Riding the Digital Wave

How Singapore’s manufacturing sector is positioning itself for the growth in advance electronics.




A Key Growth Engine 

Without a doubt, the electronics sector is a highly important contributor to Singapore’s economy. In 2014, electronics manufacturing contributed about 5 per cent of Singapore’s Gross Domestic Product (GDP). Besides being singularly responsible for 30 per cent of the manufacturing sector’s value add, the sector also employs more than 80,000 people, boasting the second highest labour productivity among manufacturing industries. With that in mind, it’s not hard to see why electronics is a segment of such economic significance for the Republic. 
 
In addition to its own manufacturing output, the electronics industry also spin-offs to many other segments of the economy. These include precision component manufacturers, chemicals and materials suppliers, manufacturing systems providers, and logistics and supply chain management providers. Singapore’s thriving research and development (R&D) ecosystem also benefits significantly from the electronics sector, which was the biggest contributor to business expenditure for R&D in 2013. In an affirmation of Singapore’s importance as a R&D hub for the electronics sector, US storage giant Seagate Technology unveiled its S$100 million state-of-the-art R&D building, “The Shugart”, here in July 2015. 

Cyclical Blips, Long Term Trends 

In recent years, the global economy has seen moderate growth with the rapid expansion of many Asian economies balancing out slower consumer demand from the developed world. But as of the second half of 2015, the global market outlook turned more uncertain, in large part due to slowing growth from China. This has seen in a slowdown of Singapore’s manufacturing output too. According to International Enterprise (IE) Singapore, electronic domestic exports contracted 2.7 per cent year-on-year in August 2015, due to a decline in the export of PC parts, integrated circuits and disk drives.
 
But looking beyond the cyclical blips, most analysts believe that there is still tremendous potential for the electronics sector in the years ahead. This stems from several trends such as the increasing importance of smart devices and machines in our everyday lives. New technologies such as wearable electronics and the Internet of Things are (IoT) are also expected to further increase demand for electronic devices and parts of an increasing level of sophistication. With its status as the region’s advanced manufacturing and R&D hub, Singapore is well-positioned to tap on this next stage of growth.

Growing From Strength to Strength 

In many ways, Singapore’s strong position in electronics is a result of farsighted economic policies in the country’s early years. From its start as the only TV assembly plant in Southeast Asia in the 1960s, the Singapore government and the Economic Development Board of Singapore (EDB) successfully courted top players in the electronics sector to set up manufacturing operations here. Today, the Republic is an important node in the global electronics market, responsible for making critical parts that go into modern electronic products.
 
Through the years, the Republic has demonstrated a remarkable ability to punch above its weight in the electronics sector. This is in large part due to its commitment to developing end-to-end capabilities, with a full suite of business activities such as manufacturing, R&D, supply chain management, logistics and headquarter functions. For a country with a relatively small land mass, Singapore is home to 14 silicon IC wafer fabrication plants, 15 assembly and test operations, and about 30 integrated circuits (IC) design centres. Four of the world’s top five electronics manufacturing services (EMS) firms also have operations here, providing design, high-value manufacturing, supply chain management and regional management functions. 

Formula for Success 

Singapore’s pro-business stance and philosophy has been a critical factor for the development of its electronics manufacturing sector – as well as the economy at large – influencing many aspects of its policy-making decisions through the years. Notably, Singapore has been ranked the easiest place in the world to conduct business by the World Bank. It has also the world’s second most competitive economy, as ranked by the World Economic Forum (WEF), for several years now. In its 2015 report, the WEF noted that Singapore was one of the most consistent performers across economies, faring well in the 12 factors assessed such as infrastructure and technological readiness. 
 
In terms of skilled manpower, the Republic is able to count on a base of high quality engineering talent – domestic and international – to support electronics manufacturing and R&D operations here. The Singapore government is also a key champion for skills development amongst Singaporeans. In his speech at the EDB Society’s 25th Anniversary Gala Dinner in July 2015, Deputy Prime Minister and Co-coordinating Minister for Economic and Social Policies Tharman Shanmugaratnam shared how the EDB has been in the business of developing skills through close collaboration with businesses, citing the support Texas Instruments (TI) received when opening its first semiconductor factory in 1969. To support the needs of future industries, Singapore will also be embarking on a brand new phase of developing deep skills and capabilities, through programmes such as the SkillsFuture initiative. 

Value Creation for the Sector 

In order to maintain Singapore’s competitive advantage in electronics,  especially the areas of data storage, semiconductors and integrated circuits, the Republic has been steadily building up its electronics R&D capabilities, which range from component-level design and process R&D to system level product design, firmware development, and industrial design.
 
In addition, there are also publicly funded research institutions such as the Institute of Microelectronics (IME), which plays an important role in the growth of the semiconductor sector here. Through the years, IME has been developing a broad spectrum of capabilities in partnership with industry leaders such as Applied Materials and Qualcomm.
 
With a view towards developing the capabilities of local electronics firms too, the EDB has been promoting the Partnerships for Capability Transformation (PACT) initiative, encouraging partnerships between global companies and their local suppliers. These collaborations are beneficial to local electronics firms, helping them in upgrading their technological capabilities and facilitating knowledge transfer of best practices and industry know-how. Through co-innovation, international electronics players and local SMEs can develop and test-bed new solutions to accelerate commercialisation opportunities and offer new products and services.

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