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THE PHILIPPINE ICT INDUSTRY ERNIE SANTIAGO SEIPI ITA SYMPOSIUM 28 March 2007 Geneva

Explore the fast-growing Philippine electronics industry, including key trends, major product trends, and Asia's position in electronics production. Learn about the country's top electronics producing countries and the growing e-services industry, including contact centers, business processing, animation, and more.

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THE PHILIPPINE ICT INDUSTRY ERNIE SANTIAGO SEIPI ITA SYMPOSIUM 28 March 2007 Geneva

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  1. THE PHILIPPINE ICT INDUSTRY ERNIE SANTIAGO SEIPI ITA SYMPOSIUM 28 March 2007 Geneva

  2. PART 2: THE PHILIPPINE ELECTRONICS INDUSTRY PART 1: THE PHILIPPINE E-SERVICES INDUSTRY SEIPI

  3. SEIPI THE WORLD INFORMATION/ ELECTRONICS INDUSTRY

  4. SEIPI WORLD INFORMATION/ ELECTRONICS INDUSTRY • ONE OF THE LARGEST INDUSTRIES IN MANUFACTURING SECTOR: > US$1 trillion output, 6-8% annual growth US$ 1.338T Source: Reed Research, 11/2005

  5. SEIPI WORLD INFORMATION/ELECTRONICS INDUSTRY Electronics Production • ASIA / PACIFIC IS THE FASTEST GROWING REGION Source: Reed Research

  6. SEIPI MIGRATION TO LOW-COST LOCATIONS High-Cost Locations - US, Canada, Japan, Western Europe Low-Cost Locations- Asia/Pacific, China, Eastern Europe, ROW Source: Reed Research

  7. SEIPI MAJOR PRODUCT TRENDS Product Trends Consumer Flat Panel TV, HDTV, Set Top Box, iPod, Digital Camera Communications 3G Handset, TV Reception on Handset, Mobile Services Industrial RFID, Energy Saving Control, Green Electronics, Optical Recognition Automotive Telematics – GPS, Hybrid Car, Safety

  8. SEIPI GENERAL TREND IN ELECTRONICS INDUSTRY • Manufacturing: moving to low-cost regions • Markets: • automotive electronics is rising rapidly • computer and communications are still big • consumer and industrial may rebound • Products: high technology, multi-function, networking base, quality in audio/visual effects • Components: complexity, high precision

  9. SEIPI THE ASIA ELECTRONICS INDUSTRY

  10. SEIPI ASIA’S POSITION IN ELECTRONICS PRODUCTION *Including Japan Source: Reed Research, 11/2005

  11. SEIPI TOP 8 ASIAN ELECTRONICS PRODUCING China Japan (In US$ Billion) South Korea Malaysia Singapore Taiwan Philippines Thailand Source: Reed Research, 11/2005

  12. 2002 162.4 120.2 62.4 38.6 36.4 26.6 23.8 15.9 Japan China South Korea Malaysia Singapore Taiwan Philippines Thailand 2003 180.2 147.4 73.8 41.3 39.4 34.6 24,2 17.7 2004 197.8 177.1 90.3 45.9 44.1 35.9 26.6 20.1 2005 202.3 210.3 96.1 47.4 45.5 35.4 27.3 21.1 TOP 8 ASIAN ELECTRONICS PRODUCING COUNTRIES (In US$ Billion) Source: Reed Research, 11/2005

  13. SEIPI ASIA / PACIFIC AS INFORMATION /ELECTRONICS HUB

  14. SEIPI INFORMATION & COMMUNICATIONS TECHNOLOGY TREND IN ASIA / PAC • Increasing spending, brought by China and India markets • Wireless services overtaking fixed line • Offshore services, business process outsourcing • Enterprise solution • Security issue • Commodization of IT hardware, servers, Linux • Digital home market • Rising technologies, e.g. RFID

  15. THE PHILIPPINE ICT INDUSTRY A snapshot ERNIE SANTIAGO SEIPI

  16. PART 2: THE PHILIPPINE ELECTRONICS INDUSTRY PART 1: THE PHILIPPINE E-SERVICES INDUSTRY SEIPI

  17. PART 2: THE PHILIPPINE E-SERVICES INDUSTRY THE PHILIPPINE E-SERVICES INDUSTRY - the fastest growing industry

  18. THE PHILIPPINE E-SERVICES INDUSTRY 1. CONTACT CENTER 2. BUSINESS PROCESSING 3. ANIMATION 4. MEDICAL & LEGAL TRANSCRIPTION 5. ENGINEERING DESIGN 6. SOFTWARE DESIGN

