Philippines - Commercial Guide
Information and Communications Technology

This is a best prospect industry sector for this country. Includes a market overview and trade data

Last published date: 2020-07-20


Economic and population growth further signal the dire need to invest more in modernizing digital infrastructure, which has only been accelerated by the pandemic. 

Speedtest Global Index documents Philippine mobile internet speed at 14.24 Mbps (global average 30 Mbps) and fixed broadband speed at 23.80 Mbps (global average 74.64 Mbps).  For many years, internet speed in the Philippines ranked lower than Syria, and was the slowest in Asia. Cellular coverage is spotty at best, due to a long lasting duopoly between two major players that have not encouraged investment in the sector. The nation of 109 million people and 7,000 islands only has 20,000 towers. Regulatory change is expected to allow for a third player and for common towers, but the vested interests have close relationships with the Government in order to craft policies to their advantage. 

Government processes are papercentric, requiring the submission of physical documents even after taxes or other paperwork is filed online. That being said, digitization efforts had been called for and should progress due to the pandemic. However, the Government will need funding and masterplanning assistance to set standards and implementation procedures for ICT solutions. The Department of Information and Communication Technology was formed in 2016, but has been unable to set nation wide standards or lead on policy issues due to a variety of causes including frequent staff turnover. 

Recognizing the challenges and realities above, the Duterte Administration’s goal is to embark on a digital transformation program to innovate government agencies. Immediate priorities include a cloud data center, software development for business process improvement, the conversion of local government units into smart cities, cybersecurity solutions for data privacy protection, and improving the internet and mobile services landscape through a national broadband plan.

The Philippines' growing middle class and the young population are also important drivers of IT demand because their spending levels on technology products are on an upward trajectory, benefitting premium brands. Infrastructure investments in the Philippines are another source of opportunity. The road, railway, airport, bridge, and port systems built will require, at a minimum, design software, building information modeling (BIM) for better project management, and file-sharing applications. These will drive demand for hardware, software, and services.

The Philippine Government, the business process outsourcing (BPO) industry, the financial sector, health, education, and the telecommunications industry are key vertical markets for IT. The Philippine Government showed its strong support for the industry by establishing its own Department of Information and Communications Technology (DICT) in 2016. Details on the DICT's projects are listed under "Market Opportunities."

Leading sub-sectors

There are four leading sub-sectors with commercial opportunities for U.S. companies:

Having a robust social media savvy population with few data protection mechanisms makes the Philippines extremely vulnerable to cyber-attacks and incidents. In 2019, one study placed the Philippines as the 5th country most likely to be attacked, following Algeria, Nepal, Albania, and Djibouti. In 2016, local firm Comelec suffered the biggest data leak in Philippine history, the data for 70 million voters. While e-payment apps and fintech solutions are embraced, security mechanisms lag, leaving vulnerable assets unprotected. In 2019, Microsoft documented that the Philippines could incur economic losses of $3.5 billion due to cybersecurity threats. The Government issued a Data Privacy Act of 2012, setting data protection standards, and recommending all entities to hire a Data Privacy Officer. However, there is limited enforcement. 

Market Opportunities
While the Government will need to purchase cybersecurity solutions, the immediate opportunities would most likely be in the private sector, especially as firms reposition themselves in the new normal and work from home. The Philippines is the home to a very robust business process outsourcing (BPO) industry, which may transition to a more of a work from home model in the future. Engaging with private sector business, U.S. firms would not have to deal with the complicated government procurement process. That being said, some potential government tenders may be worth the time and effort due to their size and scale. Firms targeting such opportunities would need to be prepared to spend years building relationships, helping define specifications, and waiting for funding to become available.  The DICT has launched a National Cyber Security Plan 2022 which has two components. The first component, valued at $10 million, has created a National Computer Emergency Response Team (NCERT), and a Security Operations Center (SOC). The SOC serves as the government think tank to study and address online threat development and risk management issues. The second component, valued at $40 million, is the roll-out of cyber security infrastructure from hardware to software, including capacity building training for all the national and local government agencies. With patience and relationship building, U.S. firms may be able to secure portions of business from these government projects as well. 

