Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Archive for the ‘electricity’ Category

A Look into the Future

Posted by butalidnl on 14 April 2012

Predicting how things will be like in the future is fun. You can let your imagination run wild and nobody could tell you whether you got it right or not. At the same time, it is tricky; a lot of things forecast before hadn’t come true – take the idea of the personal helicopter, or elaborate space colonization by the year 2000.

It was about 30 years ago that I arrived in the Netherlands (from the Philippines). I find it interesting to note the changes that have happened in those 30 years. Big things have happened: the end of the Cold War and Apartheid, the eradication of smallpox, the Internet and the Web, e-Books, digital cameras. At the same time, some other big things have not happened: manned space exploration, ubiquitous robots, Middle East peace, the ‘paperless office’ (not yet, at least).

I will try to predict things 30 years into the future (or 2042), which is as long as I can hope to live (though I think that I won’t live that long). Perhaps I could still see the changes that I predicted.
So, here goes.

Some Guiding Principles
The Future is Already Here. One thing about predicting 30 years in the future is that a lot of things then will be based on things that have already been discovered or invented today. After all, the basic discoveries for the internet were already made in the 1980s, even the 1970s. Fax machines were around since the 1930s. It takes about 20 to 30 years before a new discovery is fully developed. In the near future, this pattern will surely continue. Really new things that will be discovered in the next 10 years or more will be part of a longer-term future – i.e. beyond 30 years.

More People, More Comfort. Doomsayers who say that the people in the future will be less comfortable because of overpopulation will be proven wrong. While there will be more people in the world, they will be living longer and better than we now do. A lot of this improvement in well-being will be due to the better lives of many people in the Third World. But people in developed countries will also see their lives improved.

No Radical Changes in People’s Preferences and Habits. Social inertia is strong; ingrained habits will most likely prevail.
Many people will still hold elaborate weddings. National identities will remain. The food that people eat will generally look the same as what they eat today. People will continue to ride automobiles.

What will the Future look like, then?
Food. The world’s population will increase by at least 50% (from 7 to 10 billion). But there will be a need to increase food production by more than 50% since many people are underfed today. The Earth can sustain this population if we eat more sensibly.

The pattern of meat consumption will be different.The reason is that some kinds of meat are produced with more grain than others – this grain/meat ratio is known as the FGR (Feed Grain Ratio). Beef will be too expensive to be eaten daily by ordinary people. People will generally eat meat with lower FGRs than beef (which is 8). Pork’s FGR is 4, chicken’s between 2 & 3, FGR  for fish (i.e. the vegetarian kinds of fish) is 2. It is likely that the per capita consumption of vegetables will be significantly higher than today. A lot of ‘vegetarian meat’ will be produced from soya, mongo and other beans.

Food will be grown not only in rural areas; a lot of it will be grown in plots in urban areas (mostly vegetables and fruits). There will be a lot more fish grown in fish farms, compared to the present practice of ‘hunting’ for fish. People will NOT be eating insects (except where these are now already local delicacies).

Transportation. Personal vehicles will be small and electric. Rental services will cater to people’s need for bigger vehicles. Some vehicles will be powered by petroleum products: especially ships, airplanes, earth movers and trucks, but these will be mostly hybrid. Intercity transportation will be often done by Maglev, at least in the richer countries. High speed Maglev will replace a lot of short commuter plane links. Smart highways will guide cars through special lanes, making it possible for them to safely cruise at high speeds (200 kilometers/hour or more).

Energy. There will be a lot of energy generated; more than enough to keep people living comfortably. G4 nuclear plants (which use up 95% of the nuclear fuel, instead of the 5% that present G3 plants consume) will supply some countries with cheap electricity. For most of the rest, there will geothermal, tidal, wind, hydro and solar energy. Fossil fuel power plants will mostly be de-commissioned.Temporary surplus energy will be stored in various ways to even out the electricity supply across the day.

Solar energy will boom. The yield of silicon solar panels will have increased from the current 16% to 40% (present prototypes with improved silicon panels already have a yield of 30%, while those with Gallium Arsenide already routinely exceed 35%, so the technological jump will not be much). Electricity from fossil fuels (including coal) will be too expensive, especially since environmental costs will be fully factored in. Petroleum will be used for some vehicles (mostly heavy duty and offroad) and for making plastics and other chemicals. Solar panels will adorn every rooftop, except those used to plant food. Some walls will be made of special solar panels. The newer solar panels will be integrated into the building materials, so thye won’t look at all like today’s solar panels.

