How the Philippines Became a Powerhouse in Semiconductor Assembly

Summary

The Philippines plays a pivotal role in the global semiconductor supply chain, particularly in assembly, testing, and packaging (ATP). Despite being known as a developing nation, it has become a key destination for ATP services due to cost-effective labor and growing expertise. The history of the semiconductor industry in the Philippines dates back to the 1960s, with major players like Texas Instruments, Intel, and Amkor establishing operations. Today, the semiconductor sector remains a dominant export industry, contributing significantly to the country’s economy and global electronics manufacturing.

Takeaways

• 😀 The Philippines plays a significant role in the global semiconductor supply chain, specifically in Assembly, Testing, and Packaging (ATP).
• 😀 Despite being considered a developing nation, the Philippines is a key player in semiconductor production, especially in ATP processes.
• 😀 Major global semiconductor companies like Texas Instruments, Intel, Amkor Technology, and Onsemi have established ATP facilities in the Philippines.
• 😀 Texas Instruments' facility in Baguio is one of its largest sites outside the U.S., underlining the Philippines' importance in semiconductor operations.
• 😀 The Philippines' semiconductor industry began in the 1970s, with multinational companies like Intel and Texas Instruments setting up operations in the Bataan Export Processing Zone (BEPZ).
• 😀 Intel's facility in Cavite, opened in 1974, played a crucial role in the development of the Philippine semiconductor industry, although it closed in 2009.
• 😀 The 1980s saw foreign investors like Amkor Technology and Onsemi further strengthening the Philippines' position in the semiconductor industry.
• 😀 Local companies such as Integrated Micro-Electronics (IMI) have also contributed to the semiconductor sector, expanding the Philippines' global manufacturing reach.
• 😀 Electronics, particularly semiconductors, became a critical export product for the Philippines, driving its foreign exchange earnings and job creation.
• 😀 Despite challenges in moving into more advanced semiconductor sectors like chip design, the Philippines remains a vital hub for assembly, testing, and packaging of semiconductors.

Q & A

What role does the Philippines play in the global semiconductor industry?

The Philippines plays a critical role in the global semiconductor supply chain, particularly in Assembly, Testing, and Packaging (ATP) processes. While it doesn’t engage in chip fabrication like Taiwan and South Korea, its ATP capabilities make it essential in ensuring that semiconductors are ready for use in various products.

How did the Philippines become a key player in semiconductor manufacturing?

The Philippines’ involvement in semiconductor manufacturing began in the 1970s when multinational companies, especially from the U.S. and Japan, sought to capitalize on cost-effective labor and skilled workers. The establishment of export processing zones (EPZs), like the Bataan Export Processing Zone (BEPZ) in 1969, attracted companies like Texas Instruments and Intel, marking the beginning of its semiconductor industry.

Why did multinational companies like Texas Instruments and Intel choose the Philippines for their operations?

Multinational companies chose the Philippines due to its cost-effective labor, a skilled English-speaking workforce, and strategic geographic location. These factors made it an ideal location for semiconductor assembly, testing, and packaging operations.

What is the significance of Texas Instruments' Baguio facility?

Texas Instruments' Baguio facility, established in 1979, became one of the company’s largest manufacturing sites outside the U.S. It was pivotal in the assembly and testing of semiconductors used in various industries like automotive, industrial, and consumer electronics. This site helped the Philippines establish a reputation as a reliable partner in the semiconductor industry.

How did Intel’s presence in the Philippines impact the local economy?

Intel’s operations in the Philippines, particularly its Cavite facility, had a significant impact by modernizing the country’s manufacturing capabilities and creating thousands of jobs. Although Intel closed its Philippine facility in 2009, the skills and expertise gained by local workers during Intel’s operations continued to benefit the semiconductor industry.

What were some of the challenges the Philippines faced in the semiconductor industry in the 1990s?

In the 1990s, the Philippines faced increased competition from other countries like China, Malaysia, and Thailand, which were also investing heavily in electronics manufacturing. To retain foreign investors, the Philippines had to improve its infrastructure, workforce skills, and the overall ease of doing business.

What role did the Philippine Economic Zone Authority (PEZA) play in the semiconductor industry?

PEZA, established in 1995, played a vital role by streamlining processes for setting up export-oriented businesses. This made the Philippines more attractive to foreign investors in the semiconductor industry, helping the country retain major players and draw in new ones like Maxim Integrated and Analog Devices.

What are the key contributions of companies like Amkor Technology and Onsemi in the Philippine semiconductor industry?

Amkor Technology and Onsemi (formerly Fairchild Semiconductor) contributed to the Philippines’ semiconductor industry by establishing significant ATP facilities. Amkor advanced the local supply chain with cutting-edge packaging technologies like ball grid array (BGA), while Onsemi expanded operations after acquiring Motorola’s semiconductor business, focusing on products for automotive and industrial applications.

What was the economic impact of the semiconductor industry in the Philippines by the 1980s?

By the 1980s, the semiconductor industry became a major contributor to the Philippines’ exports, with electronics and semiconductors making up a substantial portion of the country’s foreign exchange earnings. The industry also created numerous jobs, particularly in assembly, testing, and packaging, which required technical skills.

How has the Philippines’ semiconductor industry evolved in terms of exports and employment?

The semiconductor industry has grown significantly, with electronics and semiconductors accounting for approximately 62% of the country’s total exports as of 2022. The sector employs around 3.2 million people, including engineers, technicians, and production workers, demonstrating its large-scale impact on the Philippine economy.