Introduction
Picture a world where the heartbeat of modern civilization is governed not by skyscraper structures or grand statues but by tiny chips, invisible to the naked eye. These are the INTEGRATED CIRCUITS (ICs)- the lifeblood of our digital age. Every swipe on a smartphone, every calculation in a supercomputer, and all signals in communication satellites trace back to the marvel of IC design. As countries compete for technological dominance, an essential question stands out: What is the level of commitment our government demonstrates towards the evolution of the IC Design industry.
Purpose of the Paper
This position paper serves as an urgent call to the government, elucidation the paramount of the IC Design industry. With nations vying for technological supremacy, it is no longer tenable for the government to relegate IC Design to the periphery of their strategic agendas. By understanding the industry’s significance, challenges, and potential, this paper endeavors to make a compelling case for Increase Governmental Focus, Support, and Investment in IC DESIGN INDUSTRY.
What is IC Design
Integrated Circuit (IC) design, also known as semiconductor design, refers to the process of creating the logic, circuitry, and layout of integrated circuits. It is a critical aspect of the semiconductor industry, enabling the development of advanced electronic components that derive technological innovation and progress and are used in a wide range of electronic devices, including computers, smartphones, automotive systems, and medical equipment.
It requires specialized skills, knowledge, and investment, making it a challenge for companies to design and manufacture ICs with smaller nanometer node sizes. The demand for these advanced chips continues to grow, driving further advancements and investments in the IC Design Industry.
The Strategic Importance of Governmental Attention to the IC Design Industry
by Xinyx Design Consultancy and Services, Inc.
- An Undiscovered Reservoir of Local Expertise
- The Skill Gap
- Seizing the Geopolitical Advantage
- Niche, Yet Catalytic for Innovation
- Proposed Solutions
It is no exaggeration to say that semiconductors serve as the core of our sophisticated technological civilization. Chips have become its most critical commodity to function, from smartphones and cars to servers, drones, and fighter jets. These microchips are created through a complex and highly interconnected network across multiple continents and numerous stages of production, manufacturing, and distribution. This paper highlights the design stage of integrated circuits (IC), the stage in the microchip supply chain that determines a chip’s performance, functionality, and feasibility for manufacturing.
Microchips are at the forefront of the escalating tensions in the South China Sea, the supply of which is threatened by China’s territorial claims. While the USA and Europe scramble to shore up investments in infrastructure crucial to global chip production, the Southeast Asian region is poised to compete for a greater share of the global semiconductor market.
Unbeknownst to many, the Philippines has the advantage of housing capabilities in the crucial, early stage of conceptualizing, designing, and physically arranging the components and connections that make up microchips before being sent off for fabrication. This paper aims to eradicate any doubt of this and accelerate the growth of this high-potential industry.
An Undiscovered Reservoir of Local Expertise
Sharpening our focus on the IC design industry will only strengthen semiconductors as a pillar of our economic prosperity. The Philippines already boasts robust participation in the industry, with semiconductor products accounting for 47.4% of total goods exported from the country in 20221. We are considered a major hub for cost-effective semiconductor components assembly and testing as part of the greater global supply chain in electronics manufacturing and assembly.
Yet flying under the radar is a burgeoning IC design sector of nimble minds conceiving, designing, and innovating our technological future as it unfolds. After Intel left the Philippines, Analog Devices, Synkom, ON Semiconductor, Canon, Rohm remain as some of the bigger multinational companies with microelectronics design activities in the country. A local player, Xinyx employs the largest number of integrated circuit designers in the country at 350 highly-skilled engineers, with several strategically placed offices. Its rapid growth led to satellite offices opening in Makati, Batangas, Cagayan de Oro City, and its first international site in the Netherlands, a dominant player in the global chip industry. But in Muntinlupa City, Xinyx’ flagship office in Filinvest is just one of nine to eleven companies, three of which are locally owned, involved in semiconductor research and development activities2. This was quite a pleasant surprise for the local mayor, who only recently realized that under his jurisdiction was a veritable informal hub of innovation and high technology.
