ASEAN Semiconductor Policy and Supply Chain Opportunities PDF

Semiconductor Policy And Supply Chain Opportunities for Philippines and Key ASEAN Countries Sources: ▪ International Technology Security & Innovation ▪ US Department of State ▪ US Department of Commerce ▪ Semiconductor Industry Association (SIA) ▪ Arizona State University ▪ Boston Consulting Group...

Semiconductor Policy And Supply Chain Opportunities for Philippines and Key ASEAN Countries Sources: ▪ International Technology Security & Innovation ▪ US Department of State ▪ US Department of Commerce ▪ Semiconductor Industry Association (SIA) ▪ Arizona State University ▪ Boston Consulting Group ▪ Philippines’ Department of Trade and Industry ▪ Private Sector Advisory Council (PSAC) Video: Passion Chips – also known as semiconductors – are at the center of most technologies driving the future economy, from AI, computers and electric vehicles to solar panels, healthcare devices and military weapons.  $1 Trillion Market by 2030 Global Chip Sales AI, 5G/6G, EV, autonomous $1T (2023) driving $526.8B Industrysalesexpectedtogrowin2024 by 13.1% Internet/ E- $574B Commerce/IoT Smartphones 5G $298B PCs $248B $139B 2001 2006 2010 2022 2030 3 3 Source: WSTS, TechInsights, and SIA analysis SIA – NOT FOR DISTRIBUTION F  The US side on Semiconductor Global supply US CHIPS Act to Manufacturing Shoring-up ATP Critical Drivers: To Add: disruptions highlight move production needs back-end capacity in People Partnerships and risk of to the US Assembly- preferred (Workforce Promotions overconcentration of Testing- countries thru Development) production in a few Packaging (ATP) ITSI Fund and and Policy (to source-countries partnership with attract more Arizona State Labor conditions Investments) University Near-to-market The United States has committed $52.7 billion through the CHIPS and Science Act to bring back advanced semiconductor manufacturing to North America and improve supply chain resilience. The CHIPS Act allocates $500 million to coordinate with foreign government partners. Semiconductors are the fundamental building blocks of our digital world  International Technology Security and Innovation (ITSI) Fund The US Department of State, with $100 million per year over five years (starting in FY23), aims to promote semiconductor supply chain security and diversification. ITSI Funds projects fall into three categories, and are managed by three bureaus: Promote – Economic and Business (EB) Affairs Protect – Intl. Security and Nonproliferation (ISN) Secure – Cyberspace and Digital Policy (CDP) In February 2024, The U.S. Department of State’s Bureau of Economic and Business Affairs awarded a 2-year, $13.8 million cooperative agreement to ASU under the International Technology Security and Innovation (ITSI) Fund, to diversify the global semiconductor supply chain. ASU President Michael Crow (left) shakes hands with Ramin Toloui, assistant secretary for the Bureau of Economic and Business Affairs at the U.S. Department of State, in Washington, D.C. Video: Automotive  Objective: To bolster the assembly, testing, and packaging (ATP) capabilities in ITSI partner countries in the Americas (Mexico, Costa Rica, and Panama) and Indo-Pacific (Indonesia, Philippines, and Vietnam), enhancing a resilient supply chain for U.S. semiconductor manufacturers. Mexico Panama Vietnam Philippines Costa Rica Indonesia  Program’s Objectives and Expected Results The core focus of this program is to equip and expand the semiconductor workforce while concurrently addressing policy and regulatory considerations. The program’s objectives are to engage partner governments, industry, academia, and key stakeholders to: Enhance business Build strategic Expand and diversify and regulatory Public-Private environments to the workforce to ensure sustained Partnerships support the growth of the to grow the diversification of the semiconductor semiconductor ATP global ATP supply industry. supply chain. chain.  