THE SEMICONDUCTOR and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) is clinging to its 10% export growth target this year, as it expects higher demand during the holiday season.
“This year, it (target) is still 10%. Although as of September, we are running at 4% from year on year. Why are we holding on to the 10%? Usually with the Thanksgiving and Christmas rush, the demand accelerates. There is still a chance that we will hit the 10%,” SEIPI President Danilo C. Lachica said on the sidelines of the 17th Philippine Semiconductor and Electronics Convention and Exhibition (PSECE) in Pasay City on Wednesday.
SEIPI had exceeded the 10% growth target last year. Based on SEIPI figures, the country’s total electronics exports ended the year with $45.92 billion, up 12.9% from the $40.67 billion in 2020 on the back of stronger demand for new technologies.
As of September, the cumulative electronics exports amounted to $35.34 billion, up 4.71% year on year, according to SEIPI figures.
Electronics exports remain the country’s top export commodity, accounting for 60.60% of the $58.31 billion worth of overall commodity exports.
For next year, Mr. Lachica said SEIPI may opt for a more “conservative” export growth target due to economic uncertainty and unstable market demand. However, he declined to give a specific target, saying SEIPI is still consulting members on their business outlook.
The global economic outlook has become increasingly gloomy as major economies face a risk of recession next year, amid the ongoing Russia-Ukraine war, soaring inflation and rising interest rates.
“Next year, probably, we are going to be more conservative because the demand has yet to normalize,” Mr. Lachica said in mixed English and Filipino.
“There seems to be a softening. The demand would always be there. It’s (2023) probably going to be more modest than 2022. It’s hard to imagine, except for 2020 when we closed, that the demand for electronic products would decline,” he added.
The electronics sector has seen a slight improvement in terms of supply, but is still feeling the impact of the ongoing Ukraine-Russia war, Mr. Lachica said.
“Russia supplies about 70% of palladium, which is used for power semiconductor devices, while Ukraine delivers 40% to 50% of neon, which is used for lasers. In addition, the surging fuel prices also have a huge effect on us. It (war) disrupted the supply chain and (drove up) the prices,” he said.
Meanwhile, Mr. Lachica said the electronics industry is no longer benefiting from the weaker peso as production costs have also gone up.
“Before the global crisis and Russia-Ukraine war, every peso devaluation results in an increase of one-and-half percent for exports. But. But now, with the high cost of materials, there is no benefit anymore with the devaluation. Everything is expensive such as fuel,” Mr. Lachica said.
On Wednesday, the peso depreciated 14 centavos as it closed at P57.35 against the dollar compared with its P57.21 finish on Tuesday. Year to date, the peso has weakened by P6.35 or 11.1% from its Dec. 31, 2021 close of P51.
Mr. Lachica also reiterated the group’s call to review the rationalization of incentives under Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, saying that many companies are discouraged to invest in the Philippines due to high operations costs.
“The reduction of corporate income tax under CREATE is good. But the incentives rationalization is bad. We urge President Ferdinand R. Marcos, Jr. to review the incentives rationalization. We are not getting as many foreign direct investments compared to Vietnam, Thailand, and Malaysia,” Mr. Lachica said.
Previously, Mr. Lachica said that the Philippines has lost over $3 billion worth of potential investments that transferred to other neighboring countries as investors expressed concerns over the rationalization of incentives. — Revin Mikhael D. Ochave