Electronics outlook worsens

FULL-YEAR electronics exports could contract by more than 5% given slow consumption in troubled Western markets, an industry official yesterday said.

The Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) will be meeting this week for what could possibly be a second revision of its 2011 outlook, currently at -5% after starting out at 8-12%.

“[The possible forecast] would be -5% or higher” SEIPI President Ernesto B. Santiago told BusinessWorld in a text message.

Electronics sales fell by an annual 21.3% to $2.25 billion in July. While a 2% gain from June was seen as indicating Japan’s steady recovery and a parts supply volume pick-up, aggregate electronic shipments in the first seven months of 2011 were still down 12.6% to $14.89 billion.

“The second half is still going to be better than the first half, but the problem is that the second half last year was considered the highest growth of the industry, so even if the second half improves, we’d still post a negative growth — not even a slower positive,” the SEIPI chief later explained in a telephone interview.

Accounting for 65.5% of gross export sales, the sector grew by 54.6% to $3.48 billion in September 2010 from a year earlier.

The sovereign debt crises in the United States and the European Union, said Mr. Santiago, were playing a key role as cash-strapped households were holding out from buying gadgets.

“Japan remains an issue, but shipments of parts are back to normal. The volume is still lower, because there is less consumer spending,” he added.

“We’re meeting this week to review our industry performance and target because of this.”

Economists shared the same outlook, noting that shipments and production lined up for the holidays are normally done between July and September.

“A -5% might even be on the high side given [electronics exports earnings were] -12% for January to July. While things usually pick up in the third quarter, it might not be enough,” said Peter Lee U, economics dean at the University of Asia and the Pacific, in a text message.

Benjamin E. Diokno, University of the Philippine economist and former Budget secretary, said in a separate text message: “Given recent developments, a -5% full-year growth rate is going to be difficult. Fourth quarter is just around the corner. By this time, exporters should be delivering goods for the holidays.”

Philippine exports as a whole contracted for a third straight month in July, by 1.7% to $4.43 billion, although the seven-month tally was still up by 3.3% to $29.19 billion.

Industry officials said the result necessitated a review of the 10% export growth target, with the head of the Philippine Exporters Confederation, Inc., Sergio R. Ortiz-Luis, Jr., saying that electronics exports would have to grow by at least 10% to offset a negative first half.

“They have to perform well so they will not be a baggage to other [export industries]” he said earlier this month. — E. J. Diaz, Businessworld