The Stratbase Brief is a monthly analysis of issues beyond the news cycle. It provides critical context for understanding the various issues and developments shaping the Philippine political, economic, and business environment.

This month’s Stratbase Brief features insights from Mr. Roberto F. Batungbacal – the co-chair of Amcham’s Manufacturing Committee, Director of the Federation of Philippine Industries, Vice President for Industry Development of SteelAsia Manufacturing Corporation, and convenor of the Philippine Manufacturing Team – as well as from development economist Ms. Bernice Marie A. Batungbacal, on the opportunities and implications of the Philippines’ participation in Pax Silica.

The Philippines’ recent entry into Pax Silica, a 32-member initiative built on semiconductor-electronics and critical minerals offers a potential “Samsung moment” like Vietnam’s, where one anchor investor catalyzed broader industrial transformation. The piece argues the Philippines must actively negotiate local sourcing, technical assistance, and technology-transfer terms now, while the framework is still being written, and points to spillover opportunities across construction, input materials, minerals processing, and industrial workforce reintegration — urging the country to “step up, not step off” and treat Pax Silica as a catalyst for its own industrialization.

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It’s been a few months since the Philippines formally joined Pax Silica. There’s been a flurry of activities in the government and business sector, but it cannot compare to the lively public debate warranted by such an important initiative. This is our contribution to that debate, our local industrial perspective on Pax Silica, which we perceive as a catalyst for our nation’s continuing industrialization and long-term development.

The Philippines is one of 32 member countries of Pax Silica. Each country has different interests and contributions. Our contribution to Pax Silica is mainly in the manufacture of semiconductor-electronics and critical minerals. These two sectors have outsized opportunities in the new global trade pattern.

Why the Philippines. The semiconductor-electronics sector has been the leading export of the Philippines since 1981. Based on UNIDO data, the Philippines’ share of medium- and high-tech manufactured exports in total manufactured exports is the highest in the world at 81%. The Philippines also has decades-long experience working with global semiconductor and electronics companies.

The Philippines is among the world’s most mineralized countries and remains the world’s largest exporter of nickel ore and the second-largest producer globally. With substantial reserves of copper, nickel, cobalt, and other critical minerals, the country plays a vital role in global supply chains for clean energy, electric vehicles (EVs), and semiconductors.

Because of decades-long operating experience in these two sectors, the Philippines has a huge pool of industrial talent working in the country, as well as abroad in Taiwan, Japan, and Korea, working in some of the world’s largest semiconductor and electronics companies. However, both sectors have limited integration with domestic industries. Semiconductors and electronics operate in industrial enclaves while our critical minerals are almost entirely for the export market, whereas the larger manufacturing subsectors of the Philippines, such as food and beverages and chemicals and chemical products manufacturing, are more integrated with the rest of the economy. Growing these electronics and mineral sectors, vertically and horizontally, has been challenging, especially since China has dominated both sectors across the value chain. We need a catalyst to overcome these constraints on our industrialization.

Is Pax Silica the Philippines’ “Samsung moment”? It could very well be. Vietnam offers a preview of what that moment could look like. When Samsung broke ground on its first Vietnamese plant in 2008, it was a USD 670 million bet on a country still finding its footing after joining the World Trade Organization the year before. That bet grew quickly: Samsung added USD 2 billion in 2013, another USD 3 billion the year after, and by 2018 Samsung’s cumulative investment had reached USD 18 billion. Today, its Vietnam operations generate USD 65 billion in revenue – roughly 13% of the entire country’s GDP. What makes this more than just Samsung’s success story is what happened to Vietnamese manufacturing as a whole over that same stretch. In 2008, Vietnam trailed its ASEAN neighbors – Thailand, Malaysia, Indonesia, and the Philippines – in manufacturing’s share of its economy. By 2024, it led all of them.

That shift was not Samsung’s doing alone, but its decision to invest gave other players a reason to take Vietnam seriously. A single credible anchor investor makes the next one’s decision easier: LG, Panasonic, Foxconn, and Intel all built major Vietnam operations within a few years of Samsung’s entry. A similar story could unfold in the Philippines with Pax Silica.

But turning that investment into real, lasting industrial capability took deliberate effort. For several years, Samsung ran a closed, import-heavy operation because local suppliers could not meet its standards. That was until Samsung launched its own Consultation Program in 2015, training local vendors on quality and delivery. From there, real domestic supply chains began to take shape, and Vietnamese suppliers multiplied. Nobody negotiated that diffusion plan into the original deal; Samsung built it late, because it needed to. The Philippines should not wait years for its own version to happen by accident. Pax Silica’s terms are still being written – this is the moment to negotiate local sourcing requirements, SME technical assistance, co-funded training pipelines, and technology-transfer terms.

