Philippines emerging as ‘friendshoring’ hub

For US global investors – HSBC

MANILA, Philippines — The Philippines is emerging as a promising destination for US and global investors looking to diversify supply chains away from China, according to HSBC Global Research.

“Though currently paused, we think low reciprocal tariffs from the US and amicable Philippine-US relations offer global investors a potential opportunity to diversify,” HSBC ASEAN economist Aris Dacanay said in a report released yesterday.

“We think the Philippines may be a budding friendshoring destination for the US as well as a destination for the China+1+1 strategy for investors elsewhere. Time to turn the tides,” he said.

With ongoing tensions in global trade and the restructuring of semiconductor supply chains, Dacanay said the Philippines could carve out a bigger role in the tech manufacturing space, especially in assembly, testing and packaging of electronic components.

But challenges such as high electricity costs, low research and development spending as well as limited labor market exposure to manufacturing have prevented the Philippines from securing a top spot as an electronics exporter.

Still, HSBC noted that recent reforms such as the CREATE Act, the Ease of Doing Business Act and policy support for renewable energy have helped revive investor confidence.

Major US companies such as Texas Instruments and Analog Devices have announced new expansion and R&D projects in the Philippines, while Samsung is also investing $1 billion to set up a new manufacturing facility.

According to HSBC, the country is in a strong position to attract investment as a low-risk alternative in Asia, thanks to its favorable ties with the US and relatively low reciprocal tariffs, currently at 17 percent.

This makes the Philippines a viable option under the “China+1+1” strategy, wherein companies look to diversify operations away from China and into US-aligned markets.

The report cited Samsung’s recent $1-billion investment as a sign of growing interest, adding that while the Philippines currently trails its peers in US market share, it has room to grow if trade dynamics shift in its favor.

The report also cited the Philippines’ improving trade ties, including the implementation of a free trade agreement with South Korea and ongoing negotiations for a similar pact with the European Union.

Dacanay noted that committed foreign direct investments from South Korea to the Philippines surged to $1.75 billion in 2024, more than triple the total of $524.4 billion over the previous decade (2014 to 2023).

However, the report also warned that global trade tensions remain fluid, particularly with the looming end of the 90-day pause on US-China semiconductor tariffs.

The Philippines, as a key node in the regional supply chain, remains vulnerable to potential ripple effects.

Still, HSBC said that if the country continues to build on its recent reforms and strengthen infrastructure and human capital, it could gradually expand its share in global electronics exports and play a bigger role in the evolving global economic landscape.

“We believe the Philippines is poised to present itself as a friendshoring destination for the US. Potentially lower tariffs, an attractive demographic, ready infrastructure for the industry and a friendlier relationship with the US should give all the right signals to global investors,” Dacanay said.