News: Electronics exports seen growing 5% -
23 Jan 2008
Philippine electronics exports may grow about 5 percent this year from an estimated 3-4 percent expansion in 2007 on an expected recovery in global demand in the second half, an industry official said yesterday.
Arthur Young, president of the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI), said an anticipated slowdown in the United States this year should be compensated by growing demand from Europe, China, India, and Brazil.
But he said consistently high power costs in the Philippines posed a big risk to the outlook and some firms were considering moving operations out of the country if this was not solved.
"Our industry would grow this year," Young told Reuters.
"But if some of the companies start moving their production out, no matter what kind of growth we have, it would just negate it and cause us zero growth or negative growth."
"We are trying to avoid that situation," he said.
Electronics and semiconductors account for around two-thirds of the Philippines’ total exports, and the country supplies about 10 percent of the world’s semiconductor manufacturing services, including mobile phone chips and microprocessors.
Texas Instruments and Intel Corp are two of the biggest companies with manufacturing plants in the country. Texas Instruments announced last year it would set up a new $ 1 billion plant in the Philippines, doubling its capacity, despite high power costs.
But an economic downturn in the country’s main export market — the United States — is expected to dampen demand in the first half.
The electronics sector’s shipments in the first 11 months of 2007 grew just 3.88 percent from a year earlier. Full-year 2007 exports data is set to be released next month.
The government projects total exports this year to grow 8 percent after an expected 6 to 7 percent rise in 2007.
Young, however, said the government needed to address rising power and labour costs, with industry players already burdened by a strong peso which has eroded their revenues.
The currency gained 19 percent against the US dollar last year but has dropped 0.22 percent since the start of 2008 as investors shy away from risky assets due to a possible recession in the United States.
Young said new investments in the sector could be delayed, if not scrapped, and some could start slowly phasing out local production.
"When it comes to power, we lose," he said. "Our current power cost is anywhere from 12 to 14 (US) cents per kilowatt hour. In the region, we are seeing China at 8 to 9 (US cents), Vietnam at 5 to 6, Thailand 5 to 6, etc."
"We need to address our competitiveness, our cost, now. Not in six months, not in a year, but now," he said.
The government should also review its power privatisation policy to balance its profit objective with the goal of keeping power costs affordable, Young said.
The government has sold $ 6.6 billion worth of power assets since 2004 and in all auctions, the state awarded the asset to the highest bidder.
This has repercussions on power costs, Young said, as the private sector winner would naturally try to recoup its huge investment by charging higher fees.(Reuters)