Recognition as a nucleus of technological prowess and investment is merely a matter of repositioning the city, and other innovation hotspots scattered in the country, to capitalize on what is already there.
The Skill Gap
Sharpening our focus on the IC design industry will only strengthen semiconductors as a pillar of our economic prosperity. The Philippines already boasts robust participation in the industry, with semiconductor products accounting for 47.4% of total goods exported from the country in 20221. We are considered a major hub for cost-effective semiconductor components assembly and testing as part of the greater global supply chain in electronics manufacturing and assembly.
Yet flying under the radar is a burgeoning IC design sector of nimble minds conceiving, designing, and innovating our technological future as it unfolds. After Intel left the Philippines, Analog Devices, Synkom, ON Semiconductor, Canon, Rohm remain as some of the bigger multinational companies with microelectronics design activities in the country. A local player, Xinyx employs the largest number of integrated circuit designers in the country at 350 highly-skilled engineers, with several strategically placed offices. Its rapid growth led to satellite offices opening in Makati, Batangas, Cagayan de Oro City, and its first international site in the Netherlands, a dominant player in the global chip industry. But in Muntinlupa City, Xinyx’ flagship office in Filinvest is just one of nine to eleven companies, three of which are locally owned, involved in semiconductor research and development activities2. This was quite a pleasant surprise for the local mayor, who only recently realized that under his jurisdiction was a veritable informal hub of innovation and high technology.
Recognition as a nucleus of technological prowess and investment is merely a matter of repositioning the city, and other innovation hotspots scattered in the country, to capitalize on what is already there.
Seizing Geopolitical Advantage
According to a trusted industry executive, the Filipino IC Designer is preferred amongst Asian countries because of their problem-solving abilities, work ethic, communication skills, with the added benefit of having lower attrition rates5. By attending to the needs of the untapped IC Design sector, the Philippines can amplify its global competitive advantage and lay the groundwork for a future where innovation, intellectual property and high-skilled jobs are the driving forces behind its economic prosperity.
Thanks to their government’s comprehensive approach, our neighbor Taiwan currently dominates not just the IC design landscape but also the semiconductor manufacturing industry since it began in the 1970s. One of the pivotal moments in Taiwan’s IC Design ascent was the establishment of the Industrial Technology Research Institute (ITRI). ITRI played a foundational role in developing Taiwan’s semiconductor industry by initiating R&D, transferring technology to private enterprises, and spawning companies like Taiwan Semiconductor Manufacturing Company (TSMC), the global titan in semiconductor manufacturing. Taiwanese universities and research institutions have been at the forefront of IC Design innovation. Collaboration between academia and industry have led to a steady stream of skilled professional engineers and cutting-edge research in the field. Only the covetous gaze of China threatens Taiwan’s semiconductor supremacy, allowing the likes of South Korea, India, Vietnam, Thailand, and the Philippines to jostle for a larger slice of the global semiconductor market as pandemic-weary supply chains diversify6.
Thailand implemented several policies aimed at attracting foreign investment, including tax incentives, and streamlined regulatory procedures for their new Eastern Economic Corridor. The plan spans three provinces focused on high-value-added industries such as automotive industries, electronics, robotics, aviation, digital technologies, and medical hubs. Vietnam has been even more aggressive in implementing a national strategy aimed at attracting foreign investment and the development of local suppliers.
Vietnam established the Saigon Hi-Tech Park in Ho Chi Minh and attracted several semiconductor companies such as Intel, Samsung, and STMicroelectronics to set up manufacturing facilities and research and development centers. In only 24 months, the Vietnamese government was able to attract USD 41 billion in foreign investment7. Vietnam aims to increase the localization rate of semiconductor products in Vietnam to 60% by 2025 and 80% by 20308.
With similar strategic government-backed initiatives dedicated to IC Design combined with our young and tech-savvy population, the Philippines can leverage its geopolitical position and act as a bridge between tech giants in the East and West.
