Maraming salamat po sa inyong lahat at mabuhay po tayong lahat!

Ladies and gentlemen, good morning to you all.

First, we’d like to thank the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (or SEIPI) for inviting us to speak before your members during your Annual General Membership Meeting (GMM). We hope you’re all keeping safe and healthy.

Today, we’d like to discuss how the Philippine electronics and semiconductor industry can not only help in our economy’s recovery, but also in our country’s digital transformation—as well as government’s efforts in this regard. After all, it has been more than a year now since COVID-19 challenged our world’s health and economic systems. As vaccination catches up and the global economy recovers, a more certain future awaits our export-oriented industries—including the electronics sector.

That’s why we wish to recognize the electronics industry for continually being a key driver and solid cornerstone of Philippine manufacturing, even with the present pandemic. Electronic products have comprised 54%, on the average, of the country’s annual total exports in the past ten years. In 2020, the sector further increased its share in the export basket to 62% or USD39.67B, becoming the 3rd largest contributor to our manufacturing gva and accounting for 10.8% of the total manufacturing gva. For the 1st quarter of 2021, the sector recorded a total of USD10.7B of exports, or 8.8% higher compared to that of the same period last year. Hence, it goes without saying that any growth or slowdown in the electronics sector will naturally bring with it the overall performance of Philippine exports.

Let me tell you at the onset that because of the contribution of the sector, together with the other economic sectors, we were able to redefine and expand the A4 in the listing of priorities of vaccination, and all your workers and officers in this sector will now all be part of economic front liners and be part of A4.  As we expect millions of vaccine doses to arrive this June, vaccination of A4 shall start this coming June.  We all want to hasten the vaccine rollout and increase capacity from the current 231 daily jabs to 500,000 vaccination per day.

But let me clarify that the vaccination of those in a1 to a3, the healthcare workers, seniors, and those with comorbidities – shall continue to be prioritized at all times and will be given a Greenlane.

But we can start with A4 so that will now be able to secure the health and immunity of those economic frontliners that are facing the daily grind going to their workplaces and riding the public transport and facing customers and coworkers in the factories and offices.

To continue with the discussion on your sector, the contraction of global demand and the disruption of global supply chains have simultaneously challenged all our export industries in the past year. Despite this, the electronics sector showed resilience as it is the only product group in the country’s export basket that contracted only for one quarter—during the 2nd quarter of 2020 at the height of the community quarantine lockdowns.

But we made sure in the discussion at the IATF that the electronics and the export sector should be allowed to increase faster the operating capacity, such that even in the ECQ two months ago, last March, we already included your sector in the essential businesses allowed to operate at 100%. Even under ECQ!

So, coming from the contraction in the second quarter of last year, we have seen in all other quarters of 2020, that the electronics sector showcased its ability to bounce back quickly with an immediate positive growth rate in the 3rd quarter and more recently, a remarkable 11% growth in the 1st quarter of this year.  Your sector has helped also pull up the growth that we had of 31.6% export growth that posted during the first quarter this year.

It is evident that the quick bounce-back of the electronics sector cushioned the impact of the pandemic to our exports sector and is now driving its further growth.

The role of electronics products has equally been indispensable in the recovery of the Philippine manufacturing sector. After four consecutive quarters of negative growth rates, Philippine manufacturing is now back at a positive growth rate largely driven by the fast growth of the electronics sector. As of the first quarter of 2021, the electronics sector has posted 17.5% growth, the fastest-growing sector in the manufacturing sector, while electrical equipment posted 5.1% growth. In the same quarter, the electrical and electronic sector already comprise 17% of the total value created by manufacturing, the second-largest sector next to food products.

I must also give credit to the kind of growth you’re achieving, just this morning we got an affirmation that S&P has continued to give the Philippines credit rating of BBB+ rating and that means investment is looking great.

As we adjust to the “New Normal”, the exemplary performance of the electronics sector in the midst of a crisis, is the ability, resilience, and agility that we need to cascade to other industries, especially as our country rides the wave of digital transformation. This digital transformation will fundamentally change the way we live, work, and do business. It is now transforming how goods and services are produced through the application of advanced manufacturing techniques, such as artificial intelligence, robotics, data analytics, Internet of Things, and 3D Printing, to boost productivity. However, apart from transforming how goods and services are produced, it will also define, more importantly, what type of goods and services will be produced in an increasingly digital and connected world. Therefore, there are two (2) imperatives that the industry can follow to take advantage of this transformation: (1) adopt Industry 4.0 technologies to boost productivity and (2) penetrate the high-value and high-growth global markets for the Internet of Things.

