Cheyenne Suarez

Can Pax Silica help the Philippines move up the semiconductor value chain?

Article (news)

Raine Musñgi

ABS-CBN News

MANILA — Can the Philippines use the global artificial intelligence boom to build a stronger manufacturing sector -- or will it remain a supplier of raw materials and low-value assembly work while other countries capture the biggest gains?<div><a href="https://www.abs-cbn.com/news/business/2026/4/17/ph-us-to-build-economic-security-zone-in-luzon-1013" rel="noopener noreferrer" target="_blank">Philippines, US to build &#x27;economic security zone&#x27; in Luzon</a></div>That question is at the heart of a growing debate over Pax Silica, a US-backed initiative that seeks to build more secure supply chains for semiconductors, artificial intelligence infrastructure, critical minerals, and advanced manufacturing.While critics have raised concerns about transparency, industrial policy, and the country&#x27;s role in global supply chains, industry leaders and government officials argue the initiative could help the Philippines attract investments, create jobs, and move higher up the technology value chain.For Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Dan Lachica, the issue goes beyond geopolitics.The real question, he says, is whether the country can position itself to benefit from the industries expected to drive global growth over the next decade.<div>&#x27;We&#x27;re already dependent today&#x27;</div>Lachica pushed back against claims that Pax Silica would make the Philippines more dependent on foreign supply chains.Instead, he argued that the country&#x27;s electronics industry is already heavily reliant on imported materials and components.&quot;We&#x27;re dependent on imported materials as it is today. For our industry, we are dependent on countries like China for imported materials.&quot;The Philippines&#x27; electronics sector accounts for more than half of the country&#x27;s merchandise exports and is approaching the $50-billion mark in annual exports, according to SEIPI.Yet much of the industry remains concentrated in assembly, testing, and packaging operations, with key materials and higher-value manufacturing processes taking place elsewhere.For Lachica, supply-chain diversification is exactly what initiatives such as Pax Silica are trying to address.&quot;It would be nice to be a little more independent, develop alternate supply chains.&quot;He pointed to lessons from the COVID-19 pandemic, when factory shutdowns and port closures disrupted manufacturers across the region.&quot;During the pandemic, we shut down the industry because the ports in China were closed.&quot;<div>Government: It&#x27;s about resilience, not conflict</div>Earlier, Defense Secretary Gilberto Teodoro Jr. also rejected claims that Pax Silica is primarily tied to military objectives.<div><a href="https://www.abs-cbn.com/news/nation/2026/4/24/us-led-pax-silica-for-resilience-industrialization-not-war-teodoro-1355" rel="noopener noreferrer" target="_blank">US-led Pax Silica for resilience, industrialization not war – Teodoro</a></div>Speaking in a separate ANC interview, Teodoro described the initiative as an effort to strengthen economic resilience and secure access to critical technologies regardless of geopolitical tensions.&quot;It is definitely not a war-driven imposition. It is a resilience imposition.&quot; &quot;Whether there is a war or not, the supply of what we need is being secured.&quot;Teodoro said participation in semiconductor, advanced manufacturing, and critical minerals supply chains could support long-term industrialization while reducing vulnerabilities exposed by recent global disruptions.The Philippines formally joined Pax Silica in <a href="https://www.abs-cbn.com/news/business/2026/5/20/us-official-in-ph-inspects-future-ai-industrial-hub-1309" rel="noopener noreferrer" target="_blank">April</a>, becoming the 13th member of the coalition, which seeks to establish trusted supply chains for semiconductors, artificial intelligence technologies, critical minerals, and other strategic industries.<div>Not everyone is convinced</div>The initiative has also become a flashpoint in a broader debate about Philippine industrial policy.The Makabayan bloc, including former ACT Teachers Representative Antonio Tinio, former Gabriela Representative Sarah Elago, and former Kabataan Party-list Representative Raoul Manuel, has called for congressional scrutiny of Pax Silica and related critical minerals arrangements.The group has raised questions about transparency, environmental safeguards, incentives, and the country&#x27;s place in the emerging semiconductor ecosystem.The lawmakers argue that without a clear national industrial strategy, the Philippines could remain concentrated in lower-value activities such as assembly, testing, and packaging while higher-value semiconductor design, research, and advanced manufacturing remain overseas.They have also sought clarification on whether facilities associated with the initiative could have dual-use applications that support both commercial and security-related functions.Meanwhile, the science advocacy group AGHAM has argued that science and technology policy should prioritize domestic industrialization, climate resilience, public health, food security, and civilian technological development.The organization has cautioned that technology initiatives should ultimately strengthen national scientific capabilities and not simply respond to geopolitical competition among major powers.<div>A high-stakes economic bet</div>Supporters of Pax Silica argue that the initiative presents a rare opportunity for the Philippines to secure a larger role in industries expected to shape the future global economy.The Bases Conversion and Development Authority is proposing a 4,000-acre, or roughly 1,619-hectare, Economic Security Zone in New Clark City that could serve as the first physical hub under the Pax Silica framework.The site is envisioned as a center for semiconductor manufacturing, artificial intelligence infrastructure, critical minerals processing, advanced manufacturing, research, and technology development.Government officials have said the project complements the broader Luzon Economic Corridor initiative linking Clark, Subic, Manila, and Batangas through logistics, infrastructure, and industrial investments supported by the Philippines, the United States, and Japan.The Marcos administration has previously cited projections of up to one million jobs from investments associated with the broader Luzon Economic Corridor and related industrial projects.The debate comes at a critical time for the Philippine electronics industry. According to Lachica, the sector grew by 16 percent last year and is approaching the $50-billion export mark, driven in part by rising global demand for AI-related infrastructure and electronics components.Lachica has also pointed to Vietnam&#x27;s experience as a reminder of what is possible. Vietnam&#x27;s electronics exports have grown to roughly $100 billion in just over a decade, while the Philippines is only now approaching the $50-billion mark despite having a much longer history in electronics manufacturing.<div>The bigger challenge: Moving up the value chain</div>For Lachica, the success or failure of Pax Silica should ultimately be measured not by the politics surrounding it, but by whether it helps the Philippines move beyond its traditional role in the global electronics industry.The country&#x27;s biggest challenge, he says, is capturing more value from the semiconductor supply chain—from design and advanced manufacturing to technologies that power artificial intelligence systems.&quot;It will certainly help to, one, localize these materials, and two, find alternates, and even better, to be able to produce some of those in the Philippines.&quot;&quot;That will generate employment, that will generate investments to boost the economy.&quot;For supporters, Pax Silica represents a chance to secure a place in the industries expected to power the next decade of economic growth.Critics, meanwhile, argue that the country must ensure those investments translate into genuine industrialization rather than another cycle of dependence on foreign technology and imported inputs.What both sides agree on is that the decisions made over the next few years could shape the future of Philippine manufacturing for decades.Catch the full interview with Dan Lachica on Market Edge, exclusively on the ABS-CBN News Channel.<div><iframe width="640" height="360" src="https://www.youtube.com/embed/HrwlQAH1yy8?&amp;t=507s&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe> </div>

Can the Philippines use the global artificial intelligence boom to build a stronger manufacturing sector -- or will it remain a supplier of raw materials and low-value assembly work while other countries capture the biggest gains?

Can the Philippines use the global artificial intelligence boom to build a stronger manufacturing sector -- or will it remain a supplier of raw materials and low-value assembly work while other countries capture the biggest gains?