Weak peso, holidays give recovery hopes to Philippine chipmakers
By Andreo Calonzo and Ditas Lopez
Philippine electronics exporters expect sales to grow 10% this year, hoping their products made cheaper by the peso’s weakness will attract buyers, including holiday shoppers.
“Almost everything around you has electronics, and year-end is the time that’s best for gifts and requirements for both industry and personal,” Dan Lachica, president of industry group Semiconductor and Electronics Industries in the Philippines Inc., said in an interview. “Historically, there’s a catch-up that happens towards the end of the year.”
That will be key to reversing a recent decline in electronics shipments, the Southeast Asian nation’s top export by value. The trend mirrors weakness in global trade bellwether South Korea, which saw chip exports fall for the first time in more than two years last month.
Sales grew 2% from January to July, and the industry is poised to benefit from a weak peso, he said, while discounting a threat to demand from high inflation globally.
The Philippine currency’s depreciation has a net-positive effect for chipmakers even after accounting for imported materials, Lachica said, after the peso breached the 57 to the dollar level last week compared to 50 in the same period a year ago. A weaker peso makes the nation’s exports cheaper and encourages more foreign buyers, he said.
“You still need medical electronics, automotive electronics, consumer products, cloud, artificial intelligence,” Lachica said. “They’re not going to disappear because of inflation.”
The industry group, the nation’s largest grouping of foreign and local electronics companies with 344 members, aims to grow the sector’s revenue by 5% to 6% and produce higher-value products in the coming years.
Still, some hiccups remain in the form of prolonged delivery times due to lingering effects of supply chain disruptions during the pandemic.
The previous government’s move to scrap tax incentives could put the industry’s growth target and jobs in peril, Lachica said, pointing to about $3.2 billion of investments getting diverted to countries such as Vietnam, Thailand, Malaysia, and China because of the absence of tax breaks and relatively high operating costs.
“We also have to be concerned about job preservation,” Lachica said, referring particularly to the electronics industry that directly employs some 400,000 workers and provides indirect employment to about 2.8 million people. “If we don’t do anything about rationalization of incentives, about 3 million of indirect and direct workers are at risk,” he said.
©2022 Bloomberg L.P.
