Philippines Scores One Over China

♠ Posted by Emmanuel in , at 5/04/2007 09:22:00 PM
Texas Instruments, the world's largest maker of cell phone chips, has chosen to build its new $1B chip plant in the Philippines after also considering China, Vietnam, and Thailand. As you would expect, this story is mainly about input costs. The first article from the WSJ suggests that rising land and labor costs in China are leading firms to look elsewhere:
Texas Instruments' decision to build another semiconductor testing and assembly plant in the Philippines may also reflect how rising costs in China are encouraging investors to consider other locations.

Land prices on China's industrial coastal belt are rising, and wages have been seeing double-digit growth for several years -- bringing them closer to, and in some cases, higher than -- the cost of hiring skilled workers in countries such as the Philippines. Intel is also increasing its investments outside China, partially to secure its global supply chains in case of disruptions from any one location. Intel announced plans earlier this year to build a $1 billion chip-testing and assembly plant in Vietnam, and has also increased its investments in Malaysia.

Plus, here is the WSJ again citing a possibly resurgent Philippine economy. This piece even suggests that the Philippines might show the way to beat China in attracting FDI (!):
After years in which manufacturers of all stripes have been scrambling to locate plants in China, Texas Instruments Inc.'s decision to build its new $1 billion assembly plant in the Philippines instead, after shortlisting the two countries in a head-to-head contest, might be a sign of things to come as other countries learn how to best China, especially as the costs of setting up there grow.

As James Hookway reports, the move both highlights the Philippines's economic revival and challenges the conventional view that China is Asia's most cost-effective factory floor. Land prices on China's industrial coastal belt are rising, and wages have been rising at double-digit rates for several years, in some cases now even exceeding the cost of hiring skilled workers in countries such as the Philippines.
Reuters adds more color to the story from the Philippine boosters:

"We have broken the myth of China here," said Ernie Santiago, executive director of the Semiconductor and Electronics Industry in the Philippines, Inc. (SEIPI).

"It seemed before all roads are going to China, but we have made a point here that the Philippines is also a smart choice for investment.

"It will be a magnet, we expect other companies would follow," he said.

Foreign direct investment in the Philippines was only $2.35 billion in 2006, dwarfed by almost $70 billion in China.