Electronics exports face headwinds as prices soar

MANILA, Philippines — The electronics sector, the country’s top export, is facing headwinds in the near-term amid price pressures due to global tensions and the economic slowdown in China.

In its weekly economic preview, New York-based financial intelligence firm S&P Global said the electronics industry in Asia-Pacific is being challenged by several factors.

Electronics is the Philippines’ top export, accounting for almost 60 percent of total receipts.

Latest data showed that the country‘s dollar earnings from electronic products barely moved at 0.8 percent to $3.25 billion in April.

This has been a dismal increase compared to the 8.2 percent rise in January, 15.1 percent jump in February and the 8.1 percent expansion in March.

Rajiv Biswas, S&P Global Market Intelligence chief economist for Asia-Pacific, said the protracted lockdown in China in the past months has hit consumer demand.

China remains the top export destination for the Philippines with $972 million or 15.9 percent of total exports in April.

“The global electronics industry has experienced some moderation in growth momentum during recent months. This reflects a number of headwinds related to both demand and supply factors,” Biswas said.

“Tighter COVID containment measures have contributed to weaker consumer demand in China. The industry also continues to struggle with lengthy supplier delivery times for some components and raw materials, as well as pricing pressures for critical materials,” he said.

The electronics manufacturing industry is an important part of the manufacturing export sector for many Asian economies, including South Korea, mainland China, Japan, Malaysia, Singapore, Philippines, Taiwan, Thailand and Vietnam.

Manufacturers are also facing intense cost pressures on raw material prices and supplier fees.

Biswas said there have been widespread reports of increasing raw material prices due to substantial supply and demand imbalances.

Plastics, chemicals, electronic components, metals, energy and oil were all widely cited by firms as sources of rising input prices.

Despite the headwinds, Biswas emphasized that the prospect for the electronics industry is for continued expansion.

Lengthy production backlogs for some key electronics products, notably semiconductors, will be an important factor supporting electronics output during the second half of the year.

Biswas noted that the pandemic continues to accelerate the pace of digital transformation due to the global shift to working remotely, which in turn boosts demand for electronic devices such as computers, printers and mobile phones.

He said the medium-term economic outlook is still supportive for the electronics industry, with a sustained strong world economic growth forecast until 2024.