The US is working to secure critical mineral supply chains and cement its dominance in AI. Its strategy: Pax Silica.
Critical minerals are essential to semiconductor manufacturing, the electricity infrastructure powering AI data centres, renewable energy technologies and advanced weapons systems. China’s dominance of their supply chains therefore presents a strategic vulnerability for the US, even as American firms retain an edge in key areas of semiconductor design.
Through Pax Silica, Washington is seeking to reduce that dependence and reshape the supply chains underpinning the AI economy. The Philippines signed on to the initiative in April 2026, joining 24 other signatories. For Manila, Pax Silica offers an opportunity to attract investment and strengthen its role in the semiconductor industry, but also places the country at the centre of intensifying strategic competition between the US and China.
The Imminent Invasion of Taiwan
One reason the US is looking at the Philippines is because of its dependence on Taiwan, which currently accounts for 60% of global semiconductor manufacturing and more than 90% of the world’s most advanced chips. Most of these chips are produced by Taiwan Semiconductor Manufacturing Company (TSMC), a key supplier to US firms including Apple, Microsoft, Meta, Google and Tesla. With the looming risk of Taiwan being invaded by China the US is considering moving production elsewhere.
The Strategic Value of The Philippines
Although the Philippines has joined Pax Silica, the US and Philippine governments have yet to finalise a separate agreement for the proposed 4,000-acre industrial hub located in New Clark City, near the former US air base at Clark, which is intended to host semiconductor and other advanced manufacturing facilities.
The Philippines is being positioned as a potential alternative to Taiwan, or at least as a strategic US partner in diversifying semiconductor manufacturing.
A central aim of Pax Silica is to diversify critical mineral refining, over which China holds a near-total monopoly. The Philippines, the world’s second-largest nickel producer, exports most of its mined ore to China for refining. Indonesia, the world’s largest nickel producer, took a different approach, banning raw nickel ore exports in 2020 to encourage domestic processing and attract investment from Chinese companies in refining facilities. Pax Silica might allow the US to replicate China’s nickel strategy in Indonesia by developing refining capacity in the Philippines.
Although its semiconductor industry is smaller than those of South Korea and Taiwan, the Philippines already has an established industry that the US could build on.
“We’re not starting from scratch. The semiconductor industry’s been with us for many decades,” said George Manzano, an economics and free-trade specialist at the University of Asia and the Pacific. He also highlighted the country’s workforce, saying: “Filipinos have pretty good human capital, they speak English, they’re easily trainable, and there are plenty of young people.”
“The Philippines has strategic advantages, including semiconductors, critical minerals, advanced manufacturing, AI-related technologies, engineering talent and our geographic position in Southeast Asia,” says Datu Alimatar Garangan, co-founder of a recently launched fintech company.
The Philippines’ history as an American colony and its longstanding ties with the US make it a natural strategic partner in Washington’s eyes. The country also has a longstanding territorial dispute with China in the South China Sea, where Beijing has ignored a 2016 international tribunal ruling in Manila’s favour and Chinese ships continue to confront Philippine vessels. In September, Jefferson Chua, who was with Greenpeace Philippines at the time, said: “It’s no wonder that Pax Silica is being built near a former US base. It’s a signal to investors that it’s okay.”
While other countries across Southeast Asia are experiencing a data centre boom, raising concerns that they risk becoming little more than digital landlords to multinational tech companies, the Philippines has an opportunity to carve out a more substantial role in the AI supply chain.
Can the Philippines Turn Pax Silica Into Economic Power?
“The choice of not going for Pax Silica is also a choice with consequences: If you don’t choose Pax Silica then what? Then it’s your job to provide an alternative”, said Annette Balaoing-Pelkmans, a trade and development economist.
Pax Silica is being advertised to the Filipino public as a way to provide higher paying, higher skilled jobs, boost the economy, increase investment and overall benefit the Filipino people.
The Bases Conversion and Development Authority (BCDA), the government agency overseeing the development of New Clark City, is playing a central role in plans to establish a semiconductor manufacturing hub under Pax Silica. The BCDA president said the proposed hub could attract USD 40-70 billion in investment and generate USD 200 billion in exports.
Giovanni Tapang, a professor at the University of the Philippines and convener of Advocates of Science and Technology for the People’s Pax Silica network, is sceptical of the BCDA’s projections. Tapang questioned what the proposed hub would add to an industry that already generates substantial export revenue. “They’ve been saying that it will bring around 200 billion dollars over the next 30 years, but the Philippines has been producing well over 200 billion dollars over the last 30 years [in semiconductor manufacturing]. And therefore, what’s the difference of this high-end manufacturing? Just more of the same type of jobs.”
