1. THE PHILIPPINE ICT INDUSTRY ERNIE SANTIAGO SEIPI ITA SYMPOSIUM 28 March 2007 Geneva

2. PART 1: THE PHILIPPINE E-SERVICES INDUSTRY PART 2: THE PHILIPPINE ELECTRONICS INDUSTRY SEIPI

3. SEIPI THEWORLDINFORMATION/ELECTRONICSINDUSTRY

4. WORLD INFORMATION/ ELECTRONICS INDUSTRY ONE OF THE LARGEST INDUSTRIES IN MANUFACTURING SECTOR: > US$1 trillion output, 6-8% annual growth Source: Reed Research, 11/2005 US$ 1.338T SEIPI

5. ASIA / PACIFIC IS THE FASTEST GROWING REGION Source: Reed Research Region200220032004 2005CAGR Europe220.4247.5279.1 285.89.0% Americas317.6314.1334.3 341.92.5% Japan162.4180.2197.8 202.37.6% Asia / Pacific 343.1386.9448.8 492.712.8% Rest of World 13.214.315.7 16.27.2% World1,056.81,143.01,275.6 1,338.98.2% Electronics Production WORLD INFORMATION/ELECTRONICS INDUSTRY SEIPI

6. MIGRATION TO LOW-COST LOCATIONS High-Cost Locations - US, Canada, Japan, Western Europe Low-Cost Locations - Asia/Pacific, China, Eastern Europe, ROW Source: Reed Research SEIPI

7. MAJOR PRODUCT TRENDS Telematics – GPS, Hybrid Car, Safety Automotive 3G Handset, TV Reception on Handset, Mobile Services Communications RFID, Energy Saving Control, Green Electronics, Optical Recognition Industrial Flat Panel TV, HDTV, Set Top Box, iPod, Digital Camera Trends Consumer Product SEIPI

8. GENERAL TREND IN ELECTRONICS INDUSTRY Manufacturing: moving to low-cost regions Markets: –automotive electronics is rising rapidly –computer and communications are still big –consumer and industrial may rebound Products: high technology, multi-function, networking base, quality in audio/visual effects Components: complexity, high precision SEIPI

9. THEASIAELECTRONICSINDUSTRY

10. Source: Reed Research, 11/2005 ASIAS POSITION IN ELECTRONICS PRODUCTION *Including Japan SEIPI

11. Source: Reed Research, 11/2005 TOP 8 ASIAN ELECTRONICS PRODUCING Japan China South Korea Singapore Malaysia Philippines Taiwan Thailand (In US$ Billion) SEIPI

12. Source: Reed Research, 11/2005 TOP 8 ASIAN ELECTRONICS PRODUCING COUNTRIES (In US$ Billion) 2002 162.4 120.2 62.4 38.6 36.4 26.6 23.8 15.9 2003 180.2 147.4 73.8 41.3 39.4 34.6 24,2 17.7 2004 197.8 177.1 90.3 45.9 44.1 35.9 26.6 20.12005202.3210.396.147.445.535.427.321.1JapanChina South Korea MalaysiaSingaporeTaiwanPhilippinesThailand

13. ASIA / PACIFIC AS INFORMATION / ELECTRONICS HUB Country / RegionRole Japan, Korea Design, R&D, Product Marketing China, India, Taiwan, Thailand, Malaysia and Philippines Manufacturing, EMS, ODM Singapore, Hong Kong, India IT Solutions, Software SEIPI

14. INFORMATION & COMMUNICATIONS TECHNOLOGY TREND IN ASIA / PAC Increasing spending, brought by China and India markets Wireless services overtaking fixed line Offshore services, business process outsourcing Enterprise solution Security issue Commodization of IT hardware, servers, Linux Digital home market Rising technologies, e.g. RFID SEIPI

15. THE PHILIPPINE ICT INDUSTRY A snapshot ERNIE SANTIAGO SEIPI

16. PART 1: THE PHILIPPINE E-SERVICES INDUSTRY PART 2: THE PHILIPPINE ELECTRONICS INDUSTRY SEIPI

17. PART 2: THE PHILIPPINE E-SERVICES INDUSTRY THE PHILIPPINE E-SERVICES INDUSTRY - the fastest growing industry

18. THE PHILIPPINE E-SERVICES INDUSTRY 1. CONTACT CENTER 2.BUSINESS PROCESSING 3.ANIMATION 4.MEDICAL & LEGAL TRANSCRIPTION 5.ENGINEERING DESIGN 6.SOFTWARE DESIGN