The energy needed for lighting, heating and transportation will be much less than today. Energy loss in transmission will be less, since much of the electricity will be generated close to the user.

The problem of global warming will shift from greenhouse gases to the heat dissipated with the use of all the energy.

Space Travel. Space exploration or colonization will continue at the same more-or-less leisurely pace as today. Earth-bound considerations will continue to put limits to how much is spent in space. There will have been one or two manned missions to Mars, but no permanent bases. There will be people living on the moon, but this will be more like the present Antarctic scientific camps. There will be a number of space stations in low-Earth orbit.

Life Expectancy. Major diseases like tuberculosis, malaria and even AIDS will be greatly reduced, affecting a shrinking percentage of the population. In developed countries, the treatment of degenerative diseases will be more successful.

The obesity epidemic of today will be a thing of the past. Perhaps 5% of the people may still be classified as obese; but increased prices of food, more exercise and better therapy (medication and surgery) will result in  decreasing numbers of obese people.

Cancer will still be around, but for most cases, treatment would make it more of a chronic, rather than a deadly, disease.

Death from accidents (especially vehicular and work-related) will be low and steadily decreasing, as traffic authorities and companies institute more stringent safety measures. Large-scale industrial pollution will be lower, lessening deaths from chemical exposure. The most hazardous tasks (e.g. underground mining) will be increasingly robotized.

Worldwide average life espectancy at birth may reach the late 70s (in 2010, it was 67.2 years); lots of people will live to their 90s (and be relatively healthier than now).

Computers/IT. There will be a range of devices for all kinds of needs: wristband, handheld, slate, notebook, desktop, wall, company network and super computers. People will have a wide range of options for keeping information in the ‘cloud’ or in their machines. A person’s devices will more efficiently share information with each other, in various ways and extents.

Information will be available for a fee – people will make micro-payments to access this. At the same time, more information will be shared for free. All of human knowledge will  be available on the internet. Devices can all communicate with each other, The choice will include: text, audio, full audio-visual, data.

A lot of ‘office work’ will be done partly at home, as with school work. Work and study will be combined with regular (a number of times a week) face-to-face sessions. ‘Traditional’ offices and schools will still constitute the majority, and those will employ the latest IT tools.

E-books will be widespread. Almost all books will be in e-book format. Paper books will be quite expensive in comparison, and will be bought by special book enthusiasts or as gifts.
E-paper will be used for posters/signs at stores, and maybe even on billboards.

All-round robots will still be experimental. But there will be a lot of special purpose bots. Examples would be restaurant bus bots, automatic vehicles (for use as taxis within cities), cleaning bots and smaller industrial bots.

Politics. There will be more nation-states than there are today. At the same time, many of these will be grouped into supra-national entities e.g. EU, ASEAN, Ecowas, Mercosur which would assume many functions which today belong to nation-states.

There will be peace between Israelis and Arabs – but the form could vary from a unitary Arab-Israeli state, to Israel as Jewish state at peace with its neighbours. North and South Korea will reunite. There will be no more dictators ala Gaddafi or Lukashenko anymore. However, there will probably be some ‘failed democracy’ (like present-day Russia).

Posted in alternative media, electric car, electricity, environment, solar energy, World Affairs | Tagged: , , , , , , | 2 Comments »

Alternatives to Feed-in Tariffs

Posted by butalidnl on 29 August 2011

Solar panels are sprouting all over Germany and Spain as a result of feed-in tariff programs by their governments. When governments face the need to develop their solar energy, the question comes up if they should consider feed-in tariffs.  Feed-in tariffs is a policy of governments to pay grass-roots producers of solar electricity higher fees (than traditional electricity rates) for the electricity that they generate. This policy has been extremely successful in Spain and Germany, to the point that so many people are putting up solar panels, and have become a major drain on their governments’ budgets.

The Philippines has very recently instituted a system of Feed in Tariffs for Renewable Energy. I think it will not only not work, it will end up raising the price of electricity to consumers, and be an unacceptable burden to the national budget.

I think that a feed-in tariffs policy may have been a good idea in the past; but that we should now use other strategies for promoting solar power. Feed-in tariffs are potentially a big drain to national budgets; but the main reason for not using them now is that the price of solar panels have dropped sharply in recent years, to the point where the price for generating solar electricity is almost the same as ‘grey’ electricity in some times and places. This means that price is no longer the main obstacle to people shifting to solar. Government programs to promote solar energy should address these obstacles directly.

