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The U.S.-China Trade War and Its Impact on the Philippine Semiconductor Sector

Overview

The U.S.-China trade war, initiated in 2018, has disrupted global semiconductor supply chains and reshaped trade dynamics. The Philippines, a key player in semiconductor assembly and testing, has faced challenges stemming from tariffs, geopolitical tensions, and supply chain realignments, while also exploring opportunities to strengthen its position in the industry.

Key Impacts on the Philippine Semiconductor Sector

1. Supply Chain Disruptions

• The Philippines’ heavy reliance on U.S. and Chinese markets for exports and imports has exposed the semiconductor industry to tariff-related uncertainties. For instance, U.S. restrictions on semiconductor exports to China have exacerbated supply chain bottlenecks, increasing costs for Philippine manufacturers.

• Long-term risks include reduced export revenues as companies seek cost-effective manufacturing alternatives outside China and the U.S.

2. Geopolitical Pressures

• The Philippines’ alignment with the U.S. under President Marcos, contrasting with the previous administration’s pro-China stance, has influenced market access and investment strategies. This shift complicates trade relations with China, a major export destination for Philippine electronics.

• Trade tensions have intensified competition in Southeast Asia, with countries like Vietnam and Malaysia emerging as alternative semiconductor hubs.

3. Domestic Challenges

• Talent shortages: The Philippines scores lower on human capital development (0.52 on the World Bank’s 2020 index) compared to regional peers, hindering industry growth.

• Regulatory barriers: Bureaucracy, corruption, and weak intellectual property protections deter foreign investment.

Industry Performance and Projections

• Philippine semiconductor exports contracted by 9.2% in 2023, falling to $41.9 billion.

• SEIPI anticipates minimal growth in 2024 due to geopolitical and trade uncertainties.

Adaptation Strategies

1. Supply Chain Diversification

• Companies are exploring localized sourcing and regional partnerships to mitigate disruptions.

2. Government Initiatives

• Reforms like the Public Service Act and Foreign Investment Act aim to attract foreign investment by easing restrictions.

• Participation in the Indo-Pacific Economic Framework (IPEF) seeks to strengthen U.S.-Philippine economic ties.

Conclusion

While the U.S.-China trade war has strained the Philippine semiconductor sector through supply chain instability and geopolitical friction, efforts to diversify trade partnerships and address domestic inefficiencies could enhance resilience. However, persistent challenges like talent gaps and regulatory hurdles require urgent attention to secure the industry’s global standing.

References

• Inquirer Business. (2018, April 5). "US-China trade war to affect PH exports." Available at: https://business.inquirer.net/248619/us-china-trade-war-affect-ph-exports

• Oxford Economics. (2024, June 4). "Talent shortage, geopolitics weighing on PH semiconductor sector." Available at: https://business.inquirer.net/462152/talent-shortage-geopolitics-weighing-on-ph-semiconductor-sector

• The Global Treasurer. (2024, April 23). "US & China Decoupling pt2: Reshaping global supply chains." Available at: https://www.theglobaltreasurer.com/2024/04/23/us-china-decoupling-pt2-reshaping-global-supply-chains

• Manila Times. (2025, February 4). "PH to be affected by fallout from Trump’s trade war." Available at: https://www.manilatimes.net/2025/02/04/business/top-business/ph-to-be-affected-by-fallout-from-trumps-trade-war/2048983

• VOA News. (2025, February 6). "Observers: US investments in Philippines seen easing reliance on China." Available at: https://www.voanews.com/a/observers-us-investments-in-philippines-seen-easing-reliance-on-china/752751