Electronics industry still hopes for positive growth

The electronics industry has expressed optimism that efforts to bring down the cost of doing business and huge investments coming into the country could still reverse this year’s projected flat growth for the sector.

Our projection of flat or negative growth could still turn positive depending on how deep is the possible US recession. Investments could spur up growth and offset its impact, according to  Ernie Santiago, president of the Semiconductor and Electronic Industries of the Philippines, Inc. (Seipi).

Santiago particularly cited the $ 1.4 billion investments poured into the sector last year, including Texas Instruments $1-billion assembly and test facility inside Clark Freeport which starts production this September or October.

Last year’s figure brings to more than $2 billion total investments for the sector since 2006 which are expected to spur growth this year, he added.

However, Santiago admitted that globally, investors now would be cautious of increasing capacity amid concerns of a possible recession in the US , the biggest market of Philippine products.

If this is going to happen, it’s just a soft recession and not bad as 2001, he said, recalling the slowdown in global trade that year  which reduced the industry’s export revenues by 20 percent.

To remain competitive, Santiago said their goal is to further bring down their cost of doing business, particularly electricity rates which comprise eight to 35 percent of their production cost. 

Aside from the feared US recession and high power cost in the country, the continued peso appreciation and the historic rise in the price of crude oil are other compelling reasons for the exports industry to project below zero growth this year.

The peso already breached the 40 level, closing at 41.18 to the greenback Thursday. Market analysts expect the local currency would hit 38 to the US dollar this year, while the more optimistic ones projected it would reach 35.

On the other hand, world crude price reached $ 100 per barrel first week of January, prompting President Arroyo to call a four-day energy summit by month’s end to formulate a long-term master plan to the energy crunch.

SEIPI hopes to achieve its original five-percent growth target this year if the US does not plunge into recession.

The electronics industry’s growth is crucial in improving the overall export sector revenues. Electronics now comprise 70 percent of Philippine exports.

Posted for Tradeline:  The BETP-Communications Division
Publication Date: 30 January 2008
Source:   PHilexport News and Features