JAIME AUGUSTO ZOBEL DE AYALA 1 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
JAIME AUGUSTO ZOBEL DE AYALA Philippine Manufacturing Summit November 29, 2016 | Makati Shangri-la Hotel KEYNOTE ADDRESS
Good morning to everyone. Thank you to Secretary Ramon Lopez and the DTI for inviting me
today. I am especially delighted that we are gathered here to discuss the potential of
manufacturing, which is a timely and exciting opportunity for the Philippines.
JAIME AUGUSTO ZOBEL DE AYALA 2 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Today, I would like to touch on why we believe the Philippines is well-positioned to
capture the opportunities in manufacturing. I hope that the video we just showed gave
you a sense of why we believe we can leverage the country’s unique proposition as a
viable destination in this space.
Let me begin by giving an overview of the environment today and why we think it is ripe
for investments in this field.
JAIME AUGUSTO ZOBEL DE AYALA 3 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
First, we have an economy that has been able to sustain its growth momentum against
global economic and geopolitical headwinds and natural disasters. Sound fiscal
management, structural reforms, and good governance implemented by past leadership
teams have created an enabling environment for enterprises to participate in sizeable
investment opportunities.
JAIME AUGUSTO ZOBEL DE AYALA 4 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Second, we have an abundance of qualified workers that can support a resurgence in
manufacturing. We have a highly adaptable human capital base of professional, skilled, and
unskilled workers that can be readily employed to take on manufacturing roles. In addition, we
are entering a demographic window that will result in a highly productive workforce over the
next decade. Last year, there were 37 million Filipinos between the ages of 24 and 55. By
2050, this is expected to rise to over 60 million within that age group.
JAIME AUGUSTO ZOBEL DE AYALA 5 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Lastly, the emerging trends in global manufacturing operations present a unique
window for the Philippines to establish itself as a pioneer in high-value operations in
the Southeast Asian region.
Technological breakthroughs that enable extreme connectivity and extreme automation
around trends such as artificial intelligence, robotics, the Internet of Things, and autonomous
vehicles are disrupting business models in an accelerated pace.
While it is difficult to predict how this technological transformation will unfold in the long run,
the magnitude of these changes are starting to reshape economies, industries, and societies.
JAIME AUGUSTO ZOBEL DE AYALA 6 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
In particular, disruptive technology-driven trends such as autonomous driving and
electrification are redefining the global automotive sector. With growing global vehicle
production, the rise of hybrids and electric cars, as well as constant innovation in automotive
systems, the current 40% share of electronics in the total cost of a car is estimated to increase
to over 50% by 2025.
JAIME AUGUSTO ZOBEL DE AYALA 7 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Moreover, there is an emerging shift in supply chain strategy, where manufacturers are
increasingly finding it more sensible to produce their goods closer to their core
markets. This is also known as “nearshoring” or “build where you consume”. The rising
cost of manufacturing in China, concerns on intellectual capital protection as well as on
customer responsiveness and turnaround time of the supply chain have made distance
outsourcing less compelling in recent years.
There are increasing examples of manufacturers who have shifted to “nearshoring”. Let me
cite a few. Three years ago, Lenovo set up a production line for personal computers in North
Carolina to better serve its US-based customers. Spanish-owned Inditex, which owns the Zara
retail chain, keeps more than half of its apparel manufacturing within Spain, Portugal, and
other nearby countries to allow its brand to respond better to fast-moving fashion trends.
JAIME AUGUSTO ZOBEL DE AYALA 8 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Our group has also made a similar move. IMI, our electronics manufacturing company,
strategically established its automotive electronics division in Bulgaria for proximity to the
original equipment manufacturers based in Europe who are the end-users of its products.
Reflecting on these emerging trends, I believe the Philippines can position itself as a
viable destination for manufacturing investments.