The Philippines exported USD 34.62 billion in semiconductors in 2025 alone.If annual exports remained at that level, cumulative exports would reach USD 200 billion in just under six years, far sooner than the proposed hub’s 30-year export projection. This comparison underscores Tapang’s point that the Philippines already has a substantial semiconductor export industry, raising questions about what additional value the proposed hub would bring.
Without a finalized framework agreement, it remains difficult to assess how the proposed investments will be allocated, what commitments underpin the projected export growth, or what tangible economic benefits the Philippines can realistically expect.
Dominic Ligot, data analyst, entrepreneur and one of the leading voices in artificial intelligence in the Philippines, stated that the key factor to watch out for is “Value capture. Data storage captures less value than AI computing, just as semiconductor assembly sits at the lower end of the supply chain, while chip design, fabrication and minerals processing capture greater value.”
Attracting technology companies alone will not be enough. The government must also ensure that investment creates opportunities for Filipino workers and businesses, helping the country move into higher-value segments of the supply chain.
The Protests
Pax Silica has faced some resistance in the Philippines. During my visit in September, two protests took place against the initiative, as demonstrators raised concerns that it could prioritise foreign companies’ profits over local communities’ needs, while threatening land rights and the environment.
On September 10, demonstrators gathered outside Manila’s Grand Hyatt hotel, where President Ferdinand Marcos Jr. was attending the Luzon Economic Corridor Investment Forum, amid discussions on a proposed bilateral agreement with the US.
Ten days later, protesters took to the streets again to oppose the US-led initiative, on the 54th anniversary of martial law.
The Philippines is Caught Between Two Powers
The US wants to reduce its dependence on China by collaborating with the Philippines, yet the Philippines itself remains deeply integrated into Chinese supply chains.
Chinese companies have a significant role in Philippine infrastructure, including the power grid. The National Grid Corporation of the Philippines (NGCP), which operates the country’s national power transmission grid, is 40% owned by China’s state-owned enterprise, State Grid Corporation of China (SGCC), with the remaining 60% held by Filipino investors.
The Philippine government is looking to expand renewable energy, an issue that has also featured in discussions around Pax Silica, given the additional strain the proposed hub’s power demands could place on the grid. But China also dominates the renewable-energy manufacturing chain. The uncomfortable reality is that the Philippines may need Chinese capital, technology and equipment to build the infrastructure required for a US-backed supply chain.
“The Philippines should not be forced to choose between America and China. We should choose the Philippines”, says Garangan.
The US deployed its Typhon mid-range missile system to the Philippines in 2024. In May 2026, US forces conducted its first missile firing in the country during the Balikatan exercises, launching a Tomahawk cruise missile from Leyte. Separately, US-Philippine wargaming and deployment rehearsals took place in Batanes, around 155 km from Taiwan, involving the NMESIS anti-ship system. The activities drew criticism from China over regional security concerns.
The military rapprochement between Washington and Manila comes at a critical time, as the Philippines faces growing pressure from China in the West Philippine Sea. While trying to protect itself from the very real threat of China infringing on its waters, the Philippines is also placing itself in the firing line by accommodating a US military presence.
Jefferson Chua pointed out that “If you look at US military ties with the Philippines right now, they’ve never been this strong. We have a lot of war games and military exercises, and a lot of technology coming in.”
The Environmental Price
Yet probably the biggest issue for the Philippines in considering Pax Silica remains the requirement for enormous amounts of reliable electricity.. The Philippine grid needs significant expansion. Yet the country is extremely vulnerable to climate disasters, making the environmental costs particularly consequential.
Expanding renewables could help meet this demand while reducing emissions, but reliance on imported solar panels, batteries and other equipment could create new supply-chain dependencies, particularly on China. Achieving greater energy security will therefore depend not only on expanding domestic power generation, but also on diversifying the technologies and supply chains that support it.
One option the Philippine government has been actively exploring is nuclear power. Small modular reactors (SMRs) are being considered as a potential solution to the country’s energy challenges, with the Philippines potentially serving as a test site for the emerging technology.
Chua suggested that Pax Silica could serve as a justification for the government’s SMR agenda, with the special economic zone’s legal framework potentially facilitating the import of foreign nuclear technology.
In addition, nickel refining could increase damage to waterways and ecosystems.
Yes or No to Pax Silica
Few details of the proposed partnership have been made public, leaving questions over whether it will help the Philippines move up the global supply chain or leave it exposed to the risks of a wider geopolitical struggle, corruption and environmental degradation.
For the business community, Pax Silica represents an opportunity to attract investment, create jobs and drive industrial development. Critics, however, fear it could amount to a new wave of American economic influence that benefits foreign interests at the expense of the Filipino people and the environment.
“Right now I’m looking outside my window and it’s pouring with rain. It’s flooding already. Those are the immediate problems that we need to solve. Not increasing AI development for foreign powers”, said Tapang.
But Balaoing-Pelkmans warns that if you do not choose Pax Silica, “there’s a risk of missing out.”
