With over 25 years of experience in the electronics industry, Surface Technology International (STI) manufactures state-of-the-art assemblies for many of the world’s leading companies in the defence, aerospace, automotive, telecoms, medical, satellite, energy and commercial sectors. Employing a highly skilled workforce of over 400 people in our UK manufacturing base in Hook, Hampshire, we have worked very hard over the last 3 years to translate all this know-how into the operations of our second facility in Cebu, Philippines, to mirror the UK.
In 2010, STI decided it needed to strengthen its foothold in Asia – operating supply chain offices in Hong Kong, China and South Korea – by looking for a manufacturing base in the region. Through our contacts, we found a potential partner who already had a factory in Cebu, the second city in the Philippines outside the Metro Manila area. STI initially explored the possibilities of a joint venture arrangement until the due diligence phase uncovered significant issues that led to a change of direction and we opted for a full buy-out instead.
The Cebu facility complements our UK offering (which is dominated by defence and aerospace customers) by catering for clients more in the industrial and automotive sectors who tend to build higher volume and lower mix products. All customers appreciate, however, the common features of high reliability, on-time delivery and superb customer service. The Cebu site is located in a designated economic zone set up specifically for foreign investment and administered by the Philippines Economic Zone Authority (PEZA). Locating here offers key benefits such as reduced red tape, lower import and export restrictions and low corporate tax rates, with businesses actively encouraged by the Philippines Government to grow and create local jobs. The PEZA people could not have been more helpful and accessible.
The facility, a 16,000-sq.ft base which employs over 200 staff, takes the lead from our UK operations in terms of its quality management processes and output quality benchmarks. We have spent a lot of time and investment in increasing productivity, staff training and retention, as well as securing important industry accreditations. Via video conferencing and webcams there is daily communication and regular sharing of best practices between our UK and Filipino operations to ensure we run a seamless operation.
In January 2013, we were delighted to receive the Aerospace standard AS9100 Rev C certification in Cebu – making STI-P the first Contract Electronics Manufacturer to get this approval in the Philippines. We are pursuing further accreditations this year.
Our move into the Philippines has definitely been a very positive experience for all employees of STI as well as our customers. It has created new opportunities to share business best practices between the two manufacturing platforms. Equally, some of the practices established in the factory in Cebu have now been introduced in the UK. The key market and customer opportunity comes from each facility having their unique strengths: we can offer our customers a wider spectrum of manufacturing capabilities along with competitive pricing and good lead times.
STI engages in local trade activities such as the Philippines Semiconductor and Electronics Convention and Exhibition (PSECE) and is also supporting the campaign “This is GREAT Britain” being run by the British Chamber of Commerce Philippines (BCCP) and promoted by the British Embassy in Manila.
The Philippines is one of the most rewarding countries in Asia in which to do business: the people are highly educated, diligent and quick learners with the added advantage that English – an official language – is widely spoken everywhere. The Government is very supportive of inward investment – with the highest birth rate in Asia, creating jobs is a priority and there are beneficial tax rates to hire Filipinos and enhance the local workforce. It’s important, however, to be mindful of the obstacles – every emerging market has its bureaucratic rules and regulations, as well as the potential for corruption. To ensure you navigate these successfully we recommend seeking expert advice from the UKABC, UKTI and take the time to get things right.
Tips and Advice
- Appreciate the culture there – people are diligent, polite, English-speaking and the workforce can be very stable and loyal
- Understand the challenges you’ll face, such as slow bureaucracy – they can be overcome but take your time and gather all the expert advice you can muster
- The Philippines government is doing a lot to support business development so tap into any incentives and programmes they have to encourage overseas investment
- Work closely with the UK government – they have expertly helped us navigate this market and have been a constant support
- Do your due diligence properly and don’t always take an answer at face value – you need to hire a good lawyer to understand the rules and regulations
- Don’t be surprised to find that life can be very basic there – infrastructure is improving, though, and the market is developing rapidly. The Philippines stock market has been one of the region’s top performers recently reflecting this optimism.
- Visit regularly and use video conferencing for regular contact
- Investigate locating in a PEZA location
- The Filipino’s always smile – its genuine!