(Bloomberg) -- The Philippines is trying to enlist Taiwanese chip giants in an effort to expand in semiconductors, a bid to catch up with its neighbors who are emerging as significant suppliers in the industry.
Taiwan Semiconductor Manufacturing Co. and United Microelectronics Corp. are among companies the Philippines is reaching out to as it seeks equipment and expertise to build out chip fabrication operations, said Dan Lachica, head of the Southeast Asian country’s main electronics industry group. The association is working with Philippine officials in Taiwan to talk with the potential partners.
“What I am hoping is that TSMC or UMC or some other company aspiring for wafer fabs overseas is to consider: send us your depreciated equipment, and in exchange, we’ll train the Filipino workers that you can deploy in your global operations,” Lachica said.
The country of more than 100 million people trails neighbors such as Malaysia and Singapore in the complex industry of chip manufacturing, where plants can require billions of dollars in initial investment. Taiwan is the world leader, and its companies including TSMC are expanding overseas to alleviate potential risks related to tensions between the island and the Chinese government.
TSMC representatives didn’t respond to a request for comment. “It is UMC’s policy not to comment on market speculation,” a UMC spokesperson said in an email.
The Philippines is betting that its low costs and ample workforce could help attract manufacturers. Talent shortage is one of the main challenges for global chipmakers from the US to Malaysia — the industry will need more than 1 million additional skilled workers across the world by 2030, Deloitte has estimated.
Taiwan and the Philippines enjoy a trade relationship, and both have recurring tensions with China. Beijing views Taiwan as a breakaway province and has repeatedly threatened invasion. Meanwhile, Philippine boats have clashed with Chinese vessels as the countries spar over the disputed South China Sea.
The pitch by Lachica’s group, the Semiconductor and Electronics Industries in the Philippines Foundation Inc., is part of the country’s attempt to diversify beyond chip testing and packaging, a less advanced part of the manufacturing process that carries thin profit margins.
“We’re moving up the value chain as well in terms of IC design and hopefully, semiconductor wafer fab,” Lachica said.
The Philippines has lost ground to neighbors like Vietnam in recent years after a revamp of local incentive programs led to the flow of advanced manufacturing elsewhere, according to Lachica. The country’s electronics and semiconductor exports are set to contract by 10% this year because of inventory corrections, before rebounding by 5% next year, he said.
President Ferdinand Marcos Jr. has backed a bill seeking to change the incentive regime to attract more foreign investors. Meanwhile, efforts backed by the US and Japan to build Philippine infrastructure bode well for the industry’s prospects.
“We are handicapped by the aggressiveness of Vietnam, Indonesia and Malaysia,” Lachica said. “We need to come up and essentially tell the world that the Philippines is open for business again.”
--With assistance from Jane Lanhee Lee.
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