  19. CONTACT CENTER INDUSTRY AS OF 1ST QUARTER 2006 • Still the fastest growing industry in the Philippines • Contact Centers in the Philippines: 108 • Total Full Time Employees: 112,000/Total Seats: 70,000 • Estimated Revenues in 2005: US$ 1.7 Billion • With a Growth Rate for 2005: 90% KEY PLAYERS IN THE COUNTRY: Third Party Providers: Sykes, Convergys, PeopleSupport, Clientlogic, ePLDT Parlance, ICT Group, Ambergris, Teletech, eTelecare, etc… Captives: Dell, AOL, JPMorgan, Siemens, HSBC, AIG, IBM Daksh, etc..

  20. BUSINESS PROCESSING (BACK OFFICE OPERATIONS) AS OF 1ST QUARTER 2006 • No. of Service Providers: 62 • Total Full Time Employees: 22,500 • Estimated Revenues in 2005: US$ 180 Million • With a Growth Rate for 2005: 80% KEY PLAYERS IN THE COUNTRY: Captives: AOL, AIG BPSI, Chevron Texaco,HP, HSBC, Procter & Gamble, Flour Daniel, Henkel Financial Services, Deutsche Bank, Citibank Crescent Services, Shell Shared Services, Manulife, Alitalia, Watson Wyatt, etc… Third Party Providers: Accenture, American Data Exchange, SVI Corp, SPI Technologies, DAKSH eServices, The Environments Collaborative, Eximius BPO, BayanTrade Dotcom, etc…

  21. MEDICAL & LEGAL TRANSCRIPTION SERVICES As of 1st Quarter, 2006 (Medical Transcription) • Total MT Firms: 66 (57 medical/9 legal) • MT Professionals: 6,000 employed • Estimated Revenues in 2005: US$ 76 Million • With a Growth Rate for 2005: 80% • Performance Level: 98 – 99% accuracy rate with a turnaround time of 12 to 24 hour Key Players in the Country: eData Services, SPI Technologies, SVI Corporation, Medscribe Asia, Transkripsyo Inc., Total Transcription Solutions, Inc., Dictation Source, Pilipinas Data Contracts Corporation, etc…

  22. SOFTWARE DEVELOPMENT INDUSTRY As of 1st Quarter, 2006 • Software Development Companies: 300 • Total IT professionals: 14,000 • Estimated Revenues in 2005: US$ 204 M • With a Growth Rate for 2005: 40% Key Players in the Country: Accenture, Headstrong, Microsoft, IBM Solutions, Jupiter Systems, Oracle, ADTX Solutions, Gurango, Sun Microsystems, Intel Microelectronics, NEC, etc…

  23. ANIMATION INDUSTRY As of 1st Quarter, 2006 • Total animation studios in the country: 40 • Total Full Time Employees: 4,500 • Est. Revenues in 2005: US$ 40 Million • With a Growth Rate in 2005: 25% Key Players in the Country: Holy Cow! Animation, Artfarm Asia, Digital Exchange, Top Draw Animation, Toei Animation, Top Peg Animation and Creative Studio, Creative Asia, Geebo Digital, Toon City, etc…

  24. ENGINEERING DESIGN INDUSTRY As of 1st Quarter, 2006 • Total Number of Engineering Design Companies: 14 • Total Number of Full Tim Engineers: 2,800 • Estimated Revenues in 2005: US$ 48 Million • With a Growth Rate in 2005: 30% Key Players in the Country: Fluor Daniel, JGC Phils., Bechtel, Tsuneishi, Kajima Corp, Parsons, C & E Corp, EEI Corp, Eichleay Pacific, Inc., Hyundai Engineering, Foster Wheeler, Kellog, Brown & Root, Bouygues Construction, etc…

  25. IT & IT-enabled Services (Source: BOI-CICT-BPA/P) EMPLOYEES 2004 2005 2006 2007 2008 2009 2010 Customer Care 64,000 112,000 168,000 218,000 262,000 301,000 331,000 Back Office 15,000 22,500 36,000 61,000 110,000 187,000 299,000 Medical Transcription 3,000 5,000 9,000 17,000 34,000 68,000 122,000 Legal Transcription 300 450 675 1,013 1,519 2,126 2,764 Other Data Trans 2,000 3,000 4,000 6,000 8,000 10,000 13,000 Animation 2,800 4,000 6,000 10,000 17,000 27,000 41,000 SW Dev’t (Export) 10,000 12,000 16,000 22,000 33,000 50,000 75,000 Engineering Design 2,000 2,800 4,000 6,000 10,000 15,000 21,000 Digital Content 200 500 1,000 2,000 4,000 8,000 16,000 Workforce 99,300 162,250 244,675 343,013 479,519 668,126 920,764 PROJECTIONS FOR THE NEXT FIVE YEARS

