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US chipmaker maintains local spending plan ahead of changes in incentives scheme

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CALIFORNIA-BASED chipmaker Maxim Integrated, Inc. is maintaining its capital expenditure program in the country next year despite the semiconductor industry’s concerns over the government’s plan to change its fiscal incentive policies.

“For test, this year, I look at Thailand and here, our current forecast, is $16 million. So that’s $10 million here. It’d run around that number,” Maxim Integrated’s Asia Factory Operations Vice-President Richard Cohen said in an interview after the company’s media tour of its facility in General Trias, Cavite on Tuesday.

The distribution of capex between the two Asian countries “depends a little bit on the program and where the product is growing,” he said.

“But it’s on the 40-60 range, [with] 60% going here,” Mr. Cohen added.

Its local unit, Maxim Philippine Operating Corp., usually gets the bigger share of test operations funding as the site is much bigger compared with Thailand’s.

On manpower alone, its Thailand site employs 1,000 people while the Philippines, where operations started earlier, has 2,700.

Electronic product testing in Maxim Philippines accounts for 70% of the overall operations in the county. It is focused on testing mainly integrated circuits to ensure that each die meets commercial standards.

A die is a small block of semiconducting material on which integrated circuit parts and functions are fabricated.

Mr. Cohen noted that the Philippine operations have been posting a 6% annual sales growth, in line with the 6% to 8% target of Semiconductor and Electronics Industries of the Philippines, Inc. (SEIPI) in the next few years.

“But we can’t further [give forecasts beyond] that. What I can say is we’re growing and the market looks like it will continue to grow,” Mr. Cohen said, adding that the global demand for technologically advanced automobiles will be propelling the industry’s growth.

“Automotive has had a steady growth. It’s growing double-digit,” he added.

Asked whether the uncertainties he mentioned in the middle of the year is still felt, Mr. Cohen said: “There are always uncertainties, we’re always looking at that, but everywhere there’s uncertainty.”

In June, he issued a statement during a SEIPI press conference stating his concerns when the Tax Reform for Attracting Better and High-quality Opportunities, or the Trabaho bill, was discussed.

House Bill No. 8083, which makes up the second package of the Tax Reform for Acceleration and Inclusion, was approved for final reading at the lower house and the Senate has commenced deliberations of its own version.

The bill aims to streamline corporate fiscal incentives by removing those deemed to be impairing government revenues. As such, it seeks to keep only those perks that meet industry performance standards and puts a limited time period for incentives to be enjoyed.

If enacted, the measure will gradually reduce the corporate income tax (CIT) rate to 20% from the current 30% over a 10-year period.

SEIPI has proposed a 10% CIT inclusive of the local business tax and the real property tax. The proposal seeks to make the Philippines at par with the incentives offered by regional neighbors for foreign businesses.

Maxim Integrated said it would focus on the long-term positive effects that the incentives rationalization could carry out, particularly on infrastructure, hoping that the results can justify the means.

“SEIPI has made comments on that, but whatever it ends up being, we’d have best environment work in and figure how to make it work,” Mr. Cohen said.

“There’s some very positive thing that come out of government investment before. If as a result infrastructure improves, things like that, there’s a positive benefit that offsets increased taxes,” he said. — Janina C. Lim