Upgrade or risk being 'trapped' in legacy chips

The Philippines must attract fresh investments to upgrade and diversify its semiconductor industry in order to meet the growing demand driven by artificial intelligence (AI), as the sector is poised to bear the brunt of potential tariff impositions by the United States (US), according to think tank Oxford Economics.

- By DEXTER BARRO II

In an Oct. 6 report, authored by lead economist Sunny Liu, Oxford Economics said the Philippines could face a “significant negative shock” if US President Donald Trump pushes through with his plan to slap tariffs on imported semiconductors.

Since August, Trump has been exploring the prospect of expanding his so-called reciprocal tariffs to foreign-made semiconductors, in a move to bolster US manufacturing.

Based on his initial pronouncements, Trump will impose 100-percent tariffs on semiconductor imports, but with exceptions for companies that manufacture in the US or have committed to do so.

The majority of semiconductor firms in the Philippines already have presence in the US, including top exporter Texas Instruments (TI), as well as Analog Devices, NXP, and Onsemi.

These companies are involved in assembly, test, and packaging (ATP), focusing on legacy chips that are used in automotive, consumer electronics, and industrial products.

Oxford Economics noted that since ATP is cost-sensitive and can be geographically flexible, a potential imposition of tariffs would make the country's exports less competitive, with the risk of its usual buyers shifting to those that are exempt.

The think tank expects the likes of South Korea and Taiwan to benefit from tariff exemptions due to their existing manufacturing facilities in the US.