19. CONTACT CENTER INDUSTRY AS OF 1 ST QUARTER 2006 Still the fastest growing industry in the Philippines Contact Centers in the Philippines: 108 Total Full Time Employees: 112,000/Total Seats: 70,000 Estimated Revenues in 2005: US$ 1.7 Billion With a Growth Rate for 2005: 90% KEY PLAYERS IN THE COUNTRY: Third Party Providers: Sykes, Convergys, PeopleSupport, Clientlogic, ePLDT Parlance, ICT Group, Ambergris, Teletech, eTelecare, etc… Captives: Dell, AOL, JPMorgan, Siemens, HSBC, AIG, IBM Daksh, etc..

20. BUSINESS PROCESSING (BACK OFFICE OPERATIONS) AS OF 1 ST QUARTER 2006 No. of Service Providers: 62 Total Full Time Employees: 22,500 Estimated Revenues in 2005: US$ 180 Million With a Growth Rate for 2005: 80% KEY PLAYERS IN THE COUNTRY: Captives: AOL, AIG BPSI, Chevron Texaco,HP, HSBC, Procter & Gamble, Flour Daniel, Henkel Financial Services, Deutsche Bank, Citibank Crescent Services, Shell Shared Services, Manulife, Alitalia, Watson Wyatt, etc… Third Party Providers: Accenture, American Data Exchange, SVI Corp, SPI Technologies, DAKSH eServices, The Environments Collaborative, Eximius BPO, BayanTrade Dotcom, etc…

21. MEDICAL & LEGAL TRANSCRIPTION SERVICES As of 1 st Quarter, 2006 (Medical Transcription) Total MT Firms: 66 (57 medical/9 legal) MT Professionals: 6,000 employed Estimated Revenues in 2005: US$ 76 Million With a Growth Rate for 2005: 80% Performance Level: 98 – 99% accuracy rate with a turnaround time of 12 to 24 hour Key Players in the Country: eData Services, SPI Technologies, SVI Corporation, Medscribe Asia, Transkripsyo Inc., Total Transcription Solutions, Inc., Dictation Source, Pilipinas Data Contracts Corporation, etc…

22. SOFTWARE DEVELOPMENT INDUSTRY As of 1 st Quarter, 2006 Software Development Companies: 300 Total IT professionals: 14,000 Estimated Revenues in 2005: US$ 204 M With a Growth Rate for 2005: 40% Key Players in the Country: Accenture, Headstrong, Microsoft, IBM Solutions, Jupiter Systems, Oracle, ADTX Solutions, Gurango, Sun Microsystems, Intel Microelectronics, NEC, etc…

23. ANIMATION INDUSTRY As of 1 st Quarter, 2006 Total animation studios in the country: 40 Total Full Time Employees: 4,500 Est. Revenues in 2005: US$ 40 Million With a Growth Rate in 2005: 25% Key Players in the Country: Holy Cow! Animation, Artfarm Asia, Digital Exchange, Top Draw Animation, Toei Animation, Top Peg Animation and Creative Studio, Creative Asia, Geebo Digital, Toon City, etc…

24. ENGINEERING DESIGN INDUSTRY As of 1 st Quarter, 2006 Total Number of Engineering Design Companies: 14 Total Number of Full Tim Engineers: 2,800 Estimated Revenues in 2005: US$ 48 Million With a Growth Rate in 2005: 30% Key Players in the Country: Fluor Daniel, JGC Phils., Bechtel, Tsuneishi, Kajima Corp, Parsons, C & E Corp, EEI Corp, Eichleay Pacific, Inc., Hyundai Engineering, Foster Wheeler, Kellog, Brown & Root, Bouygues Construction, etc…

25. PROJECTIONS FOR THE NEXT FIVE YEARS IT & IT-enabled Services (Source: BOI-CICT-BPA/P) EMPLOYEES 2004200520062007200820092010 Customer Care 64,000112,000168,000218,000262,000301,000331,000 Back Office 15,00022,50036,00061,000110,000187,000299,000 Medical Transcription 3,0005,0009,00017,00034,00068,000122,000 Legal Transcription 3004506751,0131,5192,1262,764 Other Data Trans 2,0003,0004,0006,0008,00010,00013,000 Animation 2,8004,0006,00010,00017,00027,00041,000 SW Devt (Export) 10,00012,00016,00022,00033,00050,00075,000 Engineering Design 2,0002,8004,0006,00010,00015,00021,000 Digital Content 2005001,0002,0004,0008,00016,000 Workforce 99,300162,250244,675343,013479,519668,126920,764

