Recharging the Philippines’ electronics exports
Electronic products are the biggest export commodity of the Philippines. Components such as semiconductor parts and integrated circuits, typically used to build smartphones and appliances, account for roughly half of the country’s annual merchandise exports.
Based on industry data, top electronic products sold by the Philippines to foreign partners are semiconductor components, followed by parts used for electronic data processing, and consumer electronics like hard drives. Companies based in the Philippines manufacture microchips for various gadgets. These chips are a key element to a highly digitized world, as it governs how basic household appliances and computers, as well as power grids and national defence systems, operate day to day.
However, a troubling story has emerged: exports of electronics equipment have declined over the past two years, and the trend is likely to hold based on industry expectations. There is no doubt that 2025 will be an even more challenging year in the face of higher US tariffs, considering that the country is the largest destination of Philippine-made goods. US President Donald Trump even planned to impose a blanket 17 per cent duty on Philippine exports beginning April, although this has been put on hold, along with another set of tariffs specific to foreign-made microchips.
With a bleak outlook ahead, is there a way to save the pillar of the Philippine exports sector?
Unsteady current
Exports of electronic products have grown consistently over the past decade, only declining by 5.2 per cent in 2020 due to COVID-19 lockdowns that prevented Philippine-based factories from operating at full capacity. However, as Graph 1 shows, this strong annual growth had been clipped in 2023 when outbound shipments of electronics products slipped by 9.2 per cent year-on-year. This drop was sustained in 2024 when electronics exports fell by 6.7 per cent to post the biggest reduction in export value across all product types.
One will also notice that the share of electronics relative to total exports has been declining in recent years. From a peak of 58.2 per cent in 2020, the share of electronics products to total exports went down to 53.4 per cent by end-2024. The Philippine government hopes to abate this decline with the creation of a Semiconductor and Electronics Industry Advisory Council in April 2025. Composed of state and private sector leaders, the council aims to lay out policies to boost the competitiveness of domestically made electronics products. The council also seeks to improve the position of Philippine manufacturers in the global semiconductors value chain from its current market share of 5 per cent, while also transitioning domestic factories to produce higher value electronics.
Taiwan leads the global semiconductor industry in terms of market share, producing integrated circuits for global tech giants like Apple and Nvidia. Other major chipmakers include South Korea, Japan, and the US, with the latter accounting for some 40 per cent of chip design software. It bears pointing out that the Philippines has a relatively weak, low-value position in the global semiconductor value chain. Local factories have the capacity to assemble and test chips, but its design, programming, and content are done elsewhere. Similar to the call centre industry, the country is a preferred outsourcing destination for semiconductor production mainly because of its young and educated workforce that demand relatively lower salaries compared to other destinations – and not particularly for its competitiveness in the tech sector.
Challenging times ahead
The industry group Semiconductor and Electronics Industries in the Philippines expects the value of electronics exports this 2025 to remain flat year-on-year as global demand appears slumped, making for a tough business environment. That forecast was given well before Trump’s new tariffs had been announced.
Onshore, business sentiment has been trending lower as well. It is worth noting that over the last 10 years, the economic outlook of Philippine manufacturing firms has been less upbeat relative to companies in other industries, as seen in Graph 2. Manufacturers have grown less optimistic about economic prospects relative to 2015.
Data from the Bangko Sentral ng Pilipinas Business Expectations Survey attributed the declining optimism of manufacturing firms to their projection of a seasonal decrease in demand for goods after the Christmas season, as well as the rising prices of basic goods.
Energizing the sector
The Philippines’ semiconductor industry faces rough winds amid greater global competition and an uncertain market due to the mega tariffs imposed by the US. A government-led advisory council to support the expansion of the local semiconductor industry provides an encouraging signal to global investors regarding the Philippines’ proactive approach in unlocking stronger growth for the sector.
Policies that would support domestic players, such as tax breaks and reduced corporate taxes, can trigger increased production. Resolving long-standing issues on high operational costs, particularly for electricity, infrastructure, and logistics, would likewise improve the sector’s efficiency and overall productivity. There is certainly room for improvement, and addressing these concerns one by one demonstrates that the Philippine economy has more space to rapidly expand.
At a larger scale, we view targeted support to the domestic electronics manufacturing sector as growth-positive at a time of increased global market volatility, making it a viable investment destination for opportunistic investors.
