Investment Climate & Business Opportunities in the

Philippine Semicon & Electronics Industry

Ms. Nora K. Terrado

Undersecretary

Department of Trade and Industry

I. Investment Climate

• Sustained Economic Growth

• Global Competitiveness

• PH Advantage

• PH-TW Investment Relations

II. Opportunities Abound in the PH S&E

Industry

Presentation Outline

Investment Climate

Sustained Economic Growth

Sustained Economic Growth

7.0%

7.0%

6.9%

6.7%

5.0%

4.8%

2.8%

2.0%

-0.2

2015 GDP Growth Rate of ASEAN Economies PH Inflation Rates (2010-2015)

PH GDP Growth Rates (2010-2015)

2011

3.7% 2012

6.8%

2013

7.1%

2014

6.1%

2015

5.8%

2010

7.7%

•PH GDP Grows 6.9 Percent in Q1 2016

•Fastest-growing economy among

selected Asian economies (with released

GDP Q1 data)

Fastest-Growing Economy in Asia

6.9% Q1 2016

6.7%

CH 5.5%

VN 4.9%

ID 4.2%

MY

51

51

153

192

0

0

251

222

5

0

176

80

52.1%

Robust Inward FDI

$5.7B (2015)

$5.7B (2014)

$3.7B (2013) $3.2B

(2012)

$2.0B (2011)

$1.1B (2010)

$1.3B (1Q 2016)

$850M (1Q 2015)

The Gross International Reserves reached Approximately US$81 Billion in 2015

Merchandise Exports

2015: US$58.648 billion (5.6% lower than 2014)

(electronic products as top export with almost 54.3% share of total exports)

2014: US$62.102 billion

Service Exports

2015 : US$28.167 billion

(10.5% higher than 2014)

2014 : US$25.498 billion

Steady Export Growth

Global Competitiveness

Most Improved Country in

Global Competitiveness Ranking

Fitch Ratings

BBB-

Outlook: Stable

March 2014

BBB-

Outlook: Positive

September 2015

BBB-

Outlook: Stable

May 2014

BBB

Outlook: Stable

April 2015

Baa2

Outlook: Stable

December 2014

Baa2

Outlook: Stable

December 2015

Standard & Poor’s

Moody’s Investors Service

Rating & Investment

Information, Inc.

BBB

Outlook: Stable

July 2014

BBB

Outlook: Stable

July 2015

BBB

Outlook: Stable

July 2014

BBB+

Outlook: Stable

July 2015

BBB-

Outlook: Positive

September 2014

BBB

Outlook: Stable

January 2016

Japan Credit Rating Agency, Ltd.

NICE Investors Service Co., Ltd.

Credit Ratings

Philippine Advantage

PH in Demographic Sweet Spot

YOUNG POPULATION

39.7 TAIWAN

We produce over 580,000

college graduates in AY 2013-

2014 across a wide range of

disciplines

Our workforce is:

•Highly educated and English Proficient

•Strongly customer-oriented

• Highly trainable with fast learning curve

•Adaptable to universal cultures

•High level of commitment and loyalty

Rich Talent Pool

56,607

169,846

117,108

66,388

75,404

16,586

83,349

TOTAL Tertiary

Level 585,288

600,000

500,000

400,000

300,000

200,000

100,000

Annual Salary in Manufacturing

2010 vs 2015

Country Workers Engineers Managers

In US$ 2010 2015 2010 2015 2010 2015

Philippines 3,554 4,098 6,205 6,429 16,957 16,621

Indonesia 3,111 4,316 5,770 6,827 13,498 14,785

Vietnam 1,834 3,855 4,849 5,940 10,184 12,865

Thailand 5,125 6,337 9,778 11,529 23,769 23,657

Malaysia 5,615 5,257 14,827 12,067 27,587 22,544

China 5,552 8,702 8,150 13,709 14,734 24,391

Source: JETRO, 2010 and 2015 Surveys of Japanese-Affiliated Firms in Asia and Oceania

Source: JETRO, 2015 Survey of Japanese-Affiliated Firms in Asia and Oceania

2016 figures are “planned” or “expected” basis as of October/November 2015

Wage Increase Rate in Manufacturing

(FY 2011 – 2016)

Country 2011 2012 2013 2014 2015 2016*

Philippines 5.6 5.5 4.8 4.8 5.0 4.9

Indonesia 10.0 15.9 28.4 16.0 14.9 11.9

Vietnam 18.2 21.0 14.0 11.3 10.8 10.3

Thailand 5.4 13.4 7.0 4.9 4.5 4.2

Malaysia 4.6 4.3 5.5 4.5 4.7 4.6

China 14.4 11.7 10.0 9.1 7.9 6.8

Unit: %

The country’s location is a critical

entry point to over 600 million

people in the ASEAN Market and a

natural gateway to the East- Asian

economies.

The country is likewise placed at

the crossroads of international

shipping and airlines.

Within Asia, the Philippines is

reachable within 3 to 4 hours by

plane.

