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WEF/DC world competitition issues ERNIE B. SANTIAGO SEIPI PHILIPPINES

WEF/DC world competitition issues ERNIE B. SANTIAGO SEIPI PHILIPPINES. SEIPI. worldwide outsourcing. 1. Is outsourcing significant in the Philippines? 2. Does your country support offshore outsourcing? 3. What is its economic impact in your country?

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WEF/DC world competitition issues ERNIE B. SANTIAGO SEIPI PHILIPPINES

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  1. WEF/DC world competitition issues ERNIE B. SANTIAGO SEIPI PHILIPPINES SEIPI

  2. worldwide outsourcing 1. Is outsourcing significant in the Philippines? 2. Does your country support offshore outsourcing? 3. What is its economic impact in your country? 4. How do you think will your country respond to protective measures being taken by US legislative? 5. Should WEF support WEF? SEIPI

  3. THE PHILIPPINE ECONOMY a snapshot SEIPI

  4. Electronics 68% Electronics 69% 2003 1976 The Philippine Economy Changing Face Of Exports …from coconut chips to microchips SEIPI

  5. The Philippine Economy A Competitive Philippine Electronics Industry • 10% of world supply of semiconductor manufacturing services • 50% world production of 2.5” HDD and 10% world production of 3.5” HDD • Who are with us: • - INTEL PHILS. – has largest microprocessor & flash test factory • - TEXAS INSTRUMENTS PHILS - produces 100% of digital signal processors (DSPs) for Nokia cellphones and 80% for Siemens and Ericsson • - TOSHIBA PHILS.-has only 3 plants in the world that manufactures laptops, one of these is in the Philippines • - THREE OF THE LARGEST HDD PRODUCERS ARE IN THE PHILIPPINES: • - Hitachi Ltd. (produces 500,000 HDDs a year); • - Fujitsu Computer Product Corp. (manufacturer of HDDs for desktops, servers • and file storage; magneto-resistive heads; & media disk); • - Toshiba Philippines (HDDs, laptops) SEIPI

  6. The Philippine Economy A Competitive Philippine Electronics Industry Every month, the Philippines produces… 250, 000 LAPTOPS 6 million MAGNETIC HEADS 3 million DSPs 2.5 million HDDs 900, 000 LCDs 700, 000 ODDs SEIPI

  7. THE PHILIPPINES: an e-services hub an update SEIPI

  8. E-SERVICES 1. CONTACT CENTER 2. BPO 3. SOFTWARE DEVELOPMENT 4. ASSEMBLY AND TEST/ ENGINEERING & DESIGN SEIPI

  9. THE CONTACT CENTER INDUSTRY a snapshot

  10. Contact Center Industry As of 1st Qtr. 2004: Sites :60+ call centers Total Seats :25,000 – 30,000 Total Employees :35,000 – 40,000 Total Revenue :USD 400 – 480 Million Projected Growth Rate :100% • Majority of the top call centers have set up operations over the last two years • Convergys, Sykes, Teletech, APAC, ICT, West • Clients handled are Fortune 500 companies

  11. INBOUND Inquiries (Products & Promos) Help desk / Technical Support (level 2) Payment Authorization Order Taking & Confirmation Complaints Handling Concierge Services Directory Assistance OUTBOUND SUPPORT Telemarketing Telesurvey Telecollection Sales Verification Sales Dispatch Reactivation of lapsed accounts Contact Center Industry Service Offerings

  12. Contact Center Industry Client Industries • Travel and hospitality • Technology • Financial services • Insurance & healthcare • Utilities • Telecom • Retail & Entertainment

  13. Contact Center Industry Customer Touchpoints Phone Fax Voice Mail E-mail Click to Chat Click to Call Other Web Collaboration Tools

  14. Contact Center Industry Tremendous growth of call centers due to confluence of factors Year # of Seats 2000 1,500 2001 3,500 2002 7,500 2003 20,000 Est 2004 40,000

  15. THE BUSINESS PROCESS OUTSOURCING INDUSTRY a snapshot

  16. Business processes outsourced to the Philippines Finance & Accounting • General accounting & bookkeeping services • Accounts maintenance • Accounts receivable collection • Invoice and accounts payable administration • Claims processing(pre-need industry) • Expense and revenue reporting, sales auditing • Payroll (including overtime tracking) • Asset management/accounting • Financial analysis and auditing • Management advisory services • Inventory control and purchasing • Tax reporting and other financial-related services (financial leasing, credit cards, factoring and stock brokering)

  17. Business processes outsourced to the Philippines HR Payroll Processing Benefits Administration Compensation Planning Travel & Expense Management Expatriate & Relocation Services HR Data Management Stock Options Administration Employee Interface Services Learning Systems Administration HR Application Development & Management

  18. Business processes outsourced to the Philippines Other Business Processes • Data Entry/Data Processing (eg. policy registration/amendment, scanning, indexing) • Agent accreditation • Membership enrollment reconciliation • Contract Drafting, review & audit • Inventory Control • Technology Support • Server Management • Litigation support • Scholarly publishing • Content conversion

  19. Philippine Trends and Predictions Captive BPO Case Model

  20. THE SOFTWARE DEVELOPMENT INDUSTRY a snapshot

  21. Software Development • Presence of more than 200 software development firms for the foreign market • Firms intensively working towards CMM certifications (Accenture, RCG IT Manila & Azeus Systems Phils Inc are already CMM/CMMI Level 5 Certified) The 2002 Global New Economy Index of the META Group, a US-based research group, cited the Philippines for the “excellent availability” of skilled IT workers and for their proficiency in mainframes, minicomputers & microcomputers as well as for their technical & business skills for ICT projects.

