What Is Pax Silica?

Pax Silica is a US-led international coalition of investors launched in December 2025 with the purpose of establishing a global supply chain for semiconductors, artificial intelligence (AI) infrastructure, rare earth elements, and other materials that are essential in the production of digital devices such as microchips and processors. The project was initiated primarily to reduce global dependence on China for semi-finished materials that are vital to many digital technologies.

Aside from the United States, the other major participants in Pax Silica include South Korea, Japan, Singapore, and Australia.

More than 30 countries are participating in the massive partnership. One of them is the Philippines, where a 1,620-hectare AI and advanced manufacturing hub will soon rise in New Clark City, Tarlac.

Costs and Benefits of Pax Silica

Since its inception, Pax Silica has been the subject of heated debate in political, business, and academic circles, with the controversies centered largely on the economic costs and benefits associated with the initiative, writes Dr. Niceto “Nick” S. Poblador in an opinion piece published by BusinessWorld.

There is general consensus on the economic benefits from Pax Silica. The project is expected to attract billions in investments — between $40 billion and $70 billion by one estimate — and to generate both high-tech and manual jobs during the extended life of the project. It is also expected to spur the development of small and medium enterprises that will form part of an extended value network, with Taiwan-based Foxconn serving as the primary anchor investor and first major locator for the Philippines. Moreover, by serving as an extended global supply chain, Pax Silica will avert the need to reshore everything locally.

There is much less agreement on the economic, political, and environmental costs associated with Pax Silica.

To begin with, data centers and AI hubs entail huge energy requirements. The project is estimated to require around three gigawatts of electricity-generating capacity, equivalent to 16% of Luzon’s current grid capacity. This enormous demand for power, the author argues, will almost certainly exert pressure on the cost of electricity in the country, which — next to Singapore — is the highest in the region.

Economists are concerned about the likelihood that Pax Silica will lock in the Philippines, the poorest among the 30 participants, into a low-value raw material export role rather than high-end manufacturing. That concern is part of a broader debate over whether large technology hubs actually deepen local industrial upgrading or simply place host countries in lower-value segments of the chain.

Some critics worry that the country’s association with foreign countries holding strategic interests in the region — notably the US, Japan, and Australia — might expose the Philippines to unnecessary security risks from potential aggressors.

Environmentalists are particularly concerned about Pax Silica’s likely impact on the ecosystem, foremost among which is damage to the environment due in part to carbon emissions and unsound waste disposal practices.

A major reason for concern is the economic and environmental damage resulting from the enormous amount of water required to cool the 1,620 hectares of facilities. These consist of IT hardware and physical facility systems — powerful servers, storage systems, networking gear comprising routers and switches, power supply, and cooling support systems — all of which need water to operate. Supplying this huge water requirement will drain water away from the millions of farmers and households in Tarlac and adjoining provinces, making water access and allocation a central issue for communities near the project site.

Technical and Environmental Issues

A likely solution is to use sea water instead. Data centers can use sea water for cooling, but this will require extensive and costly system design modifications, because the direct use of sea water causes severe damage to equipment.

Sea-water cooling could be made possible by piping in water from either Subic Bay or Manila Bay. However, this option is not only costly; it may also upset the already delicate ecological balance in the Central Plain of Luzon, the largest lowland area in the country. Some parts of the plain are prone to occasional flooding, while others — including New Clark City — suffer extended dry weather periods during the year. Water can also be piped in from the Candaba Swamps during the rainy parts of the year.

Fortunately, the author writes, there are a number of feasible solutions to choose from. In his view, one viable option is to pipe water to Clark from areas where it is abundant, such as Subic Bay, or from the Candaba swamps and surrounding areas — including Metro Manila and portions of Bulacan and Pampanga — where rainwater accumulates during the long rainy months. This could be done by installing powerful pumps to pipe water from low-lying to high-elevated areas where it can be stored, such as Lake Pinatubo, and from where water can be released gradually to users in the immediate vicinity. The release can be achieved through a process called siphoning, by which water flows down from higher to lower elevations, where the pull of gravity is greater.

Impact on Income and Wealth Distribution

Finally, the author sees a strong likelihood that Pax Silica will adversely affect the distribution of income and wealth in the region. Investors in the project and their highly paid managerial and technical staff are bound to enjoy substantial financial rewards from it, while unskilled manual workers could be displaced by workers with advanced technical skills — or by self-operating equipment. These developments will most likely worsen the existing unemployment problem in the region.

Regrettably, Poblador writes, the government cannot reasonably be relied upon to address this issue, for the reason that the interests of corrupt government officials and rapacious corporate heads coincide. The unfortunate losers, in his view, are farmers, manual workers, and small businesses.

Additionally, the project will add to the financial burdens of thousands of farmers, households, and small businesses in the region in the form of higher costs of water and electricity. This situation is patently unsustainable, the author contends, and needs a strong government — such as that of Singapore or Vietnam — to enforce feasible solutions. “Unfortunately, ours is among the weakest governments in the world!” he writes. Civil society, enlightened business leaders, and concerned citizens, he argues, should assume the responsibility given up by the state, take up the cudgels for the hapless citizens, and take a firm stand on the issue.

A Final Word of Caution

All of the above arguments for and against Pax Silica are already water under the bridge, the author writes, and the world now faces an impending danger of global proportions. Current discussions among knowledgeable people in academia, business, and media center on the possibility that the phenomenal build-up in AI may turn out to be a house of cards, to use a popular expression.

In his daily essay of July 23, entitled “The Crash of 2026,” Robert Reich lists a number of early warning signs. He notes, for example, that enormous AI infrastructure spending — such as the planned investment in Pax Silica — is driving stock prices sky high, and that any minor sign of panic is bound to trigger a resounding market crash all over the world.

The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines (MAP).

Dr. Niceto “Nick” S. Poblador is a member of the MAP Shared Prosperity Committee and a retired professor of Economics and Management at UP Diliman. Contact: map@map.org.ph / nspoblador@gmail.com.