US and Philippines advance

      TL;DR The US and Philippines are rapidly advancing a 4,000-acre AI and supply chain hub in New Clark City, the first physical facility under the Pax Silica initiative. Under Secretary of State Jacob Helberg visited the site with American companies, while the Philippines declined a US request for diplomatic immunity at the facility.

      The United States and the Philippines are accelerating plans for a 4,000-acre AI and supply chain hub in New Clark City, located north of Manila, as noted by Jacob Helberg, the Under Secretary of State for Economic Affairs. Helberg toured the proposed site on Monday with over a dozen American companies, marking the first high-level inspection of land intended to serve as the inaugural "AI-native industrial acceleration hub" under the Pax Silica initiative. This initiative aims to ensure the security of AI and semiconductor supply chains among allied countries.

      The hub, situated within the Luzon Economic Corridor, aims to foster emerging industries in AI, digital infrastructure, advanced manufacturing, and critical mineral processing. The Philippines joined Pax Silica in April, becoming its 13th member alongside nations such as Australia, Finland, India, Israel, Japan, the Netherlands, Qatar, Singapore, South Korea, the United Arab Emirates, and the United Kingdom. This Clark site is the first facility developed under the program, and its progress will be a test of Pax Silica's ability to transition from diplomatic agreements to operational infrastructure.

      In terms of structure, the Bases Conversion and Development Authority, which oversees the former US military base at Clark, has designated a 1,618-hectare area within New Clark City for this initiative. The State Department has labeled it a “Golden Node,” referring to AI-native investment acceleration hubs that aim to support the alliance's supply chain strategy. The site is intended to be a focal point for technology firms, research institutions, and government agencies collaborating on AI computing infrastructure, semiconductor packaging, and processing critical minerals such as nickel, cobalt, and copper, which the Philippines possesses in significant amounts.

      This initiative is part of a wider US strategy to restructure global technology supply chains to lessen reliance on China, which controls about 90% of rare earth refining capacity and dominates key stages of semiconductor production. The strategic goal of Pax Silica is to establish alternative production nodes in allied countries, thereby diminishing the influence any single nation, particularly China, has over essential inputs for AI and advanced computing. Given that semiconductors make up roughly 60% of the Philippines' merchandise exports, the country is seen as a fitting candidate, although currently focused on lower-value segments like assembly, testing, and packaging.

      Regarding investor protection, Helberg emphasized the need for “durability and certainty” for American investors. He stated, “Investors who are going to spend billions of dollars building out very expensive capex need to ensure those investments will endure through changes in leadership in both our countries.” This remark addresses practical concerns: the Philippines has a six-year presidential term limit with no possibility for re-election, making investment agreements vulnerable to reversal with a new administration.

      One of the most contentious issues is the matter of legal jurisdiction. Reports indicate that American personnel stationed at the site would receive diplomatic immunity once operational, but Joshua Bingcang, the BCDA chief executive, countered this by saying, “That’s their request, but we did not agree to that.” This distinction is significant, as an arrangement granting a 4,000-acre industrial zone US common law with diplomatic protections would be unprecedented for a commercial facility abroad, raising serious sovereignty issues for a country that has negotiated the closure of US military bases like those at Clark and Subic Bay.

      Bingcang described the agreement as a "normal commercial agreement," similar to previous projects in Clark with firms from Japan, Singapore, and South Korea. The BCDA has proposed a two-year grace period for lease payments, which would be regarded as an in-kind contribution to the project's development, with annual lease rates to be determined from the third year onward. While these terms are favorable, they are not unique compared to other special economic zones in Southeast Asia, where governments often provide tax holidays and subsidized land to attract foreign investment.

      Geopolitically, the Clark hub is part of a larger US strategy aimed at building allied infrastructure to reduce dependence on Chinese supply chains, also featuring chip equipment export controls and domestic manufacturing incentives under the CHIPS Act. The Philippines’ engagement in Pax Silica positions it more firmly within Washington's sphere of influence amid intensifying US-China competition for dominance in Southeast Asia.

      From Manila's perspective, economic considerations are as crucial as strategic ones. The Philippines aims to ascend the semiconductor value chain from assembly and packaging to more lucrative design and fabrication. The BCDA has engaged with Taiwanese companies, including TSMC and UMC, viewing the Pax Silica hub as a means for that transition. Success hinges on execution, requiring sustained investment, reliable power supply, and a skilled workforce, which the Philippines is still developing