JAIME AUGUSTO ZOBEL DE AYALA 9 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
We all know the unprecedented growth that our automotive industry has achieved in recent
years. Since we reached the motorization point of 2,500 dollars in GDP per capita in 2012,
vehicle sales have been growing at an average rate of 18% annually. However, out of the
320,000 units in vehicle sales recorded last year, only 30% are locally manufactured. I believe
this presents a compelling opportunity to take on a “build where you consume” strategy for the
Philippine automotive industry.
JAIME AUGUSTO ZOBEL DE AYALA 10 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Traditionally, our manufacturing industry has been focused on the lower end of the value
chain. For many years, the semiconductors and electronics segments have been the most
dominant contributor to the industry. We are one of the top producers of electronic products
and traditional automotive components globally.
JAIME AUGUSTO ZOBEL DE AYALA 11 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
While this is not a bad thing, the disruptive trends that are taking place in the global automotive
space have opened up a host of untapped opportunities that the country can leverage to move
up the value chain. I view this as a unique but fleeting window for the Philippines to pioneer in
an emerging ecosystem and carve out a niche in higher-value areas of automotive
manufacturing. Allow me to elaborate on this by citing our own experience in the Ayala
group and the transformation story of IMI.
JAIME AUGUSTO ZOBEL DE AYALA 12 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
As you saw in the video, IMI in recent years has evolved to become a global provider of
electronics manufacturing services for the automotive, industrial, medical, and
telecommunications industries.
JAIME AUGUSTO ZOBEL DE AYALA 13 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
It has established a diversified geographic footprint and today, it now counts China, Eastern
Europe, and Mexico as its largest markets outside the Philippines, employing 14,000
individuals.
JAIME AUGUSTO ZOBEL DE AYALA 14 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
IMI was founded by the Carlos family of the Resins group 36 years ago. Shortly after, Ayala
partnered with the family. IMI then was a computing assembly operation targeting the
Japanese market.
JAIME AUGUSTO ZOBEL DE AYALA 15 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Over a decade ago, IMI made a deliberate move to reinvent itself in response to the challenges
and volatility of the global economy. It diversified into fast-growing and high-margin segments
to create differentiated solutions that enable its customers to redefine their industries. These
segments continue to drive IMI’s growth amidst challenges in the global manufacturing sector.
Today, IMI is the 21st largest EMS provider and the 6th largest automotive EMS supplier in the
world.
JAIME AUGUSTO ZOBEL DE AYALA 16 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
IMI has found a niche in manufacturing extremely complex safety and control systems for
automobiles. Its automotive camera modules are a component that goes into the advanced
driver assistance system or ADAS applications. ADAS is a safety system developed to avoid
collisions and accidents using “sensing cameras” that IMI supplies to some of the leading
global tier 1 manufacturers. ADAS is the fastest growing market in automotive, estimated to
grow at an annual compounded rate of 15% by 2020.
JAIME AUGUSTO ZOBEL DE AYALA 17 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
We are seeing great potential in automotive camera modules as the industry increasingly
moves towards self-driving cars. A study by the World Economic Forum shows that 78% of
business leaders believe that driverless cars will equal 10% of all cars on US roads by 2025.
JAIME AUGUSTO ZOBEL DE AYALA 18 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
IMI continues to expand its technology and product portfolio. Last August, it acquired a 76%
stake in German company VIA Optronics, a leading optical bonding and display solutions
provider. VIA’s proprietary technology strengthens IMI’s position in offering complementary
automotive camera and display monitor solutions for ADAS.
JAIME AUGUSTO ZOBEL DE AYALA 19 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Further, our group partnered with KTM, the largest motorcycle manufacturer in Europe, to
distribute and manufacture motorcycle models in the Philippines under the KTM brand. Initial
plans for the manufacturing facility is to have an annual production of 20,000 units, primarily
for export to China and subsequently, to other Southeast Asian countries. This manufacturing
facility will be located in IMI’s complex in Laguna.