ITSI Supply Chain and Policy Leadership Institute Cross-Sector Collaboration: Unites leaders from government, industry, and academia to address global semiconductor policy and regulatory challenges. Focus on Policy s Supply Chain: Enhances understanding of policy development, supply chain management, and strategic partnerships. Key Discussion Topics: Addresses semiconductor supply chain vulnerabilities, international collaboration, and policy development. Practical Learning: Features workshops, case studies, and expert-led sessions to equip leaders with tools for driving innovation and securing the semiconductor supply chain. C  Competition is Fierce – Focus on Implementation Strategy Issued to Develop Vietnam’s Semiconductor Industry(Sept22, 2024): Prime Minister Pham Minh Chinh has signed a decision issuing thestrategy for developing Vietnam’s semiconductor industry by 2030, with a vision to 2050 Malaysia Unveils 3-Phase US$5.3bil National Semiconductor Strategy to Strengthen Position in All-Out Global Semicon War (May 28, 2024) Thai Govt Considers Setting Up National Semiconductor Board (Jun 17, 2024) Costa Rica Unveils Strategy to Become Global SemiconductorHub (Aug 26, 2024) 3 SIA – NOT FOR DISTRIBUTION  Path forward for the Philippines 26 2 SIA – NOT FOR DISTRIBUTION  Philippines’s Advantages and Potential Strong ATP Ecosystem Government support 13 ATP facilities currently in PH Growing Strong support from President Macros ecosystem: TI, Amkor, onsemi, ADI PEZA incentives Philippines Deep Talent Pool Strong electronics sector Young workforce & demographic sweet spot Electronics and semiconductors top English-proficient workers exports: - 2023 electronics exports = $45.6 billion; 61% of PH commodity exports. Partnership with U.S. - Semiconductors account for 70%of Indo-Pacific Economic Framework PH electronics exports. CHIPS/ITSI Partner SIA-SEIPI cooperation 2 SIA – NOT FOR DISTRIBUTION  Philippines’s Semiconductor Action Plan? Address key bottlenecks Implement Gov’t Initiatives & Invest in critical infrastructure: airports, ports. Incentives Lagging FDI and exports growth compared National Semiconductor Strategy? to ASEAN neighbors Favorable tax policy to ensure Philippines Services sector rising rapidly; manufacturing competitiveness; R&D and capex credits(e.g. declined. CREATE MORE?) Workforce: complete talent pipeline; work with industry to develop curriculum Free and unimpeded access to National Semiconductor Advisory Committee global markets (industry, academic, govt) Improve ease of doing business: Streamline admin processes and permitting Create one-stop-shop mechanism across high-tech parks 3 SIA – NOT FOR DISTRIBUTION Strengthening the Philippines’ Semiconductor Supply Chain through Workforce and Ecosystem Development Recommendations to Government September 2024 (cc: PBBM) Policy The Semiconductor and Electronics industry is a strategic sector of the Philippine economy, the top export contributor at 56.9% or US$41.91 billion and the 3rd largest gross value added (GVA) contributor at 11% of total manufacturing GVA in 2023. The government and industry are completing the National Semiconductor Strategy which would include: - developing the environment to make the Philippines a location of choice, especially addressing the business and regulatory bottlenecks - developing strategic partnerships with university and training centers network to expand the country’s ability to become a key provider of services and goods in the semiconductor and electronic supply chain. The country aims to be an attractive location for IC design, research and development, and EMS in selected sectors like healthcare and