THE Philippines is among the emerging manufacturing hotspots in the region as global companies diversify to multiple locations out of China.
“The next decade will accelerate shifting supply chains whereby manufacturing and production locations will diversify to multiple locations across Southeast Asia and India,” said global real estate services company JLL in a report released yesterday.
JLL said companies are increasingly diversifying their operations outside of China to hedge against supply chain disruptions.
JLL added this diversification drive is fuelling a boom in foreign direct investments for manufacturing in Southeast Asia and India, with both areas vying to become the next manufacturing powerhouse.
JLL said this offers the Philippine real estate opportunities in the semiconductors, electronics and electrical given that the country is one of the seven countries that the US partnered with in line with CHIPS Act.
CHIPS aims to expand and diversify the US’ semiconductor supply chain.
“Diversification within supply chains is a natural step for companies involved in manufacturing within the wider economic lifecycle of this region. We see Southeast Asia and India representing a natural complement to the existing production strength of China but feel that for companies to respond quickly to supply chain shifts, they need to adopt a flexible mindset towards land selection and funding options,” said Michael Ignatiadis, JLL head of manufacturing strategy for the Asia Pacific.
Ignatiadis said multiple sources shared that rising costs in China over the past decade have served as the primary accelerator of this shift towards diversification.
“Higher demand for industrial land, coupled with rising wages and material costs, has also pushed up land prices in China, which can be up to two times higher compared to some SEA (Southeast Asia) countries and India,” he said.
“Furthermore, factors such as skilled labour, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability contribute significantly to a factory’s long-term success and sustainability,” he added.
Peter Guevarra, JLL director of research consultancy, Asia Pacific, said each economy in Southeast Asia is at a different level of its manufacturing story, however.
“But we can confidently say that policymakers are extremely keen to rake advantage of diversification initiatives of supply chains. Companies need to carefully evaluate various factors such as costs, market access, infrastructure, labour, and governmental support before determining their global manufacturing investment strategies,” he said.
