Philippines industrialization and hype vs reality of Pax Silica

Last week, Sept. 2, the Philippine Semiconductor and Electronics Industry Roadmap (PSEIR) was launched and the Semiconductor and Electronics Industry Advisory Council (SEIAC) was created, headed by Executive Secretary Ralph Recto. Other members of the council are the secretaries of DOF, DEPDev, DTI, DepEd, CHED, TESDA, etc.

The purpose of PSEIR is to help secure a bigger Philippine share of the trillion-dollar global semiconductor industry, bring in more investments and high-paying jobs for Filipinos. Recto said President Marcos wants the Philippines to move beyond traditional assembly and manufacturing and capture more high-value activities such as chip design, engineering, research and innovation.

The target under PSEIR is $110 billion semiconductor and electronics exports by 2030. Our electronic products exports were $39.1 billion in 2024, $46.0 billion in 2025 and $30.9 billion in Jan-July 2026. Other manufactured goods, ignition wiring sets and other sets used in vehicles, aircraft and ships are not included from those numbers yet, data from the Philippine Statistics Authority showed.  We might hit $55 billion in electronic exports by end-2026.

Other PSEIR goals by 2030 are as follows: increase our share of global semiconductor assembly, test and packaging from four percent to seven percent; capture four percent of global electronics manufacturing services; and build an integrated circuit (IC) design sector generating $2 billion to $3 billion in annual exports. The Luzon Economic Corridor will be bannered by semiconductor and electronics industry, according to Recto.

This is a good initiative, the industry goals are specific and quantified and the overall goal – Philippine industrialization – is set on the horizon.

Part of the Philippine industrialization push should be the pharma sub-sector because of our huge trade deficit here.  We imported P132.2 billion worth of pharmaceutical products in 2025 and exported only P1.5 million, a huge trade deficit. Research firm BMI also projects that the Philippine pharma market will expand from P525 billion in 2025 to P759 billion by 2030.

The huge trade deficit is due to our high import dependence on active pharmaceutical ingredients (APIs) and other inputs, plus imports of finished medicines. I asked around about our domestic manufacturing capability and learned that there is an existing domestic pharma manufacturing base that have capabilities in formulation, quality assurance, research and development, mass production. So the problem is not the absence of capability but absence or lack of scale and policy support to transform these capabilities into a strong manufacturing ecosystem.

On the regulatory hurdle, BMI said one of the biggest challenges facing pharma investors is the length and unpredictability of regulatory processes. There are explicit timelines but actual approvals take much longer, creating uncertainty for manufacturers and investors.

The Food and Drugs Administration (FDA) has undertaken modernization efforts, there are plans of green lane for pharma investments, fine. But compared to our ASEAN neighbors, we are slow. Indonesia targets significant reduction in pharma import dependence and improve self-sufficiency. Vietnam has explicit goal of increasing domestic medicine and vaccine manufacturing. Thailand has fiscal incentives and manufacturing promotion in medicine production. Malaysia targets to become a regional pharma manufacturing and export hub.  Singapore remains the regional pharmaceutical innovation center with predictable regulation and world-class infrastructure and talent. We just need to copy their regulatory and manufacturing policies.

The real goal of the US in creating the Pax Silica project is political – to prevent China from gaining economic, technological and military dominance in advanced AI, and pool the resources and supply networks of its allies then restrict China from gaining access to them.

To attain this, hypes are created in the Philippines like ambitious targets of $40 billion to $70 billion investments in advanced manufacturing for semiconductors, AI infrastructure and minerals processing including rare earth elements, creating nearly 200,000 high-paying jobs in the country. Fine.

The reality is that in rare earths production alone, China has already attained dominance and not just targeting it. Rare earths are a group of 17 chemically similar metals – cerium, dysprosium, erbium,… thulium, ytterbium, yttrium. They possess magnetic, heat-resistant and phosphorescent properties, and these are mainly used in producing RE, EVs, defense technologies, etc.

The largest producer and exporter of rare earth elements is China. In 1995, it produced 48,000 tons of rare earth oxide equivalent, or 63.4 percent of total world supply of 75,700 tons. In 2025, China produced 270,000 tons or 70 percent of total world supply of 387,300 tons, and five times of US production of 51,000 tons.

Natural graphite is used in energy storage (lithium-ion batteries), steelmaking and metallurgy and industrial manufacturing. The main producer in the world is China again. In 1995, it produced 204,000 tons or 34.7 percent of global production of 587,400 tons. In 2025, China’s output was 1.4 million tons or 75 percent of total world production of 1.88 million tons. The US is not or just a marginal producer, based on data from US Geological Survey, British Geological Survey, UKRI and World Mining Data.

Zinc is used in industrial (galvanizing, alloys, batteries), chemicals (zinc oxide, zinc sulfide), biological and medical (enzyme and immune support), China is also the largest producer in the world, 4.1 million tons or 32 percent of world production of 12.7 million tons.

We should industrialize, no question or doubt about that. But we should do it based on existing realities and not due to international politics. Our high targets of electronics and semiconductor exports will need lots of raw materials and intermediate goods that are currently supplied by China, and we try to isolate China due to our affiliation with Pax Silica. Not a good game plan. A lousy one,actually.

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