Is Pax Silica our China+1 opportunity? Again, yes. Since the start of the global trade war, we’ve always been waiting for our friend-shoring or ally-shoring opportunity – but it has gone to Vietnam, a country that has been de-risked for investment because Samsung led the way 20 years ago. But now, there’s more. Vietnam, while it continues to attract record investments, is now seen as a diversion channel for China. Pax Silica members are looking for like-minded partners like the Philippines.

A catalyst to the Philippines’ continuing industrialization. Philippine manufacturing continues to thrive – recently exceeding PHP 4 trillion in value added, growing at an average annual rate of +6.2% (current prices) over the last 20 years – but it’s not growing fast enough to sustain our climb to upper-middle income and beyond. That is why Pax Silica is a much-needed initiative to catalyze the two manufacturing sub-sectors that face huge global opportunities in this new polarized world, and require huge capital and global investors with such capabilities.

Building Pax Silica. The Pax Silica initiative is a new opportunity for the country’s building and construction sector during the build-out of high-quality infrastructure, roads, freight rail, ports, energy, factories and offices, data centers, power plants, and water utilities. Domestic steel, cement, and other building materials gain a new market for the sector, currently dampened by a slowdown in real estate and infrastructure construction – a new market that raises industrial capacity, robust and long-term. As part of the Luzon Economic Corridor, the opportunity goes beyond the Pax Silica site, extending to other major industrial centers in Central and Southern Luzon.

Operating Pax Silica. Once operational, these semiconductor and electronics factories will require a lot of input materials, boosting the chemical, metallic, and non-metallic industries and a wide range of others. These include inorganic and organic chemicals, industrial gases, acids, slurries, specialty solvents, metals, laminate boards, wires, components, and packaging – many of which have been manufactured in the Philippines at one time or another – while new, high-end input materials can be manufactured and/or accessed from our Pax Silica partners, including highly specialized material suppliers from Japan, Korea, and Taiwan.

On minerals processing, we’ve been operating PASAR, the first copper refinery in Southeast Asia and HPAL units of Taganito and Coral Bay for decades. So the capabilities are there, and now there are opportunities to serve an alternative supply chain with like-minded countries. As the second largest nickel producer, we are well aware of Indonesia’s dramatic increase in export value from USD 3-6 billion in nickel ore to USD 30-33 billion in processed nickel. Furthermore, their domestic nickel processing attracted the world’s largest stainless steel producers to invest USD 7 billion in their country.

On industrial talent, we should leverage our existing industrial workforce plus tap our OFWs to fast-tracks our domestic capabilities. This part is not theoretical; it is actually happening today in another industry, steel. As the country’s steel sector modernizes, returning OFWs from the Middle East are now being hired and reintegrated by SteelAsia to build and operate some of the most modern steel mills in the world, right here in the Philippines. Manufacturing is more inclusive than other sectors, with proper training, it can provide decent jobs for workers with limited access to formal education. We cite the case of SteelAsia Academy, whose tech-voc program has trained and hired hundreds of young workers from Indigenous communities, including the Aeta, Dumagat, and Remontado, now working in world-class steel plants across the country.

Industrial Policy. The opportunity comes at the right time with the growing acceptance of industrial policy in the Philippines, with new laws such as Tatak Pinoy, the new Strategic Investment Priority Plan, the new Government Procurement Law, and CREATE MORE allowing greater participation from both global and domestic private investors, with the strategic support of the Philippine government.

Pax Silica is probably the most ambitious industrial project that the Philippines will embark on in recent decades; the same can be said for the US and other Pax Silica member countries. With ambition come a lot of challenges – in manpower, infrastructure, finance, and industrial capabilities. But now is the time to “step up, not step off.” Let’s do our part as one of the Pax Silica countries, but more importantly, let’s do it for our own industrialization and long term development.

This was written by Mr. Roberto F. Batungbacal, co-chair of Amcham’s Manufacturing Committee, Director of the Federation of Philippine Industries, Vice President for Industry Development of SteelAsia Manufacturing Corporation, and convenor of the Philippine Manufacturing Team, as well as from development economist Ms. Bernice Marie A. Batungbacal.