Software and Services
BMI forecasts that Philippine software and software service sales will reach $78.4 million by 2024. Enterprise application spending was the strongest area of spending in 2018-2019, making up two thirds of total software spending. The 2018-2019 year coincided with the end of extended support for Microsoft 7, which further led to software purchases. The remaining one-third included database storage and management solutions.

Enterprise Applications: More than 400 software firms operate in the Philippines with U.S. and European firms dominating in the enterprise application segment. Domestic consumers include large private sector entities seeking digitization solutions in HR, accounting, business intelligence and data warehousing. The need for digitization is high in the Philippines, which favors paper heavy bureaucratic processes, and lags global standards regarding internet speed and ICT utilization.

Data Hosting: The data hosting and processing segment is expected to grow as more firms seek to utilize cloud solutions for efficiency and resilience purposes. Local telcos Philippine Long-Distance Telephone Company and Globe Telecom are increasing data center bandwidth to service more customers. The Asia Cloud Computing Association ranked the Philippines 8th in terms of cloud readiness out of 14 countries in 2018. Large local firms are the consumers of cloud solutions, utilizing regional hubs in Singapore. The Government is also making efforts in the area, and created a Government cloud for employee email, national archives management, and online payment systems.

Market Opportunities
The BPO industry is be one of the biggest consumers of software solutions in the Philippines, valued at $24 billion in 2018. However, this industry is made up of foreign firms, likely to purchase software solutions from their home countries. The second group of consumers would consist of the more significant local players, including banks wishing to pursue greater efficiency and security, hospitals seeking virtual platforms, conglomerates looking into cloud solutions, and telcos. BMI reports that while SMEs account for 65% of employment and 32% of GDP, over 95% are not equipped with their businesses' digital tools. Offering simple cloud tools could be the first step in securing larger business opportunities. Other sectors that have software needs include the retail, manufacturing, and fintech sectors.

The Government is also a potential consumer as it works on its Philippine Digital Transformation Strategy with a budget of $800 million for 2020. The strategy seeks to improve the digital infrastructure, interconnectivity, ease of doing business of the Government using innovative tools and solutions. Software development for the revenue management system, cloud storage for government agencies, a national ID system, and a one-stop online shop for business processing are projects in the pipeline.

Smart Cities
The Philippines is facing formidable challenges as its economy and population rapidly grow. Horrible traffic, the slowest internet in Asia, and an antiquated infrastructure hinder the nation from reaching its full potential. A study noted that the Philippines loses $1.5 billion a day due to traffic. A cash-based economy further hinders the efficient delivery of services. The nation needs many solutions at the national and local levels. The Government needs to digitize services, fund infrastructure projects and set standards for data storage, protection, and utilization. Cities need to do similar things at a local scale, digitizing services, collecting revenue, and increasing accessibility and efficiency.

Market Opportunities
Smart Cities is indeed a popular term in the Philippines but there is no national standard or policy on the specifics. The Government is not procuring any national level solutions and individual cities are left to their own devices to make procurement decisions based on their respective needs. In 2018, the top four cities with the highest business revenue to invest in infrastructure development were Makati ($280 million), Manila ($209 million), Pasig ($197 million), and Quezon City ($323 million). In addition to other major cities in the metro region, non-Metro Manila are also options to consider. These include Cebu and Davao, both part of the Association of Southeast Asian Nations (ASEAN) Smart Cities Network.

Another angle to explore would be private sector land developers such as Ayala Lands, SM Prime Holdings, DMCI, Megaworld, Filinvest, and Robinsons Land. Such developers could potentially be considered as small cities with specific needs that could be fulfilled through U.S.-provided solutions.

The Philippines telecommunications industry has long been dominated by legacy players Philippine Long-Distance Telephone Company (PLDT) and Globe Telecom. A lack of Government regulatory intervention has led to an extremely saturated market with a duopoly that does not foster competition. 

market is split between the two players who offer similar pricing. Globe Telecom has 94.2 million mobile service subscribers and 2 million broadband subscribers. PLDT has 73.1 million mobile subscribers and 2.1 million broadband subscribers. Legacy players face no penalties if the spectrum is not utilized or if services are not launched. While they have made some investments, the nation still only has 20,000 towers and needs 50,000 more to ensure appropriate mobile cellular coverage.