26. PROJECTIONS FOR THE NEXT FIVE YEARS

27. THE PHILIPPINE ELECTRONICS INDUSTRY - the driver of economy SEIPI

28. CHANGING FACE OF EXPORTS SEIPI Agro-Based49% Mineral Products -18% ELECTRONICS - 3% Garments - 7% OtherManufactured Products – 10% Forest Products - 10% Others - 2% 1975 ELECTRONICS66% Garments and Textiles - 6% Machinery and Transport - 4.4% Wearables - 0.16% Food - 2.9% Motor Vehicles and Parts - 1.74% Home Furnishings - 1% Marine Products - 1% Giftwares - 0.45% Construction Materials - 0.49% Organic Products - 0.18% Mineral Products - 2.1% Others - 13% 2006 ….FROM COCONUT CHIPS TO MICROCHIPS

29. 2005 TOTAL PHILIPPINE EXPORTS SEIPI ELECTRONICS - 66% OTHERS - 34% GARMENTS AND TEXTILES - 6.0% MACHINERY & TRANSPORT - 4.4% FOOD - 2.9% MINERAL PRODUCTS - 2.1% MOTOR VEHICLE/PARTS - 1.7% HOME FURNISHINGS - 1.0% MARINE PRODUCTS - 1.0% CONSTRUCTION MATERIALS - 0.5% ORGANIC PRODUCTS - 0.2% GIFTWARES - 0.2% WEARABLES - 0.2% OTHERS -13.0% ELECTRONICS EXPORTS 66% EXPORTS OTHER THAN ELECTRONICS 34% 2006 PHILIPPINE EXPORTS

30. Source: Tradeline Philippines HISTORICAL EXPORTS OF ELECTRONICS SEIPI EXPORTS VALUE IN US$ BILLION

31. Source: Masterplan for Philippine Electronics Industry 1998 CLASSIFICATION OF ELECTRONICS EXPORTS SEIPI EMS – 26% COMPUTER REL.PROD./EDP – 20.17% CONSUMER ELECTRONICS – 2.07% AUTOMOTIVE ELECTRONICS – 1.45% COMMUNICATIONS AND RADAR – 0.98% OFFICE EQUIPMENT – 0.70% TELECOMMUNICATIONS – 0.59% CONTROL & INSTRUMENTATION – 0.06% MEDICAL AND INDUSTRIAL – 0.03% SMS – 74% COMPONENTS AND DEVICES - 74.03% EMS 26% SMS 74%

32. THE TOP CHIPMAKERS Eight (8) out of the worlds top 30 chipmakers are operating in the Philippines SEIPI TIPIIntel Philips FairchildAnalog Sanyo On SemiRohm

33. THE WORLDS TOP ELECTRONICS FIRMS SEIPI FOUR OF THE LARGEST HDD PRODUCERS ARE IN THE PHILIPPINES Hitachi ToshibaFujitsuNEC

34. DESTINATIONS OF ELECTRONICS EXPORTS 2006 USA - 13% US$ 3.3 Billion EUROPE - 19% US$ 5.1 Billion JAPAN - 18% US$ 4.8 Billion OTHER ASIA - 37% US$ 10.6 Billion Hongkong- US$ 2.8 B Singapore- US$ 2.1 B Malaysia - US$ 2.1 B Taiwan- US$ 1.4 B Korea- US$ 1.0 B Others- US$ 1.2 B Source: Bureau of Export Trade Promotion, DTI CHINA - 13% US$ 3.5 Billion SEIPI Source: 2005 Exports - Bureau of Export Trade Promotion, DTI

35. IC DESIGN: ASIC AND FPGA DESIGN, VHDL VERIFICATION (INTEL, ROHM LSI DESIGN PHILS., SANYO SEMICONDUCTOR, EAZIX, SYMPHONY, BITMICRO) IC PACKAGING DESIGN: (TI PHILS., INC., FAIRCHILD SEMICON) MODULE DESIGN, PRODUCT DESIGN (LEXMARK, EAZIX, BLUE CHIP) FIRMWARE – EMBEDDED SYSTEMS HW/SW, EMBEDDED LINUX (CANON I.T., TSUKIDEN) There is a budding silicon design and development industry in the Philippines SILICON DESIGN AND DEVELOPMENT SEIPI