In 2019, the Department of Trade and Industry (DTI) assessed the Industry 4.0-readiness of Philippine manufacturing using the Smart Manufacturing Maturity Index (SMMI). We found that the technology utilization in the electronics and automotive industries is at level 4—out of the five levels of technology utilization—which denotes a high level of technology utilization in all manufacturing dimensions.

The leading position of the electronics industry in the technology frontier is an indicator of its potential to lead the manufacturing sector in adopting the latest and advanced Industry 4.0 technologies to further drive productivity. Especially, the pandemic accelerated the transition of enterprises, globally, into the digital economy with 85% of enterprises adopting digital tools and 50% embarking on automation of tasks, according to the World Economic Forum (WEF).

Likewise, apart from the adoption of Industry 4.0 technologies to improve competitiveness, the industry can take advantage of the new emerging markets now being created especially in the advanced markets. In the future, almost all devices will be connected to the internet, otherwise known as the Internet of Things (or IoT), which will require sophisticated semiconductor chips and electronics hardware. IoT will be one of the 4IR dominant technologies that will introduce hyperconnected devices using sensors embedded with other advanced technologies such as AI, edge computing, virtual reality (VR), and augmented reality (or AR) for greater product quality and user experience.

In fact, the “New Normal” has increased the demand for medical devices, consumer electronics, and electronic data processing (EDP) equipment since last year. Now, in 2021, it’s estimated that there are more than 10B active IoT devices in the world. It’s also estimated that the number of active IoT devices will surpass 25.4B by 2030. This demand will come from both industrial and consumer segments such as autonomous and connected vehicles, smart home products, smart health wearables, clean and resilient technology, and gaming products, among others. Entering these new markets will allow us to leverage our comparative advantage in the electronics industry value chain and upgrade into more complex and high-growth products.

In order to take advantage of these opportunities, we are implementing the Inclusive Innovation Industrial Strategy (i³S), the country’s new innovation-centered and science- and technology-based industrial policy. This strategy puts innovation at the front and center of our policies and programs. It also highlights the need to embrace new and advanced technologies arising from Industry 4.0 to revitalize the global competitiveness of the Philippine manufacturing sector, especially of the electrical and electronics cluster, which is one of the strategy’s priority industries for development.

In support of the industry, DTI funded in 2016 the crafting of the Electronics Roadmap, also known as the Product and Technology Holistic Strategy (or PATHS). This Roadmap identified the niche areas where Philippine electronics can figure in competitively in the global market. This also included: AI, integrated circuit (IC) design, robotics, smart wearables, IoT devices, smart sensors, 3D printers, and autonomous vehicles. More importantly, the objectives of PATHS would support the initiatives of DTI to prepare our manufacturing industries for 4IR and digital transformation.

Currently, we are implementing multi-pronged Industry 4.0 programs to help manufacturers—across size and industry—navigate their Industry 4.0 transformation.

First, DTI has partnered with Siemens and in talks with other technology companies and global development partners to scale up the adoption of Smart Industry Readiness Index (SIRI) among Philippine manufacturing firms. SIRI is a globally recognized framework that assesses the Industry 4.0-readiness of companies and outlines priority areas for upgrading based on impact, viability, and return on investment. The WEF is also going to support our SIRI assessment and training of certified SIRI assessors. We would like to encourage you to participate in these programs. (adlib)

More than readiness assessments, we will also help manufacturers to develop their own Industry 4.0 company roadmaps that will set the pace of their adoption and outline their Industry 4.0 goals for future targeted action.

What’s more, we are planning to establish an Industry 4.0 Pilot Factory which will host demonstrations, simulations of the technologies outlined in the companies’ Industry 4.0 roadmaps. Also included are case applications of Industry 4.0 technologies that enterprises can access, especially the Micro, Small, and Medium Enterprises (MSMEs), to facilitate the adoption of Industry 4.0 technologies. This will be supported by an SME Academy to boost manufacturing innovation and develop the human resource capabilities of our MSMEs to ensure their resilience and competitiveness.

In order to fully enable the Industry 4.0 transformation of Philippine manufacturing, we are developing the Securing Manufacturing Revitalization and Transformation (SMART) Program. This program will address structural barriers that enterprises are facing in Industry 4.0 transformation such as lack of financing, lack of skills training, and insufficient technical know-how.

