PHL electronics firms expect 5% 2013 growth; KPMG survey sees ‘muted’ 2014 

Although the United States and Europe have begun to show signs of economic recovery, a key group of semiconductors and electronics makers in the Philippines chose to adopt a conservative growth forecast of five percent for 2014 as expectations of “muted” revenue growth in the global industry emerged from a benchmark survey.

Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI), said their sector continues to experience “a phenomenon of average selling prices going down while volumes remain steady,”

 

He said SEIPI sees full-year sector revenues for 2013 settling at around $20 billion to $21 billion.

 

Lachica explained that since 2012, the local industry has been in an “inventory correction” mode to deplete stocks from  “a snapback or recovery that did not quite materialize” back then. This caused a contraction this year of about 20 percent from normal production levels.

 

The Philippines exported $24 billion of semiconductors and electronics in 2011 and $23 billion in 2012, while from January to October this year the shipments were valued at about $18 billion.

 

Lachica said the recovery of the US and European markets “bodes well” for exporting countries like the Philippines, which has made some headway into the growth niches for technologies with automotive, medical, energy and battery power applications.

 

The SEIPI president said companies like Integrated Micro-Electronics Inc. (IMI) have been able to address the demand in these expanding product markets.


 

KPMG 2013 Global Semiconductor Survey
 

“Mobility and consumer electronics remain the leading applications driving semiconductor industry revenue growth, but expectations increased for favorable results from automotive, energy consumption, medical, and other promising applications including wireless sensors enabling the 'Internet of things,'” the KPMG 2013 Global Semiconductor Survey learned from its respondents.

KPMG made its findings public only last Dec. 10. The professional service firm learned that “there was a noticeable decline in the percentage of respondents calling for growth in excess of 10 percent (16 percent, compared with 24 percent last year).”

 

KPMG said the downslide seems linked to “slowing growth rates of wireless handsets in many markets increasing the difficulty of meaningful sales expansion.”

 

A majority of executives surveyed (57 percent) said the automotive category is “very important” to them as the semiconductor content of automobiles is expected to increase by “an average of 8 to 10 percent annually.

 

“Medical technologies, cited by 55 percent of respondents, are expected to provide attractive growth opportunities in coming years as the acceptance of wearable (and ingestible) health measurement, diagnostic, and management devices increases,” the KPMG report noted.

 

The same survey said the communications markets are “reaching maturity” but continue to be a major driver.

 

On the technology-specific concerns of the global semiconductor industry, the KPMG survey found that a significant shift is about to transpire as “nearly half of the executives (45 percent) say production of 450mm wafers will have a more significant impact on the industry than production at a sub-20 nanometer technology node.”

 

According to another industry study, done by BCC Research, the “global market for electronics contract manufacturing (ECM) was valued at $410 billion in 2011, and is projected to reach $435 billion in 2013 and $670 billion in 2018, a five-year compound annual growth rate of 9 percent from 2013-2018.”

 

By 2018, BCC Research said, computers and telecommunications could account for $250 billion of the global ECM market while the consumer and industrial segment gets a slice of $203 billion.

 

‘Crippling’ power rates

 

SEIPI said its “conservative” five percent growth potential next year arose as they face some immediate challenges, including the cost of electricity and “systemic” problems in the Bureau of Customs and at the international ports.

 

Lachica said power rate hikes on top of levels that are already the highest in Asia would have a “crippling” effect on some manufacturers whose electricity cost component is 30 to 40 percent of their cost of goods sold.

 

The short term effect of the power rate hike would be “very painful” also for firms whose power cost is about 10 percent.

 

“I laud what the Senate is doing to avoid this high power cost,” Lachica said with some optimism.

 

He also said the power rate hike may be a “significant” factor weighing in the corporate thinking of investors who are seriously looklng at the Philippines as a site for their operations.

 

The SEIPI president said a major investor “not based in Asia... with no presence in the Philippines now... not an appliance (maker)... a household name in the country where it is based,” is thinking of entering the Philippines while another investor already in the country will double its current capacity. He declined to identify these two firms.

 

Lachica also said that another factor against the Philippines are the “systemic” issues at the Bureau of Customs, as semiconductors and electronics manufacturers had the “unacceptable” experience of having to endure a recent “strike” at the BOC.

 

He said the strike forced some factories to shut down while they waited for matters to be sorted out or die down.

 

Lachica also revealed that SEIPI member-firms recently gave Customs Commissioner Sevilla “an earful” of feedback about the “open drawer policy” at the bureau. — DVM, GMA News