Julia Christine Botin

Article (news)

Raine Musñgi

ABS-CBN News

<div><br/></div><p>MANILA — A global reshuffling of supply chains could hand the Philippines its biggest manufacturing opportunity in decades, but turning that opening into long-term growth will require far more than attracting new factories.</p><p>According to McKinsey &amp; Company Philippines Managing Partner Jon Canto, the bigger challenge is helping the country move beyond low-value production and become a more competitive player in regional and global supply chains.</p><p>&quot;Pax Silica is an outcome of geopolitics and the shifting supply chains and economic hubs. It&#x27;s an opportunity,&quot; Canto said during an interview on ANC&#x27;s Market Edge. &quot;It moves in the right direction in terms of how we build advanced manufacturing capability in the country. We need to evaluate it and move forward with caution, but also ambition.&quot;</p><p>The comments come as multinational companies diversify manufacturing locations amid geopolitical tensions and governments across Asia compete for investments linked to semiconductors, electronics and other strategic industries.</p><p>The Philippines recently joined the World Bank&#x27;s upper middle-income economies, but Canto said reaching high-income status will require a different economic playbook.</p><p>&quot;We&#x27;ve come so far with a consumption-led, domestic-driven and inclusive growth model,&quot; he said. &quot;The question is, is that the right model to take us forward to high-income status?&quot;</p><div><span class="fr-video fr-deletable fr-fvc fr-dvb fr-draggable" contenteditable="false" draggable="true"><iframe width="640" height="360" src="https://www.youtube.com/embed/0mqVFUJy4Wo?&amp;wmode=opaque&amp;rel=0" frameBorder="0" allowfullscreen="" class="fr-draggable"></iframe></span><br/></div><p>Instead, McKinsey believes the country must make what Canto described as a &quot;hard pivot&quot; toward export-led, productivity-driven growth anchored on manufacturing, agriculture, tourism and higher-value IT-BPM services.</p><div><strong>Beyond assembly</strong></div><p>One of the biggest opportunities lies in semiconductors.</p><p>The Philippines remains a key player in assembly, testing and packaging, or ATP, but that segment captures only about 10 percent of the semiconductor industry&#x27;s total value, according to Canto. He said the country needs to climb the value chain by developing advanced packaging, chip design and other higher-value capabilities if it hopes to generate larger economic gains.</p><p>The Department of Trade and Industry has likewise identified semiconductors and electronics as priority industries under its industrial strategy, while the Philippine Development Plan aims to strengthen manufacturing as a driver of jobs, exports and investment.</p><div><strong>Productivity will matter more than headline GDP</strong></div><p>Canto also challenged the tendency to judge the economy mainly through quarterly GDP growth.</p><p>&quot;If you look at the last 35 years, only 10 percent of our growth has come from productivity,&quot; he said. &quot;Going forward, to get to high-income status, 50 percent of the growth needs to come from productivity.&quot;</p><p>That means generating more output not simply by hiring more workers or adding more capital, but by improving technology adoption, management practices, innovation and artificial intelligence across industries.</p><p>McKinsey estimates the Philippines would need to sustain annual economic growth of 6 to 7.5 percent over roughly two decades to achieve high-income status by 2045 to 2050.</p><div><strong>Exporting value instead of effort</strong></div><p>Canto said the Philippines should rethink not only how much it exports, but also what it exports.</p><p>Rather than shipping raw agricultural commodities overseas, he said the country should process and brand more products locally before selling them abroad.</p><p>&quot;We need to go from simply exporting the basic raw materials to processing that in the country, branding these under &#x27;Made in the Philippines,&#x27; then exporting them. That gives us higher value.&quot;</p><p>The same principle applies to manufacturing and services. Instead of relying heavily on semiconductor assembly and routine voice-based outsourcing, the country should pursue advanced manufacturing, engineering, AI-enabled services and higher-value digital capabilities.</p><div><strong>The next chapter</strong></div><p>For decades, household spending has been the backbone of Philippine economic growth. Canto believes that strength should remain, but says it will no longer be enough on its own.</p><p>The next phase, he argued, depends on whether the country can become more productive, more innovative and more globally competitive.</p><p>&quot;I think we have a very short window of opportunity for the Philippines,&quot; he said. &quot;While things are still in flux, we have an opportunity to put our stamp on where the Philippines plays and what we want to be known for in this decade.&quot;</p>

Pax Silica is opportunity for PH to rebuild, upgrade manufacturing—McKinsey

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Pax Silica is opportunity for PH to rebuild, upgrade manufacturing—McKinsey

Raine Musñgi,

ABS-CBN News

Published August 14, 2026 03:14 PM PHT

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Pax Silica

Philippine manufacturing

semiconductors

McKinsey

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