New entrants, including other local conglomerates, have been hesitant to enter the market. Foreign firms have been even more bearish due to foreign ownership restrictions in sectors designated as public utilities. However, the Duterte Administration has sought to change this by introducing a third telecom player, and a new Common Tower Policy.

Telecom (formerly Mislatel) is a consortium poised to begin operations in March 2021. The Common Tower Policy was also released in June 2020. These changes are intend to disrupt the duopoly, encourage meaningful and expanded investments by the legacy players, and lead to better pricing and connectivity for Filipino consumers. However, strong pressure from vested interests have led to watered down efforts which do not signal a policy framework that would truly allow for a competitive business environment to benefit new entrants and the Filipino people. 

In addition to reforms in the private sector sphere, the Government is also making efforts to reach underserved areas through a National Broadband Plan. With a budget of $450 million, the plan has five components that include bypass cable and fiber optic network layout, national free-Wi-Fi, satellite overlay, and a common tower policy.

Market Opportunities
The market will change as reforms are pursued. With full foreign ownership possibilities in the telecom sector if the pending Public Services Act is passed, foreign investors will have greater control and likely more significant incentives to pursue the market. The 167.3 million mobile subscribers would readily switch to an option with better coverage and economical pricing.

The market expects that local telco players to upgrade their network capabilities, install fiber-optic and sub-sea systems and cables, purchase modern networking equipment/storage/servers, and utilize cloud and cybersecurity services. The biggest purchasers of such equipment would be the two legacy players and the third telecom. Globe and PLDT`s 2020 CAPEX is above $ 1 billion, and Dito plans to spend $5 billion on the rollout of its services in the next five years. All players are price sensitive and significantly purchasing Chinese equipment. However, recent incidents have signaled the importance of diversification, and some business is expected to go to U.S. firms.

The market also has a growing segment of broadband providers, such as Converge ICT, One Sky, Rise Enterprise, InfiniVAN, Now Corporation, PT&T, Planet Internet, and Radius Telecom and members of Philippine Cable Television Association (PCTA). Such players are increasing their broadband capacities. Converge plans to spend $1.8 billion in a 5-year effort to layout a fiber optic and domestic subsea network to secure 30% of the country’s broadband market share. Other firms also have sizable expansion plans.

Consumer Electronics
Apart from the four leading sub-sectors, the Philippines is also considered a competitive market  for consumer electronics.

The mobile device market is the largest, making up over 55% of all consumer electronics related spending. About 44 million of the 107 million population owns smartphones, and a CNN report noted that Filipinos spent an average of 10 hours online a day, with 144 minutes being spent on social media. Long commute times and computer-based work likely are significant contributors. Even for those who do not have smartphones, mobile

phones are necessary, and used to send and receive money for most of the unbanked population.
In 2019, Huawei phones were prevented from using Google services due to President Trump's ban being instituted. This means that new Huawei phones cannot come preloaded with Google apps or use some Google services. The competitive edge of Huawei phones will drop, leaving a market for other players. Computer hardware sales will increase as more first-time computer owners emerge. The phasing out of Microsoft 7 (which still accounts for 30% browsing traffic) will induce new purchases. The audio-visual segment will see growth with more users buying their first flat-screen televisions. The analog switch off will also promote further purchases. 

A much smaller market would include premium products such as smartwatches and fitness trackers, possibly purchased by young professionals living in cities. This new group is empowered to use disposable income on such luxuries. The nation's actual purchasing power is also distorted by the $33 billion in remittances that enter the country.

Market Opportunities
Philippine consumer electronics market spending from 2020-2024 should reach $8.1 billion and spending in 2020 alone should be around $6 billion. The most popular subsectors would include mobile handsets, computer hardware, and audio-visual devices. Many favorable factors have poised this industry for continued growth. The first would be that the Philippine economy has been consistently growing for years and that 60% of its population is under 23 years old. A new middle class is also emerging, and it is estimated that 1.5 million households will reach an income of $25,000 by 2024. This group will purchase consumer electronics for the first time, and is eager to own mobile devices, televisions, and possibly computers.


Department of Information and Communications Technology: 
National Privacy Commission: 
National Telecommunications Commission: League of Cities of the Philippines: 
Globe Telecom 2019 Annual Report: 
PLDT and Smart 2019 Annual Report: