Innovative thinking is one of the many hurdles to overcome when it comes to the local electronics manufacturers in the Philippines, according to Earl Qua, president of the Electronics Industry Association of the Philippines Inc. (EIAPI).

“The mindset of creating IP is not ubiquitous. It is a very exotic, extremely risky venture. Even if you did get it across the design phase, people view Philippine technology somewhat not at par with the rest of the world. So, there are some psychological barriers as well, both internally and externally,” says Qua. “In the design industry, the bench is not that deep. Part of the reason for that is because for engineers to be good at design, it is an experiential thing. If you are not practicing design or experienced in designing, it inhibits you from becoming a better engineer.”

And that is one of the initiatives of the Electronics Product Development Center (EPDC), a project initiated by EIAPI, funded by the Department of Science and Technology–Philippine Council for Industry, Energy and Emerging Technology Research and Development (DOST-PCIEERD), and implemented by the Advanced Science and Technology Institute (ASTI), an agency under the DOST mandated to undertake R&D activities aimed at strengthening and modernizing the country’s information and communications technology and microelectronics.

The EPDC is the country’s first electronics design facility that will provide design, prototyping, and testing facilities for printed circuit boards (PCB). It is staffed with professionals who have more than 100 accumulated years in the industry.

“We have different facilities that enable us to be a one-stop shop for any Filipino entity—be it a school, a company, or entrepreneur—if they have a product concept but they don’t have the technical capability to design, test, or prototype it, this is a one-stop shop for them,” says Qua. “An entrepreneur who, for example, has a product idea but does not have an engineering background, or electronics/electrical engineering background. They can come here and work with the design industry to conceptualize the product, prototype the product, get it tested, and make it ready for primetime. Or for the use of SMEs and schools that cannot afford to purchase the tools and equipment that the facility provides. It’s a resource for the Philippines to inclusively enhance its technological capability. We want to help bridge that gap by creating a center like this so that we can enhance the design capability of the country.”

Smarter Manufacturing

Another trend right now is the move towards Industry 4.0, towards a smart manufacturing environment enabled by technologies such as sensors, data, and analytics. These, implemented properly, will help transform manufacturing processes and take production to the next level.

Earl Qua smart factory

Earl Qua, President of the Electronics Industry Association of the Philippines Inc.

Qua, who is also the vice president at Ionics EMS, an electronics manufacturing service (EMS) provider in the Philippines, spearheaded the smart factory program of the company. “We started interconnecting different machines and created a digital twin of the factory, where every aspect of operations can be viewed online or from a single enterprise room. That was an initiative that I started within Ionics, and that proved to be quite effective in terms of efficiency,” he says.

But it is a double-edged sword, according to Qua. “While Industry 4.0 increases your efficiency significantly, the effect is that we are minimizing dependency on the labor side. And manufacturing in the Philippines, as it is today, is primarily based on a labor arbitrage business model, cheaper labor. As the degree of freedom of automation increases, the reliance on labor decreases, a threshold will be reached to a point where labor will no longer be needed. This is called, “lights out manufacturing”. We are not operating in a vacuum; this is going to be a worldwide transition. As this occurs, we are going to see manufacturing shift back to the first world and/or to regions that are closer to the points of consumption where logistical costs and energy cost will be cheaper. This is already happening, and we will probably see disruption within five to 10 years when automation becomes more affordable, smarter and have more flexibility and dexterity. Our customers are going to weigh in on other decision factors apart from labor costs such as original designed product offering, proprietary or unique manufacturing techniques, cost of electricity, cost of money, back-end and front-end supply chains… For the Philippines to still be competitive, you need to boost those other factors,” he explains.

As an industry and as individual companies, the local manufacturers must learn how to pivot, according to Qua. “Getting into the designing products and getting into the innovation space where we own our own IP and we can generate our own products and solutions, becomes crucial. Otherwise, if we are playing on the labor arbitrage game, it is not a sustainable model.”