Bernardo M. Villegas
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Bright Spot in High-Value Manufacturing

           The Philippine export-oriented electronics and semi-conductor industry is facing tough times in the coming two to three years, maybe  even more, as its major markets in the U.S., Europe and Japan face recessionary forces as a result of huge fiscal and current accounts deficits of major economies, starting with the biggest of them all--the U.S. economy.  Industry analysts expect export volumes to drop by double-digit levels nearing the catastrophic declines of 2009.  There is, however, a silver lining in the dark clouds of electronic exports:  high-value manufacturing. Hitachi Global Storage Technologies (Hitachi GST) is expecting to increase its work force from 8,000 in 2010 to 10,000 in 2012.  This year, as the whole industry shrinks by 20% or more, it is increasing its volume of export by 10 to 15%.  Next year, the same growth is expected.

          Hitachi GST is located in one of the export processing zones in Sta. Rosa, Laguna.  It develops advanced hard disk drives, enterprise-class solid state drives, and innovative external storage solutions and services used to store, preserve and manage the world's most valued data.  It produces the "brain" of the computers.  It is in the same league as Western Digital, Seagate and Toshiba.  The first two do not have operations in the Philippines.  The last, also a Japanese corporation like Hitachi, also manufactures some of its products in the Philippines.  Western Digital has plants in Thailand.  There are no manufacturers of hard disk drives in Indonesia, one of our main competitors for attracting Foreign Direct Investments.

          Chandra Anamirtham, President and General Manager of Hitachi GST, is a multi-awarded CEO.  A Malaysian citizen of Indian descent, he was chosen as the Expatriate of the Year in 2010 by the ASEAN CEO Forum.  Before that his company had been consistently recognized as "Best Employer" by the Philippine Economic Zone Authority.  I know for a fact that PEZA Director General Lilia de Lima considers the operations of Hitachi GST as the harbinger of what the electronics industry should be evolving into if we are to survive the tough competition from other labor-surplus countries in East Asia.  We have to gradually move away from low-value, labor-intensive manufacturing to higher-tech, higher-value manufacturing as exemplified by Hitachi GST.  It is not easy to move upscale to higher-value manufacturing.  It takes above-average leadership as in the case of Chandra.  Not surprisingly, the company he leads was again voted in 2011 as the Most Outstanding Employer of the Year by the same ASEAN CEO Forum.

          In the books I have written about Philippine productivity, I have always maintained that there are no lazy or unproductive Filipino workers.  Contrary to "damaged culture" theories, I have always maintained that the average Filipino worker can be challenged to reach the highest level of productivity by a competent manager.  If a company is unproductive as a whole, do not blame the workers.  Always blame the managers, especially the CEO.  Filipino workers employed in high-value manufacturing operations can reach global standards of productivity if they are led by the right top executive.

          In a presentation he made to some of the leading CEOs in the country last September 2011, Chandra impressed the audience by articulating his management philosophy.  He said that products are just the end result.  If top management knows how to prioritize investing in the quality of the people and in the process, the quality of the product will come as an automatic result.  He remarked that in Hitachi GST, he and his management team put 90 percent effort to improve the quality of their people and of their process. 

          Investing in people and process has definitely paid high dividends.  In 2007, Hitachi GST gambled in transferring a major portion of its single slider manufacturing business from Mexico to the Philippines.  Since then, it has tripled its yearly mass production capacity.  In 2011, the forecast was for 120 million units produced per quarter or almost 2.3 million per day for mass production.  He then added that his factory in Sta. Rosa, Laguna has increased its new technology capacity by more than 83 times since 2008.  Its labor force increased from 5,000 in 2007 to close to 9,000 by the end of 2011 and will rise to 10,000 by 2012.  Despite the constant increase in the number of employees, unit cost has declined by some 50 percent, without any sacrifice in quality. It continues to be the no. 1 manufacturing company of Hitachi in the region.

          Focusing on people first is no motherhood statement for Chandra.  Since he took over as CEO, he has been going from one major program to another to promote employee welfare.  A non-Christian himself, he was perceptive enough to realize that the greatest source of happiness of a Filipino comes from a stable and happy family.  When he realized that a good number of his workers were just live-in partners, he managed to organize a Catholic mass wedding for the couples concerned, with the company paying for the wedding ceremonies and concomitant celebrations.  He encouraged his workers who were unable to complete their respective bachelor's degrees for financial reasons to enroll in the company's In-House Bachelor's Degree Program.  Getting the approval of the Commission on Higher Education (CHED), the company teamed up with the University of Batangas and the Technological University of the Philippines to offer courses under the Expanded Tertiary Education Equivalency and Accreditation Program (ETEEAP) with classes being held on Fridays and Saturdays in the factory site.  Over a hundred employees registered for ETEEAP.  Last November 11, 2011, some 80 graduated with degrees in engineering or business administration.  As I write this column, Chandra is already in advanced talks with a real estate developer that will provide low-cost and medium-cost housing for hundreds of his employees.

          These initiatives have fostered a strong sense of loyalty among the workers.  Attrition rate at the company is less than 5% which is much lower than that of Hitachi's plant in China, where the rate can be as high as 30% in normal times and can catapult to as high as 50% during the Chinese New Year.  Once the employees go to the provinces for the holidays, they no longer find the need to return, making it very difficult for the company to meet its commitments.  I foresee that more multinational corporations from different parts of the world will see the advantages of the Philippines in high-value manufacturing.  They must, however, make sure that their Philippine operations will be headed by an individual like Chandra who espouses the doctrine that the first Corporate Social Responsibility of a company is to take good care of its employees in all their personal dimensions, i.e. economically, psychologically and spiritually. With companies like Hitachi GST, the Philippines electronic and semiconductor industry need not fear extinction.  For comments, my email address is bernardo.villegas@uap.asia.