Critical Market Access

Infrastructure Development

ECONOMIC ZONES and IPAs

•18 IPAs

•70 Manufacturing

EcoZones

•225 IT Parks and Centers

•21 Agro-Industrial

EcoZones

•19 Tourism EcoZones

•2 Medical Tourism Zones

PPP and other Infrastructure

Projects (in the pipeline)

• NAIA Expressway

• LRT Line 1 Cavite Extension

• Daang Hari-SLEX Link Road

• Soutwest Integrated Transport

System

• Cavite-Laguna Expressway

• Bulacan Bulk Water Supply

Other Infrastructure Projects

under implementation

• MRT Line 7

• Metro Manila Skyway Stage 3

Projects under Procurement

• New Bohol Airport Operations,

Maintenance and Development

• NLEX-SLEX Connector Road

INCENTIVE Board of Investments (BOI)

(Executive Order No. 226, as amended)

Philippine Economic Zone Authority (PEZA)

(Republic Act No. 7916, as amended)

Income Tax Holiday (ITH) 4 – 6 years (max of 8 years)

ITH Bonus 3 years provided the firm meets certain conditions

Special Tax Rate of 5% on Gross

Income None Special Tax Rate of 5% on Gross Income

Importation of Capital

Equipment, Spare Parts and

Supplies

0% Duty Tax and Duty-Free

Importation of Raw Materials &

Supplies used in Export Tax Credit Tax & Duty-Free

Value Added Tax Zero Rating for Exports 0%

Employment of Foreign

Nationals

Special Non-Immigrant Working Visa within 5 years from project’s registration

including spouse and unmarried children under 21 years of age

Competitive Investment Incentives

Philippines-Taiwan Investment Relations

Investments in the Philippines

IPA-Approved Investments from TW

2011 – 2015 (in million US$)

Investments from Taiwan from

2014 – 2016 (Q1)

2014

US$ 67.7 million (12th)

2015

US$ 119.94 million (7th)

2016 (Q1)

US$ 9.01 million (8th)

83.30% growth rate

INDUSTRY CLASSIFICATION 2014 2015

Manufacturing 42.1379 46.4753

Electricity, gas, steam and air conditioning

supply 9.1161 70.5375

Water supply; sewerage, waste management

and remediation activities 0.1148 0.0000

Construction 0.5690 0.0000

Wholesale and retail trade; repair of motor

vehicles and motorcycles 0.0000 0.3318

Transportation and storage 0.0000 0.0029

Information and communication 0.3516 0.0006

Financial and insurance activities 0.5667 0.0769

Real estate activities 11.1803 2.5163

Administrative and support service activities 3.0301 0.0011

Total IPA-Approved Investments from

Taiwan 67.07 119.74

Taiwanese Investments in the Philippines

Comparative Major Recipients of Taiwanese Investment Commitments

2014 vs 2015 (in million US$)

1. Light Manufacturing

- Electronics companies (OEM, EMS, parts/components

manufacturers);

- Value Chain Complementing PH Industry – Tool & Die

- Machining

2. Green Technology

- Photovoltaic;

- LED Module and applications

- Smart Grid

- E-Vehicles

3. Financial Sector

- Banks and insurance companies

PH Sectors for Investment

Promotion to Taiwan

Opportunities Abound

in the S&E Industry

PH S&E Industry

2nd Largest Contributor to the Country’s

GVA in Manufacturing

2.81 Million Direct & Indirect Workers

Source: IC Insights 2014 / SEIPI

5 of the World’s Top 20 Semicon &

Electronics Sales Leaders Operating in

the Philippines

Major SMS & EMS Players in the

Philippines

BOI & PEZA-Registered

Electronics & Semicon Companies in PH

• Acbel Polytech Philippines, Inc.

• Allegro Microsystems Phils., Inc.

• Alliance Mansols, Inc.

• Creo Products, Inc.

• DMSI International Fiber Manufacturing (DMSI International)

• Dyna Image Corporation Philippines

• High Well Electronics Mfg. Corporation

• Inoac Philippines Corp.

• Kinpo Electronics (Philippines), Inc.

• Lakepower Converter, Inc.

• Leader Electronics (Philippines Branch), Inc.

• Linksphere Technologies, Corp.

• Magnetica Electronics, Inc.

• MEC Electronics Philippines Corporation

• Nidec Subic Philippines, Corp.

• Orient Semiconductor Electronics Philippines, Inc.

• Sencon Asia, Inc.

• Taiphil Protech Industrial, Inc.

• Tong Fang International, Inc.

• Tong Hsing Electronics (Philippines), Inc.

• Ultra-Park Philippines Corporation

IC Design: The Next Frontier of S&E Industry

Why Philippines on IC Design

Availability of Talent Pool

Technically competent, English speaking and

experienced talents

Cost competitive, stable and attractive eco-

system for IC Design, targeting the global needs

of Internet of Things and SMARTX

A service-oriented industry to address the needs

of flexible and adaptable research and

development

Innovative and efficient clusters to accelerate

design/applications development and product

time-to-market

Production of telephone sets, modems,

copper communication cables and fiber

optic cables

Total exports (2015): US$ 570 million

Growth rate (2015): 68%

Telecommunications Electronics

Consumer Electronics

Manufacture of TV sets, LCD players,

electronic games, MP3/MP4 players

Total exports (2015): US$ 538 million

Growth rate (2015): 32%

Production of car stereos, ABS, automotive

cameras, lane departure warning systems,

sensors, etc.

Total exports (2015): US$ 12 million

Growth rate (2015): 8%

Automotive Electronics

Medical and Industrial Electronics

Manufacture of wireless health mirror, flat

panel imaging equipment, dental system,

concealed hearing aid, etc.

Total exports (2015): US$ 19 million

Growth rate (2015): 46%

Solar: The Emerging Subsector

Manufacture of solar cells and panels for

solar cells producing electricity

Department of Trade and Industry

Direct Line: (632) 890.4891 Trunk Line: (632) 465.3300 loc. 309

Website: http://www.dti.gov.ph