Philippine semicon braces for tougher times

Semiconductor and electronics sector is one of hardest hit by falling global demand, says Philippine industry group, but adds economic crisis is "cyclical".
Written by Joel D. Pinaroc, Contributor

PHILIPPINES--Local semiconductor and electronics companies are bracing for tougher times ahead as demand continues to decline this year, according to an industry group.

In a statement Wednesday, the Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI) said one of the hardest hit sector is the semiconductor and electronics industry, as global demand continues to slide.

Established in the 1970s, the SEIPI seeks to be the representative body for major players in the Philippine electronics industry and currently has some 240 members.

The immediate effects on the electronics industry include a sharp downturn in consumer spending, lower volume requirements of original equipment manufacturers, and massive layoffs by electronics manufacturing companies that began in the fourth quarter of 2008, the industry group said.

The SEIPI estimated that electronics export revenues dipped by 5 percent in 2008, over the previous year, as customers of Philippines-based semiconductor and electronics manufacturing companies saw a drastic drop in demand for their products in the fourth quarter of 2008.

Based on current guidance, it said the situation is expected to worsen in 2009 for the electronics industry.

The SEIPI said the anticipated contraction in the global semiconductor market will continue to adversely affect the local electronics industry, which accounts for 75 percent of the Philippine semiconductor export revenues.

However, the SEIPI President Ernie Santiago said this dismal situation is not new to the industry, and is only "cyclical".

Santiago revealed that plans are now in motion to offset the effects of the global slowdown, particularly for Philippine semiconductor and electronics organizations that have laid off workers in mass numbers.

"Most companies have given a commitment to laid-off workers that they will be given priority when they reapply for jobs when the industry recovers," he said.

He added that programs have been put in place to "manage the downturn". These include initiatives on controlling costs, maintaining growth or operating at flat growth, strengthening local sourcing, and preventing or mitigating layoffs, he said.

"Layoff is the last resort of every company," Santiago said, adding that the industry is expected to "survive this crisis".

According to research firm iSuppli, the worldwide semiconductor industry will shrink by 9.4 percent in 2009. Revenue is estimated to decrease to US$241.5 billion, down from US$266.6 billion last year.

Intel was one of the first companies to announce mass layoffs. The semiconductor giant last week announced plans to restructure its manufacturing operations, reducing its manpower by some 3,000--mostly in its key facilities in Asia.

It will close two assembly test facilities in Penang, Malaysia, and Cavite, Philippines.

Joel D. Pinaroc is a freelance IT writer based in the Philippines.

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