Solar Bank
The biggest obstacle that keeps households or businesses from installing solar panels is the need for a large expense up front. It is similar to having a mobile phone where you pay for 15-20 years worth of service at one time. The mobile phone industry would not have taken off if this was the case. There needs to be a way to ‘cut up’ the expense of solar power to convenient monthly portions.

The government should put up a ‘Solar Bank’ which would pay for the panels, and to which the buyer could make monthly payments. The bank could charge the household for electricity produced, at slightly below the prevailing price of  ‘grey’ electricity(and at a very low interest), until they are fully paid (which should be between 15 and 20 years (solar panels are expected to last at least 25 years) . Included in this contract should also be insurance coverage, so that people will not continue paying if the panels get destroyed or damaged.

Net Metering
Another measure would be to require electricity providers to offer net metering for a modest one-time fee. Net metering is when a user is allowed to sell (excess) electricity to the grid at the same price that he pays for getting electricity.  This is favorable for those who produce electricity themselves,  from solar, wind, biomass etc. Another advantage is that net metering also reduces the need for batteries, which are a significant part of the expense of solar systems.

In Europe, net metering arrangements mean that a household can ‘sell’ excess electricity to the grid, for the same price, but only as long as it does not exceed the household’s monthly consumption. Beyond that, the electricity provider will only pay the ‘generating cost price’ (i.e. excluding transport and taxes )

Business Incentives
Businesses should be stimulated to adopt solar energy.  In a previous blog, I pointed out that, for commercial and industrial users in Metro Manila, the cost of Meralco electricity is sometimes higher than the cost of solar electricity (Solar Cheaper than Meralco in April). This is especially so during the dry season, when cheap hydro-electric power is less abundant. But businessmen consider not only the cost of solar energy; they also have other concerns, which need to be addressed.

Reliability. Solar electricity depends on the presence of the sun; so the panels don’t produce energy at night and only a little during cloudy days. Companies should be able to combine grid and solar electricity to get a very reliable energy supply. And for this, they would need heavy-duty batteries. I propose that the government subsidize the batteries for solar installations of businesses. Perhaps a subsidy from 25% to 50% of the cost of the batteries would be appropriate.

Resale Value. The government could take measures to develop the secondary market for solar panels. This would stimulate businesses to buy and install solar panels. Some businesses may then opt to install second-hand panels that are cheaper. A secondary market would also stimulate businesses to upgrade their panels when technological improvements improve panel efficiency.

One measure to help stimulate the secondary market is to allow panels to be subject to accelerated depreciation. When the panels’ book value reaches zero, businesses may decide to sell them for a tidy profit, and then buy new panels.

Maintenance. Companies may be unwilling to install solar panels because of perceived maintenance costs and hassle. The government should provide them with technical support, and even training programs for building administrators or maintenance staff, to teach them how to maintain the panels properly.

Of course, businesses should also be able to avail of the loans/insurance from the Solar Bank, as well as benefit from net metering.

Posted in electricity, environment, LGU, Philippine economics, Philippines, solar, solar energy | Tagged: , , , , , , , , | 4 Comments »

Biofuels are not the Answer

Posted by butalidnl on 20 August 2011

Biofuels have been hailed as our way out of the dependence on fossil fuels. In the US, massive amounts of government funds have gone into making ethanol from corn. In the Philippines, the 2006 Biofuels Act targets the mixing of 5% ethanol in gasoline and 1% biodiesel in petrodiesel.

Biofuels as the solution to the energy problem is a myth, especially if you look deeper into its real prospects. Experts have computed that, in order to supply enough fuel for US’ transportation needs, they would have to grow corn in 3x the current cropland of the US. In other words, it is impossible for corn to do the job.

But why is that the case? Well, plants are actually (contrary to the myth) very inefficient transformers of solar energy. Plants transform only about 1% of the energy from sunlight into plant material. And of this plant material, perhaps only 20% (or 0.2% of the total) gets into the corn cob, which is what is processed towards ethanol. Then, the processing uses up energy. The end result is that only about 0.1% (one-thousandth) of the sun’s energy is transformed into ethanol.

Contrast this with silicon solar panels, which transform 16% of sunlight into energy. This is 160 times the energy obtained from corn! Some solar panels can even achieve 30% efficiency; but these are made with expensive Gallium Arsenide, and are thus only used for things like space satellites.

The main ‘problem’ that silicon solar panels face is that they still cost too much to make, making it cheaper to rely on traditional sources of energy. But the cost of making solar panels is rapidly going down; even to the point where it has reached ‘grid parity’ (i.e. solar costs the same as ordinary electricity) for some places or applications.  Reaching grid parity is important because this means that subsidies will no longer be necessary for these applications.