Niche, Yet Catalytic for Innovation
Beyond the microscopic world of integrated circuit design is the greater vista it enables. The untapped potential of the microelectronics research and development sector is a beacon of promise.
According to research by the Economic Development Research Group, the semiconductor industry has a multiplier effect of 6.7, which means that for every job created in the semiconductor industry, an additional 5.7 jobs are created in other industries. While the industry’s employment impact is concentrated in the manufacturing industry, professional and business services account for 19% of potential employment impact, education and health, 11%, while trade, transportation, and utilities account for 15%9. Capitalizing on our capabilities in integrated circuit design will not only expand the semiconductor industry but bolster adjacent sectors in Telecommunications, Information Technology, Smart Cities and the Internet of Things, Healthcare, Automotive, Aerospace, and Defense, generating more employment opportunities within the country and securing our position as a middle-income country.
Department of Trade and Industry Secretary Alfred Pascual, addressing a room of top Dutch semicon executives last June 2023, pointed out that though the Philippines may have missed the third industrial revolution, we may very well be able to catch “the fourth wave” of connectivity, automation and step into the vanguard of this era where technology governs the trajectory of nations.
Proposed Solutions
Acknowledging the Philippines’ IC design industry is the first step, as only industry insiders know it exists. Drawing inspiration from Taiwan’s close-knit industry-academia ecosystem can be transformative for the Philippines. Strengthening the bond between academe and industry can lead to groundbreaking innovations. Collaborative engagement between government, industry, and academia is paramount. We propose the following strategies to maximize this opportunity:
Adopt A Lab
A proactive step towards fostering the IC Design Industry is to strategically identify prominent universities or engineering institutions in the field. By infusing these centers with cutting-edge tools and software, and by providing faculty with requisite training, we can directly bridge the skills gap and expand the pool of talented individuals. Xinyx has had success with directly funding laboratories in universities, such as with Mindanao State University Institute of Technology in Iligan, and also engages with government to secure a tripartite approach to microelectronics promotion and development, such as with Colegio de Muntinlupa.
Legislative and Policy Support
A more comprehensive approach would be to formally institutionalize promotion and support of the microelectronics research and development industry. Aside from an official acknowledgement of the burgeoning IC design sector, legislative support or executive policy work can provide a framework for sustained investment in training, education, research and development, ensuring that the Philippines remains at the cutting edge of IC design innovations. Such a framework can direct investment and encourage the development and adoption of new technologies that can lead to patents and new products. Intellectual property can be a significant source of revenue and can position the Philippines as a direct contributor or even a leader in technological advancement.
Key Aspects of Industry-Friendly Policy:
- Acknowledge the burgeoning microelectronics research and development sector and the potential of the IC Design industry
- Support partnerships and programs aimed at growing the pipeline for skilled engineers
- Support companies in the semiconductor industry that are already taking action, especially in retaining and attracting talent
Create an Institute of Microelectronics, Research, & Design
Under the oversight of a multi-sectoral council comprising academia (3 eminent engineering university delegates), industry leaders (3 representatives), and government (NEDA, DOST, IPO, DICT, DTI), create a dedicated Institute for Microelectronics Research & Design to the purpose of:
- Growing the domestic STEM pipeline for engineers and computer scientists vital to the semiconductor industry and other sectors that are critical to the future economy
- Curricula and education solutions tailored to the semiconductor industry by expanding certification boot camps, apprenticeships, and other training programs at universities and engineering colleges.
- Establish mechanisms for intellectual property protection and the commercialization of research and development outcomes
Conclusion
Focusing on the IC Design Industry is not just about circuits and chips, it’s about economic vision, technological self-reliance, and carving a niche in the global technological narrative. The moment is ripe for the Philippines government to make strategic investments, forge global partnerships, and harness the nation’s potential in the realm of IC Design. With your support, we can cultivate and harness the incredible creative, transformative power of semiconductor design engineering for the betterment and benefit of the Philippines and its people.
A Position Paper by XINYX | November 10, 2023