Semicon firms ask government to cut cost of power by 50%

Semiconductor firms are asking the government to cut in half the power cost in an attempt to temper the negative impact of the continued appreciation of the peso against the dollar.

“It would help us if the power cost is decreased by more than half the current rates,” Melba A. Cuyahon, Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) board director and vice president and general manager of NXP Semiconductors told reporters.

In a press conference, Cuyahon said the current level of P11 to P12 per kwh charged is not competitive when compared to the P5.5 to P6 per kwh in other countries like China.

Initially, SEIPI chairman Arthur J. Young Jr. said they can live with P8 to P10 per kwh. “That is already palatable to us,” he said.

The government has already lowered the power cost imposed on makers of semiconductors located in economic zones to help the export industry cope with the strong peso.

“The government is helping us bring down the cost of doing business by reducing the power generation cost by 20 percent,” Ernesto B. Santiago, executive director of SEIPI said.

Santiago said they are still negotiating for more power rate cuts in order to help exporters deal with the “uncomfortably strong peso.”

Santiago stressed the adverse effects of the currency to the export business. He estimated that for a small semiconductor exporter, the loss is $400 for every P1 dip. “It gets bigger as the company gets larger,” Santiago noted. “The companies are just biting the bullet,” Santiago explained.

The peso, which was trading at 52 to a dollar, broke into the 47-to-a dollar territory in April and further to 45 to $1 level because of strong dollar inflows.

Another way the government can reduce the cost of power, he said is by reducing or removing royalties on natural gas. Currently, the government is imposing P1.50 royalties for the use of natural gas.

Santiago lamented that in other countries, royalties are only imposed when the natural gas will be used in places other than the country it was sourced. Since SEIPI is based locally, he said they should not be paying any royalties.

However, he said they are open to discussions. “We can discuss how much they are willing to give up. Hopefully they can bring down the royalties to P0.70,” Santiago explained.