The need to ride on the Apple supply chain (as well as diversify outside semiconductors)

The decline of exports for semiconductor products may be a confirmation that the market demand for consumer electronics still have not fully recovered save those in the supply chain supporting Apple for its products. This may be the right time to help diversify the country’s exports outside this sector.

Outlook for electronics exports dims—BSP

Bangko Sentral cites drop in book-to-bill ratio

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Sunday, September 23rd, 2012

The outlook for the coming months for the country’s electronics exports has turned sour, with the industry’s book-to-bill ratio falling to its lowest in more than two decades, the Bangko Sentral ng Pilipinas said.

The BSP, however, expressed optimism that total export revenues might still grow because the country was gradually diversifying its export products to lessen its dependency on electronics.

“Insofar as the outlook for electronics exports is concerned, we [BSP] are seeing very difficult conditions especially for semiconductors,” BSP Assistant Governor Ma. Cyd Tuaño-Amador said in a briefing Friday.

The book-to-bill ratio for electronics exporters stood at 0.87 percent in July, slipping from the previously reported 1.2 percent in March and hitting the lowest level since the mid-1980s.

“The ratio is even lower than what we have seen in the ’80s. This means we may face substantial headwind as far as electronics exports are concerned,” Amador said.

Book-to-bill ratio—a major indicator of future export earnings—is the ratio between the value of orders for export goods and the value of previous deliveries.

A ratio above one percent indicates that the value of orders is higher than that of previous deliveries, suggesting an increase in export revenues in the succeeding months. A ratio below one percent means the value of future deliveries is likely to be lower than previous deliveries.

However, Amador said the outlook for the entire export sector remained positive because exporters were increasing their sales of non-electronic goods.

“Despite the drop in the book-to-bill ratio for electronics, we are seen to maintain a respectable growth in total export revenues. The story being told to us is one of diversification of export products,” Amador said.

In July, electronics exports fell 25.6 percent year-on-year to just $1.7 billion, documents from the National Statistics Office showed. Despite this, total exports grew 7.8 percent $4.8 billion.

Electronics exports accounted for just about 35 percent of the country’s total export revenues in July, much smaller than the 50- to 60-percent share in the past few years.

The drop in the book-to-bill ratio for the electronics sector from more than one percent earlier this year showed that the global economic demand for electronics remained volatile. Demand for electronics, which are non-basic goods, is largely affected by swings in consumer sentiment.

Economists said that global demand for non-essentials remained volatile because consumer sentiment was being affected by various developments. On one hand, they said consumer sentiment was being dragged by the prolonged crisis in the euro zone and the lackluster growth of the American economy. On the other, sentiment was being lifted by stimulus measures being implemented by governments in the advanced economies.

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