Global real estate services firm JLL has treated the Philippines as one of the emerging manufacturing destinations, with the semiconductor industry topping the list that will prosper in the next few years.

In a statement on Thursday, JLL said emerging manufacturing hotspots are implementing more policies that aim to boost their local manufacturing industries, placing a premium on land availability and access to capital sources.

For the Philippines, opportunities are seen in semiconductors, as the country was one of the seven countries that the USA partnered with in line with their CHIPS Act, which aims to expand and diversify the US’ semiconductor supply chain.

Under the CHIPS and Science Act, the US government earmarked $500 million for the International Technology, Security, and Innovation Fund to be spent over the next five years in the partner countries.

JLL said key products in the area of semiconductors are integrated circuits, RF/microwave, and assembly and testing services.

Also, electronics and electricals were seen to be emerging segments, as Semiconductor and Electronics Industries in the Philippines Foundation, Inc. reported an all-time high electronics exports of $49.1 billion in 2022.

Key products in this area are consumer and industrial electronics, as well as telecommunication equipment, JLL said.

Diversification of locations

In the said analysis, JLL stressed that the next decade will accelerate shifting supply chains whereby manufacturing and production locations will diversify to multiple locations across Southeast Asia and India.

According to JLL, Southeast Asia and India stand to be net beneficiaries of companies diversifying manufacturing capabilities to complement existing bases in China.

For decades, China has dominated global manufacturing.

However, companies are increasingly diversifying their operations elsewhere, adding manufacturing bases outside of China to hedge against supply chain disruptions.

This diversification drive is fueling a boom in foreign direct investment (FDI) for manufacturing in Southeast Asia and India, with both areas vying to become the next manufacturing powerhouse.

“Diversification within supply chains is a natural step for companies involved in manufacturing within the wider economic lifecycle of this region. We see Southeast Asia and India representing a natural complement to the existing production strength of China but feel that for companies to respond quickly to supply chain shifts, they need to adopt a flexible mindset towards land selection and funding options,” says Michael Ignatiadis, head of Manufacturing Strategy, Asia Pacific, JLL. 

The JLL also revealed that rising costs in China over the past decade have served as the primary accelerator of the shift towards diversification.

“Higher demand for industrial land, coupled with rising wages and material costs, has also pushed up land prices in China, which can be up to two times higher compared to some SEA countries and India,” the JLL said.

Furthermore, factors such as skilled labor, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability contribute significantly to a factory’s long-term success and sustainability.

JLL recommends careful evaluation of these non-cost or qualitative factors are crucial to make an informed decision and lay a strong foundation for future growth.

“Each economy in Southeast Asia is at a different level of its manufacturing story, but we can confidently say that policymakers are extremely keen to take advantage of diversification initiatives of supply chains.  Companies need to carefully evaluate various factors such as costs, market access, infrastructure, labor, and governmental support before determining their global manufacturing investment strategies,” said Peter Guevarra, director, Research Consultancy, Asia Pacific, JLL.