  22. Philippine Trends and Predictions Software Development Presence of International Players • Accenture, IBM Solutions, Sun Microsystems, Software Ventures International (SVIC), Canon, NEC, ServiSoft (SPI Technologies), Jupiter Systems, ADTX, CyberJ Resources Inc.,SQL Wizard, Weserv Systems, ITS International, J-SYS Philippines, Inc., Tsukiden Software Philippines Group, Mysis Manila (SSC for banking software applications), Trend Micro

  23. THE PHILIPPINE ELECTRONICS INDUSTRY a snapshot SEIPI

  24. US$35B US$ 38B US$ 32B PHILIPPINE EXPORTS WITH ELECTRONICS US$35B US$32B US$ 29B US$ 25B US$ 20B US$ 17B PHILIPPINE EXPORTS WITHOUT ELECTRONICS US$11B TOTAL PHILIPPINE EXPORTS in US$ M 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2001 2002 2003 1999 2000 1995 1997 1998 1996 SEIPI Source: Bureau of Export Trade Promotion, DTI

  25. % TO TOTAL RP EXPORTS TOP 5 EXPORTS 2003 • ELECTRONICS 68 % • Garments 6% • 3. Fresh and • Processed Food 3% • 4. Machinery and • Transport 3% • Metal • Manufactures 1% TOP PHILIPPINE EXPORTS SEIPI Source: BETP/DTI

  26. DESTINATIONS OF ELECTRONICS EXPORTS EUROPE 2002-22% 2003-20% CHINA 2002-4% 2003-7% JAPAN 2002-14% 2003-16% USA 2002-20% 2003-14% NIC ASIA 2002-21% 2003-23% ASEAN 2002-17% 2003-20% SEIPI Source: Bureau of Export Trade Promotion, DTI

  27. 3.78 B 4.89 B 7.55 B 10.61 B 14.98 B 19.87 B 25.34 B 27.17 B 27 % 28 % 55 % 40 % 41 % 33 % 27 % 7 % 33 % 36 % 43 % 52 % 58 % 67 % 72% 71 % 1993 1994 1995 1996 1997 1998 1999 2000 2001 21.90 B -20 % 68 % 2002 24.26 B 11 % 69 % EXPORTSOF ELECTRONICS INDUSTRY YEAR EXPORTS (in US$) GROWTH RATE % TO RP EXPORTS 1992 2.97 B 20 % 28 % 2003 24.60 B 2 % 68% 2004 May10.30 B 8 % 67% SEIPI Source: Bureau of Export Trade Promotion, DTI

  28. YEAR INVESTMENTS US$ 40 M 220 M 1.290 B 2.160 B 1.080 B 1.470 B 670 M 790 M 1.240 B 720 M 270 M 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 INVESTMENTS IN THE ELECTRONICS INDUSTRY 2003 230 M 2004 May 300 M SEIPI Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA)

  29. EXPORTS (US$) TARGETS YEAR INVESTMENTS (US $) 0.3 B 0.3 B 1.0 B 24.26 B (11%) 24.60 B (2%) 27.00 B (10%) 2002 2003 2004 TARGETS OF THE ELECTRONICS INDUSTRY SEIPI

  30. critical mass of global players COMPETITIVENESS OF THE ELECTRONICS INDUSTRY SEIPI

  31. 2003 Others Malaysia 8% 2% Singapore 2% Philippines Taiwan NUMBER OF FIRMS 865FIRMS 28% 4% Europe 7% NATIONALITY: 72% Foreign 28% Filipino US 9% Korea Japan 10% 30% COMPANIES IN THE ELECTRONICS INDUSTRY Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA) SEIPI

  32. COMPETITIVENESS OF THE INDUSTRY people SEIPI

  33. In thousands 346 335 350 315 Semiconductor Rest of Electronics 307 300 280 250 250 220 200 150 160 120 100 90 80 74 73 69 50 61 42 44 38 41 0 2003 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 ‘02 ‘01 ‘00 EMPLOYMENT IN THE ELECTRONICS INDUSTRY SEIPI Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA)

  34. Engineering Design • Competitive Engineering Fundamentals • University system produces qualified graduates with the necessary basic engineering skills. • “The Philippines has good basic engineering curriculum” - Fluor Daniel Inc. Phils & JGC Philippines. • Over 40,000 graduates annually SEIPI