36. ICs Connectors Magnet CapacitorsTransistors Actuator Packaging Materials Diodes Base & Cover Plastic Molded Parts Screws Coils Resistors PCB/ PCBA Metal Pressed Parts Spacer Ring Motors Magnetic Head Carriage Assembly …SUPPLYING THE WORLD WITH 2.5 MILLION HDD PER MONTH A GROWING BASE OF SUPPLIERS FOR HDDS SEIPI

37. Power devices Logic devices Strong in assembly, test and packaging design for semiconductor manufacturing services… …CAPTURING 10% OF THE SMS WORLD SUPPLY Memory chips Microprocessors Flash memory DSPs Opto devices Analog devices SEIPI TEST AND PACKAGING DESIGN

38. COMPETITIVENESS OF THE INDUSTRY CRITICAL MASS OF GLOBAL PLAYERS SEIPI

39. COMPANIES IN THE ELECTRONICS INDUSTRY Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA) Malaysia 2% Others 8% Europe 7% Taiwan 4% Singapore 2% Philippines 28% Korea 10% Japan 30% US 9% SEIPI 912 Firms NATIONALITY: 72% Foreign 28% Filipino

40. COMPETITIVENESS OF THE INDUSTRY PEOPLE SEIPI

41. EMPLOYMENT IN THE ELECTRONICS INDUSTRY Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA) SEIPI Over 400T engineers, technicians and operators

42. EXPORTS OF ELECTRONICS INDUSTRY EXPORTS OF ELECTRONICS INDUSTRY Source: Bureau of Export Trade Promotion, DTI 1992 2.97 B 20 % 28 % YEAR EXPORTS (in US$) GROWTH RATE % TO RP EXPORTS 1993 1994 1995 1996 1997 1998 1999 2000 3.78 B 4.89 B 7.55 B 10.61 B 14.98 B 19.87 B 25.34 B 27.07 B 27 % 28 % 55 % 40 % 41 % 33 % 27 % 7 % 33 % 36 % 43 % 52 % 58 % 67 % 72% 71 % 2003 24.17 B 2 % 68% 2004 26.64 B 10 % 68% 2005 27.30 B 2.3% 67% 2006 30.00 B 10 % 66% 200121.60 B-20 %68 % 2002 23.76 B 10 % 69 % SEIPI

43. Sources: Philippine Board of Investments (BOI) & Philippine Economic Zone Authority (PEZA) INVESTMENTS IN THE ELECTRONICS INDUSTRY SEIPI 2003 230 M 2004 443 M 2005 776 M 2006 747 M YEARINVESTMENTS US$ 40 M 220 M 1.290 B 2.160 B 1.080 B 1.470 B 670 M 790 M 1.240 B 720 M 270 M 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

44. TARGETS OF THE ELECTRONICS INDUSTRY SEIPI YEAR 2002 2003 2004 2005 2006 2007 INVESTMENTS (US $) 230 M 270 M 443 M 776 M 747 M 1.000 B EXPORTS (US$) 24.26 B 24.60 B 26.64 B 27.30 B 30.00 B 33.00 B TARGETS 11% 2% 11% 2.3% 10%

45. SEIPI YEAR EXPORTS (US$) TARGETS our industry has always been cyclical but in an upward direction this has not changed therefore we must continue to do the right things to prepare for our future success knowing that adversity always transcends unique opportunities it is up to us to make the most of it CHALLENGES OF THE INDUSTRY

46. SEIPI YEAR EXPORTS (US$) TARGETS global fundamentals are still there and supports a continued long term worldwide economic expansion world peace trends towards freer trade growing global communications enhancement accelerating pace of technological developments GLOBAL CHALLENGES

47. SEIPI YEAR EXPORTS (US$) TARGETS THE ITA AND ITS ROLE IN THE ECONOMIC DEVELOPMENT OF COUNTRIES THE RAPID PACE OF TECHNOLOGY INNOVATION THE CHALLENGES AHEAD TEN YEARS OF ITA

48. SEIPI YEAR EXPORTS (US$) TARGETS END Some men see things as they are and say, why? I dream things that never were and say, why not?

49. SEIPI YEAR EXPORTS (US$) TARGETS END