In Philippines, Blinken goading semiconductor industry to kill two birds with one stone

United States Secretary of State Antony Blinken on Tuesday arrived in the Philippines. One of the first things he did is head to the facility of a semiconductor packaging, design, and testing services provider company, Amkor Technology.

“There’s a long-standing partnership between the United States and the Philippines when it comes to semiconductors. We have companies that have been here, working here, investing here, for many, many years[…]We continue to look for ways to strengthen even more the partnership between our countries. The Chips (and Science) Act has significant funds the State Department is responsible for, to make further investments in partner countries to build their capacities,” he said.

That is a calculated move on the part of the US.

Two birds with one stone for the US

Blinken’s meeting with Filipino President Ferdinand Marcos, Jr., and Secretary of Foreign Affairs Enrique Manalo is about deepening the US’ ties with the Philippines, a key ally of Washington. Simultaneously, it is also about countering the influence China has over the country owing to its economic engagement with Manila.

The semiconductor industry in the Philippines can be a lynchpin for not just these goals, but also serve the US well in securing its supply chain for various industries that rely on chips.

Greater economic integration to counter China

The US’ push for greater investment in the semiconductor industry in the Philippines comes after multiple warnings from government officials and analysts. They have pointed out that the US is missing from regional trade deals, while China is aggressively forging ahead with them.

No wonder Washington is having a hard time countering Beijing’s deep influence in Southeast Asia, where the economies of several nations are deeply intertwined with that of China. There are calls for Washington to ramp up its economic engagement and military and security co-operation with its allies in Asia to match up.

Securing US’ chips supply chain

Under President Joe Biden, the US government has been trying to diversify its supplier base for semiconductors, and reduce its dependence on a handful of producer nations in Asia.

That attempt has become even more important in light of the China-Taiwan tensions escalating.

The self-governing island territory of Taiwan, which China claims as its own, is home to the world’s largest semiconductor manufacturer, Taiwan Semiconductor Manufacturing Co (TSMC). Along with South Korea, Taiwan produces most of the world’s most advanced semiconductors. In contrast, mainland China supplies a significant number of more mature legacy chips.

Why focus on the Philippines?

The electronics sector has played a vital role in the Philippine economy since the 1970s and serves as the backbone of the country’s export industry. Although the Philippines isn’t the leading exporter of any particular semiconductor product category, it is renowned for having a substantial number of semiconductor assembly and testing facilities.

The country has 13 back-end semiconductor plants that specialise in assembling, testing and packaging chips that are manufactured elsewhere.

The US’ ongoing efforts

Just a week ago, the US commerce secretary Gina Raimondo has called for doubling the capacity the Philippines currently has. That appeal came at the heel of 22 US-headquartered companies like Microsoft and Unite Airlines pledging fresh investment worth $1 billion in the country.

The Philippines is one of the six nations that US will be supporting under the CHIPS Act. Last month, it was announced that the US International Development Finance Corporation would establish a more permanent presence in the Philippines. This came with the announcement of both the nations forging a strategic collaboration in the semiconductors space.

With inputs from agencies