Cellulose and Algae
There are efforts aimed at using cellulose or algae as the source of biofuels. Using cellulose would mean that the full 1% of sunlight that the plant transforms will be used. Algae transforms up to 3% of sunlight, but they require expensive glass containers (which need to be regularly cleaned) so that the net yield of algae would be something like 1.5%.  Another problem with algae is that it grows slowly when it is producing hydrocarbons.

Algae is only marginally better than cellulose. And there is still a long road ahead, in terms of bringing either cellulose or algae to even get to 1-1.5% efficiency. It is a terrible waste of money to spend so much on biofuels of any kind. At the same time, solar is already 16 times more productive than algae and cellulose will ever be. And with further research, it should be possible to raise solar’s efficiency even more.

Use Other Technologies
The logical conclusion to all this would be that governments should stop all subsidies for biofuels immediately, and to rechannel the funds to more promising technologies. I suggest that these be solar, geothermal and wind. With a relatively small amount of research on solar and wind, their efficiency stands to improve a lot. Geothermal needs relatively big investments, but pays off well. Geothermal costs much less than traditional sources of energy to generate.  At the same time, the use of electric cars should be stimulated, so that gasoline and diesel will be replaced by electricity.

The Philippines should rescind the 2006 Biofuels Act. It is already a failure. Both ethanol and biodiesel are suffering from “volatile prices and insufficient supply”.  This is a natural result of the inefficiency of their production; and this basic inefficiency means that prices and supply will never be satisfactory, even with subsidies. Instead of biofuels, the Philippines should stress more on geothermal and solar, which are a lot more cost effective, and for which future price developments are growing more favorable.

Posted in electric car, electricity, environment, Philippine economics, Philippines, solar, solar energy, World Affairs | Tagged: , , , , , , , , , , | Leave a Comment »

Nuclear Power after Fukushima

Posted by butalidnl on 22 March 2011

The present problems with the nuclear reactors at Fukushima are sure to affect how countries look at nuclear energy. And the overall net effect is that lesser nuclear plants will be built, and those that will be built will be made to higher safety specifications.

In the Philippines, the proposal to build nuclear power plants and/or activate the Bataan Nuclear Power Plant seems to have died with Fukushima. These proposals were based on the apparent safety of Japanese nuclear plants. In Germany, the plan to extend the life of a number of nuclear plants seems also to have died. Venezuela also announced that they are freezing their plans to build a nuclear plant, in the light of the Fukushima nuclear crisis.

In the US and France, authorities insist that nuclear power plants are safe; and that they plan to continue building them – to new, stricter specifications.

Vulnerabilities
Traditional ideas about protecting nuclear plants have concentrated on protecting the reactor core. Fukushima shows that vulnerabilities outside this core could result in nuclear accidents.

Nuclear advocates say that a 9.0 magnitude quake together with a 10 meter high tsunami is a very unique event, and we shouldn’t worry too much about this happening elsewhere. True, but other kinds of “unique” events could still happen elsewhere. Humans can also produce catastrophes in the form of a terrorist attack. After Fukushima, terrorists all over the world now know that nuclear reactors are more vulnerable than they previously thought.  It is no longer a matter of disrupting the reactor core (which IS hardened), but a well-planned attack could knock out the pumping system and cause a disaster anyway. Thus, what authorities say about a reactor being able to withstand even a nuclear attack is no longer valid; a much smaller explosion would now do. We could imagine things like a 747 plane crash or a truck bomb would suffice to cause a meltdown. Or, a hacker could simply turn off the pumping systems from a distance.

Cooling Pumps. The constant supply of water needed for cooling makes it vulnerable to all kinds of disruption. In Fukushima, this was due to the tsunami that hit it. The tsunami knocked out the triple-redundant pumping systems. These pumping systems are not as hardened as the reactor core, and thus quite vulnerable.

Spent Fuel Rods. The storage area for spent fuel rods is another vulnerable point. There are not as hardened as the reactor core. Since the rods retain more than 90% of the original uranium, they could heat up if the water is taken away.

Software. The controls of nuclear plants are run by computer programs. Bugs in these programs, or more probably, their inability to cope with unusual events, may cause problems. Also, if the controlling software is connected to the outside – this would be an added vulnerability. Hackers could then disrupt the software itself, even causing a meltdown.