  26. IT & IT-enabled Services REVENUES 2004 2005 2006 2007 2008 2009 2010 Customer Care 1,024 1,792 2,688 3,488 4,192 4,816 5,296 Back Office 120 180 288 488 880 1,496 2,392 Medical Transcription 42 70 126 238 476 952 1,708 Legal Transcription 4 6 9 13 20 28 36 Other Data Trans 26 39 52 78 104 130 169 Animation 52 74 111 185 315 500 759 SW Devt (Export) 170 204 272 374 561 850 1,275 Engineering Design 34 48 68 102 170 255 357 Digital Content 3 7 13 26 52 104 208 Revenues in US $ M $1,474 $ 2,419 $ 3,627 $ 4,992 $ 6,769 $ 9,130 $ 12,199 PROJECTIONS FOR THE NEXT FIVE YEARS

  27. SEIPI THE PHILIPPINE ELECTRONICS INDUSTRY - the driver of economy

  28. Marine Products - 1% Construction Materials - 0.49% Forest Products - 10% Home Furnishings - 1% Others - 2% Motor Vehicles and Parts - 1.74% Food - 2.9% Giftwares - 0.45% Wearables - 0.16% Organic Products - 0.18% Other Manufactured Products – 10% Machinery and Transport - 4.4% Mineral Products - 2.1% Garments and Textiles - 6% Others - 13% Agro-Based 49% Garments - 7% ELECTRONICS - 3% Mineral Products -18% ELECTRONICS 66% 1975 2006 SEIPI CHANGING FACE OF EXPORTS ….FROM COCONUT CHIPS TO MICROCHIPS

  29. ELECTRONICS - 66% OTHERS - 34% GARMENTS AND TEXTILES - 6.0% MACHINERY & TRANSPORT - 4.4% FOOD - 2.9% MINERAL PRODUCTS - 2.1% MOTOR VEHICLE/PARTS - 1.7% HOME FURNISHINGS - 1.0% MARINE PRODUCTS - 1.0% CONSTRUCTION MATERIALS - 0.5% ORGANIC PRODUCTS - 0.2% GIFTWARES - 0.2% WEARABLES - 0.2% OTHERS -13.0% EXPORTS OTHER THAN ELECTRONICS 34% ELECTRONICS EXPORTS 66% SEIPI 2006 PHILIPPINE EXPORTS 2005 TOTAL PHILIPPINE EXPORTS

  30. SEIPI HISTORICAL EXPORTS OF ELECTRONICS EXPORTS VALUE IN US$ BILLION Source: Tradeline Philippines

  31. SMS – 74% COMPONENTS AND DEVICES - 74.03% EMS – 26% COMPUTER REL.PROD./EDP – 20.17% CONSUMER ELECTRONICS – 2.07% AUTOMOTIVE ELECTRONICS – 1.45% COMMUNICATIONS AND RADAR – 0.98% OFFICE EQUIPMENT – 0.70% TELECOMMUNICATIONS – 0.59% CONTROL & INSTRUMENTATION – 0.06% MEDICAL AND INDUSTRIAL – 0.03% EMS 26% SMS 74% SEIPI CLASSIFICATION OF ELECTRONICS EXPORTS Source: Masterplan for Philippine Electronics Industry 1998

  32. TIPI Intel Philips Fairchild Analog Sanyo On Semi Rohm SEIPI THE TOP CHIPMAKERS Eight (8) out of the world’s top 30 chipmakers are operating in the Philippines

  33. FOUR OF THE LARGEST HDD PRODUCERS ARE IN THE PHILIPPINES Toshiba Fujitsu NEC Hitachi SEIPI THE WORLD’S TOP ELECTRONICS FIRMS

  34. SEIPI DESTINATIONS OF ELECTRONICS EXPORTS 2006 EUROPE - 19% US$ 5.1 Billion CHINA - 13% US$ 3.5 Billion USA - 13% US$ 3.3 Billion JAPAN - 18% US$ 4.8 Billion OTHER ASIA - 37% US$ 10.6 Billion Hongkong - US$ 2.8 B Singapore - US$ 2.1 B Malaysia - US$ 2.1 B Taiwan - US$ 1.4 B Korea - US$ 1.0 B Others - US$ 1.2 B Source: 2005 Exports - Bureau of Export Trade Promotion, DTI Source: Bureau of Export Trade Promotion, DTI