JAIME AUGUSTO ZOBEL DE AYALA 20 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Early this year, we also formed a new unit called AC Industrials, to take advantage of
opportunities in emerging trends in the global automotive manufacturing space. We are
currently assembling a portfolio of investments in industrial technologies to be housed under
AC Industrials, including IMI and our automotive dealership unit AC Automotive. Through IMI
and AC Automotive, we are leveraging our group’s experience and expertise to deepen our
presence across a wider spectrum of the automotive value chain—from manufacturing, to
distributorship and dealership, to assembly, and to tier 1 technologies.
JAIME AUGUSTO ZOBEL DE AYALA 21 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
IMI is only one of the many examples of how an organization’s ability to innovate, quickly adapt
to evolving landscapes, and take a certain level of risk can successfully transform itself,
compete globally, and maintain its relevance in a changing economic environment.
JAIME AUGUSTO ZOBEL DE AYALA 22 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
The final point I want to make revolves around public-private partnerships. Achieving
a sustainable revival of the manufacturing industry will require collaborative efforts
between the government and the private sector.
With an environment that is ripe for transformation, I believe that the Philippines can position
itself as a viable destination for automotive manufacturing investments if we can work together
in addressing some of the key challenges. It is for this reason that I welcome this gathering
today.
JAIME AUGUSTO ZOBEL DE AYALA 23 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
First, I believe it is imperative that we develop an integrated country strategy for the
manufacturing sector under a single and unified roadmap across the entire spectrum of the
supply chain. The country strategy should cover a wide range of areas like policies, incentives,
as well as mechanisms to empower the micro-, small-, and medium enterprises, who are
important participants in the manufacturing supply chain. In addition, this entails collaboration
across different government agencies such as the DTI and the DOST.
JAIME AUGUSTO ZOBEL DE AYALA 24 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Second, we need to accelerate investments in infrastructure development, particularly in
transport. The current administration is already addressing this gap with a target to raise
infrastructure spending by at least 5% of GDP in 2017.
JAIME AUGUSTO ZOBEL DE AYALA 25 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
Finally, the government and the private sector can collaborate in retooling and building new
skills in our existing workforce. While we have a qualified workforce that can be readily
deployed to take on varying levels of manufacturing roles, the accelerated pace of
technological disruptions can result in a potential skills gap. We need to develop a workforce
who are agile and can be highly flexible to changes.
JAIME AUGUSTO ZOBEL DE AYALA 26 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
We are putting our money where our mouth is. Our group has embarked on a related endeavor
through AC Education. We partnered with UK-based Pearson Education to set up APEC
Schools, a high school designed to train its students with the skills and values relevant to
employers and help them achieve the best possible career tracks out of high school. APEC
Schools uses a blended learning model—combining digital content with traditional methods—
which integrates practical and soft skills into the curriculum. To date, APEC Schools have over
10,000 students enrolled in 27 sites in Metro Manila and nearby provinces.
JAIME AUGUSTO ZOBEL DE AYALA 27 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
In conclusion, I believe that the disruptive trends taking place in the global automotive
space have opened up a host of untapped opportunities that the country can leverage
to move up the manufacturing value chain. I view this as a unique window for the
Philippines to pioneer in an emerging ecosystem and carve out a niche in higher-value
automotive manufacturing.
JAIME AUGUSTO ZOBEL DE AYALA 28 | P a g e Keynote Speech Manufacturing Summit November 29, 2016
I am a strong supporter of a sustainable resurgence of the Philippine manufacturing industry,
both as a way for our country to remain globally relevant and as a way to create employment
with greater scale. With its enormous and inclusive job generating ability and large multiplier
effect, a robust manufacturing industry can truly stimulate economic prosperity for a broader
segment of Filipinos.
We are all ready to do our part, and I believe that with stronger collaboration, we will be able
to take this engagement to the next level and bring this aspiration to fruition.
Thank you.