Safety Requirements
“Hardening”. The pump system and spent fuel rods should be protected by more layers of cement and/or steel. They should be made strong enough to withstand a major tsunami, a plane crash (ala WTC) or a truck bomb.

Isolated Back-ups. Back-up pumps should be stored at relatively distant locations (perhaps 2 km away) so that they will survive any “direct hits” on the plant itself (this is what is done for data backups).  It should also be possible to install the pumps manually, or robot systems should be available to install them.

Software for the plant should be physically separated from the outside. No part of the system should be accessible from outside sites. This way, no hackers could disrupt the plant from outside.

Protection from Outside Takeover. When controls are isolated, the only way to induce a meltdown will be for a suicide team to take over the plant to cause a meltdown. Measures should be taken to protect nuclear plants from such a takeover. The computers on site should also have programming that will disregard commands that would cause a meltdown.

Insurance
Governments should require that insurance should be taken out for possible nuclear accidents. This should cover costs for lives lost and property damage, as well as for relocating affected people and businesses from a given distance around the plant (e.g. a 20 km radius). At present, this “insurance” is covered by the national government, in the sense that if an accident occurs, the national government will shoulder all damages. This is a hidden subsidy to the nuclear industry.

This insurance should be available from private sources, and the company operating the plant should shoulder this expense. And the insurance should be regularly updated to make sure it corresponds to changes in population and economic activity in the area.

If private insurance companies charge “too high” a premium for this insurance, then it is obvious – the planned plant is unsafe.

Insurance coverage will also force companies to implement safety measures. Insurance companies would charge more if the plant lacks certain safety features. There is no such thing as “uninsurable”; it all boils down to a question of price.

The Obama administrations’ plan to “review” all US nuclear plants is, by itself, toothless. Is the government willing to subject all plants to the insurance requirement? Are plant operators willing to make the needed changes to harden plants? or is the government going to shoulder this? And what will they do if the government is not willing to shoulder the expense for extra safety?

I believe that the new requirements needed for nuclear plants will mean the early retirement of a lot of plants. This is important, because it is when we fully “internalize” the externalities of nuclear plants (including disposal of nuclear wastes) that can we see if they are indeed economically feasible.

At the same, other kinds of power plants – from LNG to coal – should also be required to take insurance against possible accidents, as this will really level the playing field when it comes to energy sources.

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Philippine Electronics Industry set to Take Off

Posted by butalidnl on 18 January 2011

The Philippine Electronics Industry is about to take off. In 2010, investments in the industry surged to more than $1 billion, and exports reached $20 Billion. According to the Semiconductors and Electronics Industry of the Philippines (SEIPI), an industry association for the electronics industry, exports could exceed $30 billion this year, and reach $50 billion in 2015.

But it is all relative. The Philippines’ share in the world electronics market is a mere 1%, while that of China is more than 20%.  So, even if the Philippine electronics industry grows by 150% in 5 years, it won’t be too much in the overall scheme of things.

Although it is a small part of the overall “pie”, the electronics industry is quite important to the Philippines. By the end of 2010, the industry employed nearly 500,000 people. And electronics exports make up almost 50% of total Philippine exports.

Growing Market, Lower Tariffs
One of the main reasons to be enthusiastic about the electronics industry is that there is a growing number of electronics products. A couple of years ago, things like the iPod, GPS navigation and e-Readers were unheard of. Now, they are capturing the market, and a big part of the production of such items is done in East Asia. More than half of all electronics are made in Asia, so as the number of things that are electronic grows, the more all East Asian countries stand to benefit.

As people get wealthier, their need for electronic products will grow. If everyone who now owns a mobile telephone will also get to use an e-Reader, just think how many e-Readers would be needed.  And even if wealth does not grow in some countries, the use of electronic products will grow anyway: modern appliances need ever more sophisticated electronics, so simply replacing old appliances will increase the demand for electronics.

At the same time as the demand for electronics increases, production costs are decreasing. Tariffs within ASEAN, for example, in electronics products (and a lot of other items too) have gone to 0% as of 1 January 2011 (under the Asian Free Trade Area – AFTA – agreement). And ASEAN has free trade agreements with China, India and Australia/New Zealand too.  Technical specifications for electronics are also getting more standardized. The low tariffs and technical standardization mean that it would be easier for companies to source their electronic inputs from anywhere in the ASEAN area, with very little extra expenses for doing so. Thus, final assemblers in the Philippines could source some parts from plants in other ASEAN countries, while Philippine-based suppliers could also easily supply the needs of assemblers in other countries. The effective scale for electronic products has been increased because of this, making for cheaper production costs.

