Exports of electronics and semiconductors, which make up more than half of total shipments, hit bottom in the first quarter, with demand slowly returning due to low inventory levels worldwide, an industry official said yesterday.

Shipments of electronics products contracted an annual 33.9 percent in March from a year ago after falling more than 40 percent each month since December.

Exports of electronics and semiconductors slumped 42.56 percent in the first quarter from a year earlier. But shipments of these products surged 19.9 percent in March against February.

"There’s enough data points that we believe that we’ve seen the worst in the first quarter," Arthur Young, chairman of the Semiconductor and Electronics Industries in the Philippines, told Reuters. "We definitely believe the bottom has happened."

He said the sector would likely see a contraction of 20 percent at best in exports for the full year this year after an 8.3 percent fall in 2008.

The government expects overall merchandise exports will drop 13-15 percent this year, with imports seen contracting 12-14 percent.

The Philippines supplies about 10 percent of the world’s semiconductor manufacturing services, including assembly of mobile phone chips and micro processors.

Merchandise exports declined 31 percent in March.

Exporters continued to expect a better performance for the second half of the year, as the excess electronics supply gets used up and demand picks up anew.

Clothing and other apparel exports, 4.6 percent share of total, declined 19.2 percent at $134.81 million from $166.88 million in 2008.

Woodcrafts and furniture followed as the third top earner in March 2009 with total revenue of $85.81 million or a share of 3.0 percent to the total export receipts. It fell by 20.4 percent from $107.79 million in March 2008.

Comprising the top five exports were copper export which declined by 45 percent at $52.21 million compared to $94.98 million a year earlier, and products manufactured from imported materials on consignment basis which declined by 23.8 percent at $51.26 million from $67.27 million.

Philip Edward B. Sagun, Philippine Export-Import Credit Agency (Philexim) vice president, said that while the figures point to further contraction, there is an indication that semiconductor demand is partly approaching the actual supply.

"During the crisis, there was an excess capacity and manufacturers opted for this excess capacity utilization. Right now, because of this utilization, the demand is now reaching the available supply," said Sagun.

"So exporters are expecting an uptick in the second half," he added.

Sagun however said the overall condition still depends on how the US market will recover given that the US remains the biggest market of the Philippines. Since the effect of the US crisis is to be felt only this year, Sagun said that exporters’ utilization focus has been shifted to the local consumer market.

Focusing on the domestic market however gives manufacturers lower margin.

The US, including Alaska and Hawaii, remained to be the country’s top export market with $503.27 million receipts, accounting for 17.3 percent of total export. This was however was lower by 26.5 percent from $684.33 million a year earlier.

Japan, including Okinawa, is second, 15.4 percent share, with $446.74 million, a drop of 37.6 percent from $716.11 million in 2008.