  35. Engineering Design • Availability of Labor Skills • Over 75,000 licensed professionals (1995-2000) • OFWs - Skilled Construction Engineers, Technicians, etc. • 2nd largest OFW earnings next to Mexico • Easily trainable in new technology • Overseas exposure to big-ticket projects • H1 2001 DEPLOYMENT: 76% - MIDDLE EAST | 11% - ASIA | 6% - AMERICAS • 5% - AFRICA | 1.39% - Australasia | 1.37% - EUROPE

  36. Engineering Design • Competitive Labor Costs - 15%-30% of Salaries in USA, Japan & Singapore • English Proficiency(most widely-used Engineering Design software / technology is English & then French) TYPICAL SOFTWARE • General Office Automation (Novell, Windows, Oracle, etc.) • Design and Engineering (STAAD, Frameworks, X-Steel, Piping, Mechanical, Process, Electrical, Instrumentation, Autocad, etc.) • Project Management • IDOC, BQR, J-DOME, MSR, IVIS, Project Control System, Material • Control System, Piping Material Management System, etc. • Technological/Level of expertise of local workers in engineering design • Adherence to internationally accepted engineering standards • Computer-Aided Design & Drafting Skills (CADD) Training • Computer-Integrated Manufacturing/CIM Skills(CNC & NC Machines) • ISO Certification (Milestone: July 2001 =1000 firms certified) SEIPI

  37. Engineering Design Design & Development (D & D) Centers in the Philippines • Fairchild Semiconductors – with 14 design engineers for D & D team • NEC – with 60 design engineers for D & D team • Saturn – 15 design engineers for D & D team • Texas Instruments – 300-member package development center • Lexmark – 200 engineers for its D & D team • Intel – 200 development engineers and 70 design engineers SEIPI

  38. THE PHILIPPINE OUTSOURCING INDUSTRY VALUE PROPOSITION Better Quality Delivery At A Significantly Reduced Cost

  39. ALMOST ALL GLOBAL COMPANIES NOW DO A LOT OF OUTSOURCING ACTIVITIES. FROM COMPONENTS AND TEST ASSEMBLY ACTIVITIES, TO OUTSOURCING OF AFTER-SALES SUPPORT AND OTHER SERVICES LIKE ACCOUNTING, EMPLOYEE SERVICES, ETC. IT WOULD BE FUTILE TO THINK THAT A U.S. LEGISLATION WOULD BLOCK OUTSOURCING AS IT CREATES PROFITS FOR U.S. COMPANIES. SEIPI BELIEVES THAT WEF SHOULD SUPPORT OUTSOURCING AS IT FOSTERS A COMPETITIVE ENVIRONMENT IN DRIVING COST DOWN, AS WELL AS IN SPREADING KNOWLEDGE AND WEALTH TO DEVELOPING ECONOMIES

  40. SEIPI END

  41. SEIPI THE INDUSTRY ROADMAP a review

  42. SEIPI THE INDUSTRY ROADMAP a review

  43. SEIPI THE COMPETITIVE LANDSCAPE STUDY VISION TRANSFORM THE PHILIPPINES INTO A REGIONAL CENTER OF EXCELLENCE IN SELECTED ELECTRONICS INDUSTRY PRODUCTS AND PROCESSES AND THUS BECOME THE INVESTMENT LOCATION OF CHOICE FOR DOMESTIC AND FOREIGN ORGANIZATIONS WHO WISH TO DESIGN, MAKE AND SELL THEIR PRODUCTS

  44. THE STUDY ADDRESSES 2 KEY AREAS • Improving the Country’s Competitiveness • Expanding the Value Chain of the Industry OBJECTIVES 2001 2008 EXPORTS US$ 22 B US$ 100 B EMPLOYMENT 300,000 1,000,000 SEIPI THE COMPETITIVE LANDSCAPE STUDY

  45. SEIPI THE COMPETITIVE LANDSCAPE STUDY SEVEN (7) KEY INITIATIVES 1 Manufacturing Cost Control 2 Country Image 3 Targeted Sector Development 4 Allied Industry Development 5 MNCs and Domestic Value Chain Expansion 6 Center For Excellence 7 Wafer Fab

  46. SEIPI THE COMPETITIVE LANDSCAPE STUDY • 1MANUFACTURING • COST CONTROL • how we can reduce the cost of business

  47. SEIPI MANUFACTURING COST CONTROL • 1. POWER COST • LABOR COST • TAXES • INCENTIVES

  48. MANUFACTURING COST CONTROL COST LESS ALL MATERIALSOTHER MATERIALS 1. DEPRECIATION 1. SUBSTRATES 2. SALARIES & BENEFITS 2. LEADFRAMES 3. SPARES 3. GOLDWIRE 4. OMC 4. PACK MATERIALS 5. POWER 5. MOLD COMPOUND 6. SUPPLIES 6. OTHER OM 7. CIC 7. SUBCON ASS. 8. OM AND CHIPS FRT SEIPI

  49. MANUFACTURING COST CONTROL COST PARETO

  50. SEIPI THE COMPETITIVE LANDSCAPE STUDY • 2 COUNTRY IMAGE • how we can improve the image of the country

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