What About China?
The Philippines’ niche in the growing electronics market is in final assembly and testing – this is also the most labor-intensive part of the electronics value chain.  In a sense, we are competing directly with China, which has generally the same niche. However, we should consider the role of the Philippines (and ASEAN) relative to China.

Japanese and other multinationals prefer to have a “China Plus One” policy when they do offshore production. This means that they would set up shop in China, but also in one other country, preferably one of the “ASEAN-5” (Indonesia, Malaysia, Philippines, Thailand and Vietnam). This is some kind of an insurance against problems in China.  China sometimes makes policies against Japanese or Taiwanese companies, and they need to have a back-up operation or else they would have problems if their China operations get into trouble.   And things could also go wrong with joint ventures with Chinese.  In addition, ASEAN-5 countries are more friendly to 100%-owned subsidiaries than China is.

While China is perceived as the cheapest production platform, its price advantage over ASEAN-5 is rather small when it comes to electronics.  Both China and ASEAN-5 import chips and high-end electronics from Japan and the NIE-3 (Hong Kong, South Korea and Singapore), process these into finished products, and export these mostly to developed countries.  The cost of the electronics inputs are the same, and the difference between countries is only in the cost of operations – things like transport, labor costs, electricity, infrastructure. Since the electronics products (both intermediate and final products) are relatively lightweight, it is relatively easy and cheap to transport them from one location to another.  Chinese labor costs are lower than that in ASEAN-5, and transport and electricity are subsidized more in China than elsewhere, but the difference is rather small, and these are average costs.  So, there are enough cases where the particular mix of operating costs for producing certain items would actually be lower in an ASEAN-5 country than in China.

Sometimes, the decisive difference is the proximity of other electronics companies which make intermediate products needed for the assembly of a specific item. This reduces the cost of transport, and thus the overall cost of making a product. This proximity of suppliers is something new in the Philippines. Today, there is a wide range of companies producing all kinds of electronic parts that the chance of sourcing most of a company’s needs from within the Philippines ( from within the Calabarzon region), or even from within the same Export Processing Zone, is getting bigger.  The range of companies includes everything from the assemblies around chips to making of hard disk drives to electric power supply. There is even a company that specializes in helping  electronic companies get ISO certifications.

Locally Owned
A recent trend (in the last decade) in the Philippine electronics industry is that there are now a lot of Philippine-owned companies. This means that there is a stable anchor of companies which are definitely Philippine-based.  Some of these are getting quite integrated in the industry, even to the point of buying US electronics companies. They are busy “filling-in” gaps in the supply base of electronic materials, making it cheaper to produce all kinds of products. Where before, we could fear that companies would pull out of the country; now, chances are that if a foreign company pulls out, their equipment will be taken over by a local company.

Experts have commented that the Philippine electronics industry needs to go “upstream” in the electronic value-chain in order to survive. Well, I think this needs to be nuanced a bit. As is, the Philippines handles a disproportionate proportion of high-tech electronic products; and this is probably because it has a relative advantage in short-run (smaller batch) assembly and testing. China and Vietnam will have a relative advantage in long-run assembly. Philippine companies are busy innovating in terms of manufacturing process, and even to some extent re product development.

The real upstream activity would be the fabrication of the chips itself.  But this is a very expensive thing to do. It will take a bit more to induce companies to take this step, and to base it in the Philippines. The growing role of Philippine-owned companies in the field makes it more likely for the country to soon have chip production. Why? Because, as the production base for electronics widens, it will soon become quite profitable to also establish chip production in country. Even with low transport costs, which mean that chips could still be sourced from Hong Kong, Taiwan or Singapore, it would be even cheaper for companies if the chips are made in the Philippines itself.  And since Philippine-owned companies have a different take on the issue of basing; they will more likely want to start chip production earlier than foreign-owned firms. So, I think that chip making will soon be done in the Philippines also.

Another issue is the adequate supply of skilled personnel for all the electronics companies.  There are now schools that are specifically producing skilled workers for companies; and I think that more will do so with time.  However, I think that the government should also do something to encourage the continuous training of personnel who are already working with companies – to ensure that their skills keep getting upgraded.

All in all, things are indeed looking bright for the Philippines electronic industry. I think that the projected growth rate for 2011 of 10% is indeed too conservative. It will grow much faster than that – perhaps something in the 20-30% level. And,  in the process, it will also positively influence the rest of the economy.

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