  35. SEIPI SILICON DESIGN AND DEVELOPMENT There is a budding silicon design and development industry in the Philippines • IC DESIGN: ASIC AND FPGA DESIGN, VHDL VERIFICATION (INTEL, ROHM LSI DESIGN PHILS., SANYO SEMICONDUCTOR, EAZIX, SYMPHONY, BITMICRO) • IC PACKAGING DESIGN: (TI PHILS., INC., FAIRCHILD SEMICON) • MODULE DESIGN, PRODUCT DESIGN (LEXMARK, EAZIX, BLUE CHIP) • FIRMWARE – EMBEDDED SYSTEMS HW/SW, EMBEDDED LINUX (CANON I.T., TSUKIDEN)

  36. Magnet Actuator Motors Base & Cover Spacer Ring Diodes Coils PCB/ PCBA Connectors ICs Carriage Assembly Plastic Molded Parts Resistors Capacitors Transistors Packaging Materials Metal Pressed Parts Magnetic Head Screws SEIPI A GROWING BASE OF SUPPLIERS FOR HDDS …SUPPLYING THE WORLD WITH 2.5 MILLION HDD PER MONTH

  37. DSPs Microprocessors Logic devices Analog devices Flash memory Opto devices Memory chips Power devices SEIPI TEST AND PACKAGING DESIGN Strong in assembly, test and packaging design for semiconductor manufacturing services… …CAPTURING 10% OF THE SMS WORLD SUPPLY

  38. SEIPI COMPETITIVENESS OF THE INDUSTRY CRITICAL MASS OF GLOBAL PLAYERS

  39. Others Malaysia 8% 2% Singapore 2% 912 Firms Philippines Taiwan 28% 4% NATIONALITY: 72% Foreign 28% Filipino Europe 7% US 9% Korea Japan 10% 30% SEIPI COMPANIES IN THE ELECTRONICS INDUSTRY Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA)

  40. SEIPI COMPETITIVENESS OF THE INDUSTRY PEOPLE

  41. SEIPI EMPLOYMENT IN THE ELECTRONICS INDUSTRY Over 400T engineers, technicians and operators Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA)

  42. SEIPI EXPORTSOF ELECTRONICS INDUSTRY YEAR EXPORTS (in US$) GROWTH RATE % TO RP EXPORTS 3.78 B 4.89 B 7.55 B 10.61 B 14.98 B 19.87 B 25.34 B 27.07 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 1992 2.97 B 20 % 28 % 2001 21.60 B -20 % 68 % 2002 23.76 B 10 % 69 % • 24.17 B 2 % 68% • 2004 26.64 B 10 % 68% • 27.30 B 2.3% 67% • 30.00 B 10 % 66% Source: Bureau of Export Trade Promotion, DTI

  43. SEIPI INVESTMENTS IN THE ELECTRONICS INDUSTRY 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 • 2003 230 M • 443 M • 776 M • 747 M Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA)

  44. SEIPI TARGETS OF THE ELECTRONICS INDUSTRY TARGETS EXPORTS (US$) YEAR INVESTMENTS (US $) 24.26 B 24.60 B 26.64 B 27.30 B 30.00 B 33.00 B 11% 2% 11% 2.3% 10% 10% 2002 2003 2004 2005 2006 2007 230 M 270 M 443 M 776 M 747 M 1.000 B

  45. SEIPI CHALLENGES OF THE INDUSTRY our industry has always been cyclical but in an upward direction this has not changed therefore we must continue to do the right things to prepare for our future success knowing that adversity always transcends unique opportunities it is up to us to make the most of it TARGETS EXPORTS (US$) YEAR

  46. SEIPI GLOBAL CHALLENGES • global fundamentals are still there • and supports a continued long term • worldwide economic expansion • world peace • trends towards freer trade • growing global communications enhancement • accelerating pace of technological developments TARGETS EXPORTS (US$) YEAR

  47. SEIPI TEN YEARS OF ITA THE ITA AND ITS ROLE IN THE ECONOMIC DEVELOPMENT OF COUNTRIES THE RAPID PACE OF TECHNOLOGY INNOVATION THE CHALLENGES AHEAD TARGETS EXPORTS (US$) YEAR

  48. SEIPI END Some men see things as they are and say, why? I dream things that never were and say, why not? TARGETS EXPORTS (US$) YEAR

  49. SEIPI END END TARGETS EXPORTS (US$) YEAR

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