Semiconductor devices are essential to the manufacturing of electrical products. From smartphones to cars to gaming hardware to electrical appliances, semiconductors can be found in a multitude of devices. Also known as microchips, or integrated circuits (ICs), these ubiquitous devices are critical to the global economy, and the industry has never seen greater demand. The industry is set to grow to a value of US$1 trillion by the end of the decade, according to McKinsey & Company.
As supply shortages trigger production disruptions and supply chain bottlenecks, tech companies around the world look to diversify their sources. Companies in the Philippines can tap into this demand for microchips by shipping them internationally.
In this article, we provide greater insight into the semiconductor industry and offer a guide on the customs regulations of shipping semiconductor devices globally and how to package them when shipping.
Semiconductor devices are key devices in the Philippines, capturing 10% of the global semiconductor manufacturing services market. The semiconductor and electronics export sector is also its largest export sector. According to the Observatory of Economic Complexity (OEC), the semiconductor industry in the Philippines is worth US$2.12 billion.
In 2020, the top countries that imported semiconductor devices are Hong Kong (US$16.5 billion), the US (US$12.5 billion), followed by China (US$10.8 billion), as found by The Observatory of Economic Complexity (OEC). Hong Kong, the industry’s biggest importer, accounts for 21.15% of the country’s electronics exports.
We see a global shift to adopt digital technologies, such as automation, the Internet of Things (IoT), artificial intelligence (AI), cloud computing, and 5G – all of which are supported by microchips. As consumer demand for electric vehicles, self-drive cars, and wireless communication sees an uptick, so will the parallel demand for semiconductors. According to International Data Corporation (IDC) in 2021, this demand for semiconductor devices was particularly strong in the industrial industry, with 30.2% year-on-year growth and the automotive industry at 26.7%.
What does this all mean for businesses in the Philippines? It presents local businesses with the attractive opportunity to become global suppliers of these chips. Philippines is a successful hub for Semiconductor Manufacturing Services (SMS) and Electronics Manufacturing Services (SMS) – making it easy for locals to gain access to the resources and expertise they need. Also, with English being spoken widely here, it makes it easy for foreign businesses to conduct trade and speak to sales representatives based overseas. By understanding how to ship to top export destinations, such as the US, you can seize this lucrative opportunity.
As with the shipping of all other products, in order to successfully have your semiconductor devices processed along the supply chain, having the right documentation is key. These provide international customs officials with the information they need about your chips to ascertain if they can be allowed entry into the country. Some essential documents include the commercial invoice, bill of lading, air waybill and certificate of origin. These documents contain information about the product’s contents, breakdown of costs, categories of the product, and buyer’s and seller’s details. To avoid delays during the customs clearance process, conduct adequate research and prepare all the necessary documentation.
By also providing product classification – determined by the Harmonized System (HS) code – it allows customs officials to calculate the right amount of taxes that must be paid. Most semiconductor devices are classified under the HS headings 8541 or 8542.
Customs duties and taxes vary depending on where you plan on exporting to. There are three basic ways to figure out these costs: manually calculate the cost of the goods, using software that calculates the price automatically and partnering with a shipping company that takes the work out of the calculation.
Semiconductor devices are made up of different components like transistors, capacitors, diodes, resistors and switches – which are then assembled together to form circuits. Small, fragile and expensive – these chips need to be properly packaged to avoid getting damaged or rendered useless or unusable.
Exporters need to be aware of the potential dangers of shipping semiconductors, as several environmental hazards can mean immediate damage, delays in transportation and unnecessary costs for both the supplier and the exporter. Package your chips by ensuring that they are guarded against static electricity, vibration, moisture, dust, extreme temperatures and temperature change. Use multi-layer packaging with layers of plastic and packing tape. Or read our tips on packaging to understand how you can best protect your semiconductor devices during the shipping journey.
Having a sound logistics plan in place is imperative to becoming a reliable supplier of semiconductor devices. If you’re exploring shipping lithium batteries and other electronic equipment along with semiconductor devices, also understanding the regulations related to your shipment will help you become a successful international exporter.
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