maritime, where the Philippines excels as a dominant player - implementing a robust workforce pipeline strategy to expand the numbers and diversity of the workforce www.boi.gov.ph, 06 August 2024 (cc: PBBM) McKinsey & Company 56 Education and Training ATP Advanced Manufacturing IC Design and Education Educatio Education Training n Triple the placements in The enhancement of the CHED Improve awareness for TESDA’s Enterprise Based curriculum for a Master’s manufacturing jobs through Training (EBT) program; Degree and PhD for engineers the enhanced senior high Enhance the work immersion to roll out initially to 12 school work immersion program for DepEd’s senior universities, to ramp up the program in the semiconductor high school in semiconductor number of engineers for the and electronics. and electronics. sector. (cc: PBBM) McKinsey & Company 62 OVERVIEW: The Philippines Investment Priorities, Opportunities in the Semiconductor Industry Dr. Ceferino S. Rodolfo DTI Undersecretary for Industry Development and Investment Promotions Group Managing Head BOI  PH’s 2023 GDP growth strongest among major Asian economies Philippine GDP Year-on-Year GDP Growth Rate of Other ASEAN Growth Rates (Q1 2021 – Q2 2024) Countries for 2023 and Q1-Q2 2024 14 6 12.0 PH 5.6 12 5.08 10 ID 5.05 7.9 8.1 7.5 7.7 6.4 8 7.0 7.1 VT 6.3 6.3 5.05 6.0 5.5 5.7 6 4.3 MY 4.9 3.7 4 1.9 2 TH 1.9 0 2.8 PH on track to become a SG 1.1 -2 -3.8 USD 1-Trillion Economy by 2033 Q1-Q2 2024 2023 -4 Source: Countries National Statistics Offices & Central Banks -6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2021 2022 2023 2024  POSITIONING REGIONAL HUB FOR SMART AND SUSTAINABLE STRATEGY: MANUFACTURING AND SERVICES PRIORITY SECTORS ELECTRIC SMART/HIGH-TECH SEMICONDUCTOR AND VEHICLES MANUFACTURING ELECTRONICS GREEN HIGH-TECH AGRICULTURE METALS DATA CENTERS//TELCO RENEWABLE ENERGY INFRASTRUCTURE YOUNG, TALENTED RICH IN RELEVANT STRATEGIC LOCATION WORKFORCE NATURAL RESOURCES  Comparative Net ASEAN FDIs (in USD Billion) Country 2022 2023 Growth Singapore 141.3 175.2 ▲17.7 Indonesia 25.5 21.7 ▼12.2 Vietnam 22.4 18.5 ▲3.3 Philippines 9.4 9.1r ▼3.96 Malaysia 17.1 8.3 ▼ 43.8 Thailand 11.2 3.0 ▼ 73.6 PHL decline in Net FDIs in 2023, was less than the large negative growth rates experienced by Malaysia, Thailand, and Indonesia. Thus, for 2023, PH has overtaken Malaysia and Thailand in Net FDI levels.  Inward Net FDIs 2023 Sem1 2024 USD 9.12B USD 4.44B 7.9 % higher than Q1-Q2 2023 ($4.1 billion) TOP INDUSTRIES TOP INDUSTRIES Manufacturing Wholesale and Real Estate Information and Real Estate Construction Accommodation Electricity, Gas, Steam Manufacturing USD 931.75 M Retail Trade USD 89.83 M Communication USD 69.83 M USD 22.13 M and Food Services and Air Conditioning USD 1,116.06 M Supply USD 101.35 M USD 82.65 M USD 11.16 M PHP 10.15 M TOP COUNTRY SOURCES TOP COUNTRY SOURCES 1 2 3 4 5 1 2 3 4 5 Japan Singapore Germany USA Taiwan United Kingdom Japan USA Singapore Malaysia USD 849.36 M USD 182.65 M USD 149.89 USD 113.14 M USD 36.96 USD 764.19 M USD 343.24 M USD 49.59 M USD 41.63 M USD 24.70 M Source: Bangko Sentral ng Pilipinas, Net FDI Flows  Strong Pipeline of Inward Investments Investment Promotion Agencies (IPAs) Approvals 2023 Q1 - Q2 2024 PHP 1.47 T PHP 889.05 B PHP 336.64 B (USD 15.63B) PHP 1.02 T (USD 5.92B) (USD 25.84B) (USD 17.93B) Foreign Investments Approval Foreign Investments Approval 57% increase from 2022 61% share of total investments for 2023 28.43% increase from Q2 2023 32.86% share of total investments TOP INDUSTRIES TOP INDUSTRIES Electricity, Gas, Information and Electricity, Gas, Steam and Air Manufacturing Mining and Real Estate Manufacturing Accommodation Administrative and Real Estate PHP138.41 B Communication quarrying PHP73.56 B Steam and Air and Food Service Support Service PHP1.68 B Conditioning