Fastest growing sub-sectors of manufacturing
The manufacturing sector has at least 22 major sub-sectors, making it quite a diverse industry. Like in our previous posts, we grouped these sub-sectors into three technology groups (low, medium and high), as can be see in the bar chart below which shows 2014 growth rates.
In 2014, the fastest growing sub-sectors were: Publishing and printing which grew 89% vs previous year, fabricated metal products 46% growth, beverage, 25%, furniture and fixtures, 25%. In fact, 17 out of the 22 major sub-sector experienced positive growth last year. If you want to see a full list of the sub-sectors, go to the NSCB website on Q4-2014 results for manufacturing by following this Link.
Growth of technology groups
Let’s compare the growth of the technology groups. The bar graph below shows that the low-technology group grew fastest at 10.3%, followed by the medium technology group at 8.3% and finally the high-technology group at 5.5%. Interesting to see that the low-tech sector led the growth last year. This group has the best potential to provide a lot of jobs, though at relatively low value and low productivity to the other technology groups. Its encouraging to see the medium tech ground gaining ground, with fabricated metals leading the growth. With the start up of a steel mill in Davao (see related news), and plans for future expansions (see related news), this is a good sector to watch. The medium tech group provides raw materials to the other sectors, enabling much needed integration across the value chain. These group provides fuel, cement, iron and steel, plastics and rubber. Lastly, the high tech sector is experiencing relatively low growth due to the weak demand for semiconductor and electronics. Fortunately, the sector saw a rebound towards to 2nd half of the year, and we do hope to see better growth this year. The chemical sector experienced its slowest growth in recent years after it’s very high growth rate last year, hence this could be due to base effect. We may see this sector resume it high growth rate with the start up of very large projects like the first naphtha cracker late last year (see related news).
If you would like to see the 3-year average growth of these sub-sectors, please refer to our earlier post by going to this link.
2014 is another growth year for Philippine manufacturing, with a full year growth rate of 8.1%. While it’s slower than 2013 growth of 10.5%, it was high enough to bring the three years average growth to 8%. See the bar chart below for the quarterly and annual growth rate in the last three years.
Food manufacture continues to be the largest subsector with 36% share, followed by radio, tv, communication equipment with 17% share, chemicals is third with 11% share of total manufacturing value added (MVA) in 2014.
As we’ve done in previous post, we classified the subsectors into technology groups to understand the profile of the manufacturing subsectors. Low tech group continues to dominate given the size of food manufactures. We’re seeing some diversification with the growth of beverage and furniture. Contribution of the medium technology group seems limited last year. While radio,tv, communication and chemicals continue to provide much needed diversification into the high value, high technology sector, though both sector experienced low but positive growth this year.
In our next post, we will see which are the fastest growing sectors in manufacturing, and more important, look at the bigger growth trends by technology group bearing in mind that we need a more diversified profile, with a bias towards higher value, higher technology sector for faster overall growth of the manufacturing sector.