Philippines set to become manufacturing hub as expansion shifts from China

Record-high $49.1b in electronics exports in 2022 set to attract more investors.

Manufacturers are now looking towards expanding beyond China and the Philippines is emerging as a potential hub for operations.

JLL, a global real estate company, states that companies are diversifying their manufacturing locations across India and Southeast Asia, including the Philippines, to offset supply chain disruptions in China.

China has dominated global manufacturing for decades. However, JLL noted that companies are " increasingly diversifying their operations elsewhere, adding manufacturing bases outside of China to hedge against supply chain disruptions."

Rising costs in China, the firm said, have pushed manufacturers to expand to other countries, with land prices in China being up to twice higher than in Southeast Asian countries and India.

Michael Ignatiadis, JLL Asia Pacific head of manufacturing strategy stated that diversification within supply chains is a natural step for companies involved in manufacturing within the wider economic lifecycle of Southeast Asia and India.

The Philippines, in particular, has caught the attention of the US with its inclusion in the CHIPS Act, which aims to expand and diversify the semiconductor supply chain such as integrated circuits, RF/microwave, and assembly and testing services.

JLL also noted the record-high of $49.1b in electronics exports in 2022, including consumer and industrial electronics, as well as telecommunication equipment.

The firm, however, said that the manufacturing sector should make a careful evaluation of non-cost or qualitative factors when deciding to diversify.

Skilled labour, infrastructure, environmental regulations, proximity to suppliers and political stability are all crucial for long-term success and sustainability in manufacturing operations.

Peter Guevarra JLL Asia Pacific director and research consultancy said that each economy in Southeast Asia is at a different level of its manufacturing storey.

"But we can confidently say that policymakers are extremely keen to take advantage of diversification initiatives of supply chains," he stressed.

Companies must also carefully evaluate various factors such as costs, market access, infrastructure, labour and governmental support before making investment decisions.