By Shirin Bhandari | 2026-05-04

The United States and the Philippines have agreed to build a 4,000-acre (1,620-hectare) industrial hub on the island of Luzon, the latest step in Washington's push to secure semiconductor supply chains with allied partners, the US State Department said.

The agreement, signed April 16, makes the Philippines the 13th country to join Pax Silica, a Washington-backed initiative launched in 2025 to strengthen the full technology supply chain — from critical minerals and advanced manufacturing to computing and data infrastructure.

The hub is supposed to be "AI native," meaning it will have artificial intelligence built into it from the ground up rather than being added later.

Allied buildup

The strategic rationale is blunt. "The current geography of the global supply chain is completely unsustainable," Jacob Helberg, US under secretary of state for economic affairs, told the Wall Street Journal. "If you look at the whole supply chain stack, layer after layer, it is totally dominated by China."

"It is intended to serve as a staging point for a purpose-built platform for allied manufacturing," the State Department said. "The two allies are committed to strengthening shared supply chains in critical minerals, semiconductors, electronics, and other goods."

The hub will be situated in New Clark City, the Philippines' flagship planned metropolis north of Manila. It is owned and developed by the government through the Bases Conversion and Development Authority (BCDA). Under the arrangement, the US will occupy the site rent-free and administer it as a special economic zone, with a two-year lease renewable for 99 years.

The hub will carry diplomatic immunity and operate under US common law, the first arrangement of its kind anywhere in the world.

However, the project remains largely conceptual at this stage. Factories approved for the hub will be highly automated, using autonomous systems to operate around the clock, Helberg said. Investment must come from private sector companies, which will bid for a place in the hub.

Minerals and limits

The Philippines contributes a wealth of natural resources to the partnership. The nation holds substantial reserves of nickel, copper, chromite and cobalt -- minerals indispensable to the electronic and defense supply chains.

However, the country currently exports raw materials and lacks the processing capacity to plug directly into advanced technology supply chains, said Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies in Washington, according to the Journal.

"By joining Pax Silica, the Philippines is ensuring that our mineral resources and strategic location are not simply supporting global industries from the margins, but are actively harnessed to build the industries of the future," Philippine Finance Secretary Frederick Go said.

Beijing expressed displeasure. "China has long played an important and constructive role in keeping the global industrial and supply chains safe and stable," Liu Pengyu, spokesman of the Chinese embassy in Washington, told the Journal. China opposes any country setting up an exclusive trade bloc, he said.

The hub will be built within the Luzon Economic Corridor, a trilateral framework among the Philippines, the United States and Japan, with commitments to expand infrastructure in transportation, clean energy and semiconductor manufacturing.

The corridor provides access to Subic Bay, a major port on Luzon island. Some US manufacturers seeking to reduce their dependence on Chinese supply chains already have established factories in the corridor. Lower operating costs and access to regional funding attracted them.

Strengthened alliance

The initiative strengthens Washington's ties with a key Southeast Asian ally. Relations between Manila and Washington have warmed under President Ferdinand Marcos Jr., who has steered the country closer to the United States. China has stepped up aggressive tactics against Philippine vessels in the South China Sea, making the Philippines central to Washington's broader efforts to reinforce a network of allied partners across the Indo-Pacific.

Meanwhile, BCDA Chairman Hilario Paredes said authorities were still assessing land availability at New Clark City. "We will have to sit down and finalize the details," he told Reuters.

Other Pax Silica signatories include Australia, Finland, India, Qatar, South Korea and Singapore. The Philippines deal builds on the US-Philippines Critical Minerals Framework and comes as the nations mark 80 years of diplomatic relations.