Meanwhile, skills frameworks for industries are also being developed and serve as a guide for the reskilling/upskilling path of workers. DTI, together with the Technical Education and Skills Development Authority (TESDA), has partnered with SkillsFuture Singapore (SSG) to enhance our human capital and the reskilling and skills upgrading of our workforce. Among the priority industries for the development of skills frameworks are: construction; creatives; food/agriculture; health and wellness; IT-BPM; logistics; manufacturing; and tourism.

Global trends suggest that software is now being increasingly bundled with hardware products and gaining a larger share in the IoT value chain. With this, the strong software development competency of the similarly export-oriented Philippine IT-BPM industry can be a good source of technology, talent, and knowledge through linkages and value co-creation.

Just this month, we launched the National AI Roadmap for the Philippines, which recommends the establishment of a private sector-led National Center for AI Research (N-CAIR). To push the Philippines as a “Center of AI Excellence,” N-CAIR will serve as a hub where multinational companies can explore various AI R&D projects with the Philippine government, its researchers, and its linkages with universities and research institutions. It will offer consultancy services, AI tech products, and data literacy training envisioned to be a technology provider and research leader in precision agriculture, smart city, resilience technology, and smart manufacturing.

We also have startup development programs in the pipeline to develop the Philippine startup ecosystem and make our startups globally competitive. Startups are vibrant channels for innovation and can be enablers in our Industry 4.0 adoption. They can also be strategic partners of the electronics industry for product co-development.

Consistent with our industrial policy, DTI is continuously developing strategies to encourage investments and provide assistance and support to industries. Let us remember that the Philippines offers a strong value proposition to attract investments in electronics—be it in manufacturing, product design, and research and development (R&D). This is thanks to our country’s high caliber human capital, unrivaled market access to key markets, government support facilities, and the presence of global brands profitably operating in the country. 

That’s why when we officially launched the “Make It Happen in the Philippines” international investment brand highlighting the country as a leading and ideal business destination, electronics was included as one of the five key investment priority sectors.

Moreover, the game-changing Republic Act No. 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, has also enhanced the country’s attractiveness for projects and investments. The reduction of Corporate Income Tax (CIT), the President’s flexibility in granting incentives, the removal of export and national bias, and the new incentives package and other additional incentives depending on the project are a few key features of this law.

In the Strategic Industries Priorities Plan (SIPP) being crafted by our Board of Investments (BOI) under CREATE, we are rationalizing our incentive system to be more innovation-driven. Under the SIPP, we will focus on developing industries with existing and future comparative advantage, as well as integrating production system, deepening global value chain (GVC) participation, and embracing Industry 4.0 and digital transformation.

The SIPP will also be a tool to push our industries to innovate and enter new emerging product markets. For example, through the Electric Vehicle Incentive Strategy (EVIS), we are positioning the Philippines as a major production hub for strategic parts of electric vehicles such as automotive electronics, charging systems, batteries energy storage systems utilizing local Nickel and Cobalt minerals, among others.

Lastly, the government is doing its part to promote and accelerate automation and digitalization through our efforts to streamline government processes and improve government services as ordered by President Rodrigo Roa Duterte. Under Republic Act (RA) 11032, or the “ease of doing business and efficient government service delivery act of 2018,” we’ve already launched the Central Business Portal (CBP) to make business registration easier.

The CBP’s first phase streamlined the documentary requirements and reduced the processing time for registration with the Securities and Exchange Commission (SEC) and the Bureau of Internal Revenue (BIR) to at most 3-4 days from over 10 days before. This has also made reporting of employees to Social Security System (SSS) and Philhealth easier.  Within the year, we shall further reduce the three-four days into less than one day as we complete the further streamlining of procedures and make the one-day business registration end-to-end a reality.

ICT systems are also being implemented to improve customs administration to enhance stakeholder engagement and ensure seamless simplified customs service. In this regard, customs processing time has been significantly reduced with online systems in place.

Lastly, we’ve started to operationalize TradeNet, the Philippine national single window and cloud-based and automated licensing and certification system integrated into one platform for trade-related regulatory agencies. Around 76 government agencies will be using the platform. This will serve as the Philippines’ link to the ASEAN single window and is intended for traders, customs shippers, brokers, and inbound forwarders.

Before we conclude, we’d like to thank SEIPI for always being one of DTI’s strongest industry partners in promoting our initiatives and we look forward to your continued cooperation and support. We can confidently say that, as one of the bright stars of Philippine manufacturing, your industry will not only help us to build back better in the post-pandemic future but also lead the Philippines’ digital transformation. But we also enjoin you to continue to grow the local industry as this means the creation of more high-value jobs and employment for our people.

Maraming salamat po at mabuhay tayong lahat!

Date of Release: 31 May 2021