Supply PHP96.48 B Conditioning Supply PHP25.01B (Renewable Energy) (USD2.43B) PHP79.21 B (USD1.3) (USD0.44B) PHP20.09 B PHP5.34 B (USD0.026B) (USD1.7B) (USD1.4B) PHP281.9B (USD0.35B) (USD0.093B) PHP992.92B (USD4.96B) (USD17.46B) TOP COUNTRY SOURCES TOP COUNTRY SOURCES 1 2 3 4 5 1 2 3 4 5 Germany The Netherlands Japan Singapore Cayman Islands Switzerland The Netherlands South Korea Cayman Islands Japan PHP393.99B PHP349.93B PHP57.47B PHP37.52B PHP11.63B PHP234.93B PHP39.74B PHP20.33B PHP8.88B PHP8.6B (USD6.75B) (USD6.15B) (USD1.01B) (USD659.6B) (USD0.20B) (USD4.13B) (USD0.7B) (USD0.36B) (USD0.16B) (USD0.15B) Source: PSA TOTAL EXPORTS, 2014-2023 (in US$ Billion) 2023 highlights (US$ Bn): In 2023 - first time for ------------------------- PH exports to breach Electronics – 45.6 US$100Bn IT- BPM – 35.5 103.6 Tourism – 9.1 98.8 94.7 90.4 87.8 86.6 80.0 75.3 73.9 72.3 57.7 55.3 51.8 52.0 53.5 54.2 49.8 48.2 48.3 43.2 42.7 41.3 41.1 38.4 34.8 31.8 33.6 29.1 31.2 25.5 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Goods Services Total Exports Note: based on BSP data  PH Merchandise Exports Annual Export Performance (2019 – Q2 2024) (Billion US$) 90 79.57 80 74.65 73.52 70.93 70 65.21 60 Export Value 50 40 35.34 36.41 30 20 10 0 2019 2020 2021 2022 2023 Q1-Q2 2023 Q1-Q2 2024 Top 5 Highest Export Trade Value Products in Q1-Q2 2024 Top 5 Highest Export Markets in Q1-Q2 2024 Top Exports by Commodity Group Value (USD) Top Export Markets Value (USD) Electronic Products (including semiconductors) 20,630.55M United States of America 5,815.74 M Other Manufactured Goods 1,870.64 M Hong Kong 5,241.65 M Other Mineral Products 1,429.96 M People’s Republic, China 4,599.47 M Machinery and Transport Equipment 1,258.89 M Japan 5,053.78 M Ignition Wiring Set and Other Wiring Sets (Used in South Korea 1,852.79 M 1,170.81 M Vehicles, Aircrafts and Ships) Source: Philippine Statistics Authority USD 106.4B ELECTRONICS AND ELECTRICAL EXPORTS 128K S&E-RELATED ENGINEERS AND TECHNICIANS TOP 10 NICHE PRODUCTS & TECHNOLOGIES Drones Microsatellite Autonomous vehicles Wearable Solar Devices Smart home devices Augmented Medical Devices Virtual reality devices 3D Printer Digital health devices Collaborative Robots Source: Philippine Export Development Plan (PEDP), BOI, Product and Technology Holistic Strategy (PATHS)  Electronics and Semiconductor Industry Enabling innovation and technology driven sectors Trade Data of Electronics and Semiconductor Products (2018 - 2023) ✓ World class center for OSAT – Outsourced Semiconductor Assembly and Test with exceptional design capabilities ✓ A successful hub for Electronics Manufacturing Services (EMS) with strengths in complex PCB assembly, box build and systems integration with growing capabilities in Design and Development and Original Design Manufacturing (ODM) ✓ Deep intellectual talent pool with an unparalleled command of English to support the research and development and manufacturing activities right Total exports Semicon Total Semicon across the well-established electronics ecosystem exports imports imports *Preliminary PH Semiconductor Industry Source: Export Management Bureau; BOI-MIS Specializing on Back-End of 73% Chip Fabrication: Semiconductor Manufacturing The PH electronics Services (SMS) Testing (Wafer Probing, In- Circuit Testing, Functional industry is the TOP Testing, RF Testing, Flying CONTRIBUTOR to PH 27% Electronics Manufacturing Services (EMS) Probe, etc.) Assembly and Packaging total exports around 60%, US$ 45.64B in 2023. NEW INITIATIVE TO OPEN MORE INVESTMENT OPPORTUNITIES: Establishment of Science and Technology Center (STC) which will house the IC Design Training Laboratory, R&D Lab and a Lab-scale Wafer Fab  The Philippines has built strong partnerships with key economies that play significant roles in the global semiconductor