implies an additional $9.6 billion worth of exports (about 40% of the total value of electronics exports for 2011) By that time, electronics exports should also show a growth trajectory after staying essentially flat over the last decade," it said.
The disruption in electronics manufacturing in Thailand may also lead to a short-term shift in demand to the Philippines. "The country may also benefit with firms looking to diversify their electronics manufacturing base away from Thailand following the flood disaster," DBS said.
This year, DBS said it sees a "cyclical" rebound in Philippine electronics exports, after the slump in 2011.
Electronics and semiconductor shipments, which made up nearly half of Philippine export revenues, contracted 32.7% in December from a year ago.
"The US semiconductors book-to-bill ratio has come off the low of 0.71 registered in September and is at 0.95 in January. This divergence in this ratio and electronics exports suggests that a bottoming out in the electronics cycle may be imminent," it said.
"However, a sharp recovery (similar to post-global financial crisis) is not expected given ongoing concerns about the eurozone debt crisis and the state of the US economy."
PH lagging behind Asian neighbors
DBS noted the electronics industry in the Philippines has been lagging behind other countries in the current downturn.
"Electronics exports across Asia dipped sharply during the global financial crisis (GFC) and this was followed by a rebound of roughly the same magnitude across the different countries. Now, the Philippines is the worst impacted by the current electronics cycle downswing, with electronics exports dropping close to GFC-levels.
By contrast, electronics exports of Singapore, Taiwan, Thailand and South Korea are all hovering significantly off their GFC lows," DBS said.
The underperformance of the electronics industry cannot be attributed solely to the "industry-wide overhang weighing on prices" and suggests structural weaknesses.
"In fact, the longer-term picture shows that the value of electronics exports has essentially stagnated since 2000," DBS said.
The weak performance has been attributed to low investment in the electronics sector in the last decade and heavy dependence on the semiconductor segment, which has been hit with oversupply worries.
DBS noted that electronics investments in the country has stagnated. In 1995, electronics investments totaled over $2 billion, and over the 10 years, the average investments was only P700 million.
"The lack of sufficient investment during that time period could have hurt potential output growth and also means that the country could have missed out on the latest technology trends," DBS said.
"According to Semiconductor and Electronics Industries of the Philippines Inc (SEIPI), each US dollar of investment will generate $2 of additional exports. Assuming that these investments start to operate at capacity in two years, this implies an additional $9.6 billion worth of exports (about 40% of the total value of electronics exports for 2011) By that time, electronics exports should also show a growth trajectory after staying essentially flat over the last decade," it said.
The disruption in electronics manufacturing in Thailand may also lead to a short-term shift in demand to the Philippines. "The country may also benefit with firms looking to diversify their electronics manufacturing base away from Thailand following the flood disaster," DBS said.
This year, DBS said it sees a "cyclical" rebound in Philippine electronics exports, after the slump in 2011.
Electronics and semiconductor shipments, which made up nearly half of Philippine export revenues, contracted 32.7% in December from a year ago.
"The US semiconductors book-to-bill ratio has come off the low of 0.71 registered in September and is at 0.95 in January. This divergence in this ratio and electronics exports suggests that a bottoming out in the electronics cycle may be imminent," it said.
"However, a sharp recovery (similar to post-global financial crisis) is not expected given ongoing concerns about the eurozone debt crisis and the state of the US economy."
PH lagging behind Asian neighbors
DBS noted the electronics industry in the Philippines has been lagging behind other countries in the current downturn.
"Electronics exports across Asia dipped sharply during the global financial crisis (GFC) and this was followed by a rebound of roughly the same magnitude across the different countries. Now, the Philippines is the worst impacted by the current electronics cycle downswing, with electronics exports dropping close to GFC-levels.
By contrast, electronics exports of Singapore, Taiwan, Thailand and South Korea are all hovering significantly off their GFC lows," DBS said.
The underperformance of the electronics industry cannot be attributed solely to the "industry-wide overhang weighing on prices" and suggests structural weaknesses.
"In fact, the longer-term picture shows that the value of electronics exports has essentially stagnated since 2000," DBS said.
The weak performance has been attributed to low investment in the electronics sector in the last decade and heavy dependence on the semiconductor segment, which has been hit with oversupply worries.
DBS noted that electronics investments in the country has stagnated. In 1995, electronics investments totaled over $2 billion, and over the 10 years, the average investments was only P700 million.
"The lack of sufficient investment during that time period could have hurt potential output growth and also means that the country could have missed out on the latest technology trends," DBS said.
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