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By Ben Arnold O. De Vera, Reporter
The local semiconductors and electronics export industry is bracing
for an even worse first quarter of 2009, a top player in the sector
said Tuesday.
The industry projects a further slowdown in
orders especially as the global economy is expected to further
contract this year, Arthur Young, the chairman of Semiconductors and
Electronics Industries in the Philippines Inc., told The Manila
Times during a telephone interview.
Young said that electronics exports for the
first three months of this year could be “at best, at least
[performing] the same as in the fourth quarter of 2008, or worse.”
Although he declined to say how weak the orders
have become, he noted that “orders for January and February are
very soft across segments such as phones, computers and other
consumer electronics products and parts, and also automobile
accessories and parts.”
Young earlier said the last quarter of last year
was “terrible” for the local electronics export sector, and the
industry estimates total electronics exports in 2008 to have a flat
or even negative growth of between 5 percent and about 8 percent
compared to the previous year.
The Philippines’ electronics exports are
slumping as their major destinations, such as Japan and the US, are
in recession.
Latest data from the National Statistics Office
(NSO) showed that $2.336 billion in electronics exports in October
last year was 18.9-percent lower year-on-year, as compared to the
$2.879 billion during the same period in 2007. The same month’s
shipment of electronics goods out of the country also posted a
month-on-month decline of 9.9 percent, compared to September’s
$2.592 billion.
Semiconductors and electronics products
accounted for 58.9 percent of the total exports revenue in October
2008, NSO said.
It does not help that the initial quarter of a
new year presents a typically low demand from a high demand during
the holiday season, Young said. “And our situation is exacerbated
by the already weak global markets because of the downturn.”
Credit crunch
During a previous interview, he explained that
the recent drop in orders was not entirely caused by slower demand
but by tighter credit that arose from the global financial crisis.
“[Importers of electronics products] are not ordering because of
the credit squeeze. There’s actually always a demand, but there is
also an ongoing credit crunch.”
The slower demand and the credit squeeze, Young
said, have affected investments of local players in the electronics
industry. “But we have not heard of any current investors pulling
out either.”
The weakening orders might impact on the
sector’s labor pool, Young warned.
Also earlier, he told The Times that if the
global economic meltdown persisted, companies could resort to
cutting down their workforce.
US microchip maker Texas Instruments Inc. last
month told the Labor department that it would retrench 400 people in
its Baguio City plant. It said it had to cut costs, citing declining
orders.
Taiwan’s electronics export sector was also
badly hit by the global crisis, resulting in the displacement of
thousands of workers, including Filipinos, in its factories.
Cutting costs
Young maintained that semiconductors and
electronics manufacturers here are still trying to minimize the
impact of the downturn on their employees. “The softening would
cause companies to reduce costs. But everyone’s trying not to lay
off people. We are trying to protect our workers as much as we can.
I can’t tell you there won’t be layoffs, there would be right
sizing in some firms.”
To save on production costs, some electronics
companies are already implementing shorter workweeks, subcontracting
some work and also momentarily shutting down plants, he said. Young
cited some companies temporarily stopping operations during the
holidays, others giving employees a chance to exhaust their vacation
and sick leaves, although some without pay.
“Of course, workers would only get paid when
they go to work. But such is better at the moment than our employees
entirely losing their jobs,” he said.
According to Young, more adjustments in the
industry’s workforce could be expected this year, but he said that
since laying off employees is their last resort, it is still too
premature to project the number of potential job losses in the
sector.
He added that the sector is suggesting to the
Trade and Labor departments that the government assist workers who
would be displaced by putting them under retraining for jobs that
require higher skills. “Upgrading the skills of our engineers and
technicians amid this downturn could better prepare us for the
upturn, and keep them partially busy in the meantime.”
Optimistic outlook
Despite the current gloomy situation it is in,
Young said the sector is still optimistic it could rebound by the
second half of next year.
He added that the industry hopes that the second
quarter of 2008 could get better than the projected bad first
quarter, and expects that the industry would be back on track
starting the third quarter of this year. “We are hopeful that once
the demand comes back, the US credit market improves and consumer
confidence goes up, hopefully the industry would recover.”
Young projected overall electronics export
growth for this year to be between minus 8 percent and minus 10
percent because of the deep negative impact of the crisis in the
beginning of this year.
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