industry, gaining their support to attract investments, build capacities Strong and access technology and infrastructure to further expand the local industry Partnerships Income Tax Holiday of up to 50% of the Cost of the Renewable Energy Project! While Philippines is targeting to produce 128,000 VN: 50k engineers technicians and engineers by 2028 to support our > USD 1 billion local semiconductor and electronics industry. PH: 128k engineers Vietnam has allocated over USD 1 billion to produce 50,000 semiconductor engineers by 2030. Malaysia is targeting to produce 60,000 semiconductor engineers in the next 5-10 years MY: 60k engineers with over USD 5 billion budget to support the > USD 5 billion initiative. SEMICONDUCTORS: WAR ON TALENT  KEY MESSAGES ❑ The Philippines is in good position towards its goal of transforming the country into SEA’s hub for smart and sustainable manufacturing and services by empowering the Private Sector thru market-based tools. ❑ The semiconductor and electronics industry, the largest contributor to the country’s export, has been identified as one of the country’s priority sector ❑ The country’s young and skillful workforce, game changing reforms, investment promotion and facilitation strategies, as well as strong partnerships with key economies poses as strong advantages for its partner investors. ❑ Thru the CHIPS Act and this project, the country is looking to further strengthen the local semiconductor industry and pave way to more investments from US and other partners Inadequate Infrastructure Insufficient transportation, energy, and communication infrastructure has hindered economic growth and competitiveness compared to countries like Vietnam and Thailand, which have invested heavily in infrastructure. Why the Bureaucratic Inefficiencies Philippines Complex regulations, bureaucratic red tape, and corruption have made it difficult for businesses to operate efficiently. This contrasts has been overtaken by with countries that have streamlined processes to attract investment. Political Instability ASEAN Periods of political instability and governance challenges have undermined investor confidence and hampered long-term economic planning and development. neighbors? Lack of Foreign Direct Investments (FDIs) The Philippines has struggled to attract FDIs due to concerns about political stability, governance issues, and restrictive economic policies, resulting in lower investment levels compared to its neighbors. Why the Philippines Slow Adoption of Technology and Innovation Other countries have rapidly adopted new technologies and has been fostered innovation ecosystems, while the Philippines has lagged in these areas, impacting competitiveness. overtaken by Sectoral Weaknesses ASEAN Key sectors, particularly agriculture and manufacturing, have not seen the same level of growth and innovation as in other ASEAN neighbors? countries, limiting overall economic expansion. Why the Philippines has been overtaken by ASEAN neighbors? Education and Skills Gap Natural Disasters and Climate While the Philippines has a relatively Vulnerability educated workforce, there are significant The Philippines is highly vulnerable to natural gaps in technical and vocational training. disasters, which disrupt economic activities and Other countries have prioritized skill infrastructure, making it harder to maintain development to meet industry needs. consistent growth. Trade Policies Demographic Challenges High population growth without corresponding The Philippines has been slower to engage job creation has led to high levels of in comprehensive trade agreements and underemployment and unemployment, regional partnerships, missing opportunities affecting economic productivity and growth. to boost exports and market access compared to more proactive countries.