Surging to Success

The electronics industry has been an integral part of Singapore’s economic success story right from the start. From modest beginnings in the 1960s, the industry has grown in size, scope and sophistication to become the bedrock of Singapore’s manufacturing sector, contributing a significant 5.2 per cent to the country’s GDP in 2012.

World-Class Electronics Hub

Besides being a critical part of the domestic economy, Singapore’s electronics industry also forms an important node within the global electronics market. Despite its small geographical size, the Republic is home to many of the world’s top semiconductor firms, electronics manufacturing services (EMS) providers, hard disk manufacturers and much more.

With its stated ambition of becoming a world-class innovation-driven electronics hub, Singapore also boasts a full suite of activities to meet business requirements – encompassing research and development (R&D), manufacturing, supply chain management, logistics and regional and global headquarters functions.

Bright Prospects

In its World Economic Outlook (WEO) report, the International Monetary Fund (IMF) forecasted the global economy to grow at 3.3 per cent in 2014 and 3.8 per cent in 2015. This growth is expected to be uneven across countries with the US in the midst of an economic renaissance, while each of the remaining key economies grapple with their own set of issues.

The stronger global economic conditions and resurgence in the US economy is expected to translate into stronger performance for the IT industry ahead. Following a seasonally adjusted 1.5 per cent quarter-on-quarter growth in the first quarter of 2014, global chip sales further accelerated in Q2 with a 1.9 per cent growth. The upturn largely reflected a turnaround in the US market, as business confidence and IT spending rebounded.

The continued improvement in global demand will provide critical support to Singapore’s electronics manufacturing sector. In its Macroeconomic Review, the Monetary Authority of Singapore (MAS) forecasted Singapore to grow between 2.5 to 3.5 per cent in 2014, while maintaining a similar pace in 2015.

One aspect that manufacturers in Singapore will need to contend with is higher operating costs, brought about by factors such as the tightening of foreign manpower supply and other resource constraints. However, the Singapore government is committed to help firms in their transition to a higher productivity-led growth, with a wide range of assistance schemes, such as the Productivity and Innovation Credit (PIC).

Growing R&D Capabilities

In any case, Singapore’s electronics sector has been shifting upwards on the manufacturing value chain across the years. With its strategy of developing new technologies, products and services to seize new opportunities in an increasingly mobile, connected and sensory world, the Republic has been steadily ramping up its R&D capabilities accordingly.

One of the ways Singapore has grown its strengths in this area is through attracting important R&D investments from major electronics players to complement HQ and manufacturing functions here. In fact, the semiconductor sector is the single largest contributor to private sector R&D in Singapore, accounting for 26 per cent of private sector R&D expenditure in 2012.

Recognising R&D to be an important enabler in Singapore’s economic ecosystem, the government has committed billions towards growing the country’s own R&D capabilities from as early as 1991. This sustained investment has seen the establishment of leading research institutions under the Government’s Agency for Science and Technology Research (A*STAR) and institutes of higher learning, such as the national universities.

Creating Economic Value

One R&D institution that has added tremendous economic value over the years is the Institute of Microelectronics (IME) under A*STAR. Since its establishment in 1991, IME has played an important role in the growth of the semiconductor sector, developing a broad spectrum of capabilities that has seen it embark on successful public-private partnerships with industry leaders such as Applied Materials, Qualcomm and Honeywell.

Such public-private partnerships have contributed tremendously to the shift in companies here towards higher value-added activities. In the semiconductor industry alone, value-add per semiconductor worker in the past five years has grown at a Compound Annual Growth Rate (CAGR) of 7.3 per cent, double that of the manufacturing industry average, to reach $270,000 per worker.

The presence of leading electronics players in Singapore is also benefitting Singaporean companies. In 2010, the Economic Development Board (EDB) launched the Partnerships for Capability Transformation (PACT) initiative, encouraging partnerships between global companies and their local suppliers. Such collaborations benefit these SMEs by upgrading their technological capabilities, encouraging transfer of valuable industry know-how, and promoting co-innovation opportunities with commercial potential.

Made in Singapore

Moving from electronics to electrical products, we turn our attention from foreign multinationals to homegrown small and medium enterprises (SMEs), particularly those in the consumer electronics segment. These companies range from established electronics manufacturers to technology startups.

Singapore’s existing strengths in product design, R&D and manufacturing, along with the government’s strong support for businesses to go international, provide ideal conditions for electronics startups and companies to take the plunge and venture into overseas markets.

The Republic’s status as an international trading port, with multiple free-trade agreements in place to facilitate ready access to markets, places it in good position to serve as a leading electronics export hub. And while the US, Europe and Japan are all highly competitive markets for electronics, there is considerably more room in emerging economies such as China, India and Southeast Asia, where the Singapore brand name is also held in high regard.

Smart Nation Rising

Capping off the other end of the IT spectrum, Singapore is also a key player in infocomm products and services. Across the years, many major infocomm product companies had chosen to make Singapore their regional and global base, establishing the full value chain of activities such as product development, R&D, manufacturing, logistics, marketing and intellectual property (IP) management.

These companies range from manufacturers of computer hardware and peripherals to network equipment providers to leaders in consumer electronics. All these companies benefit from Singapore’s business and investment-friendly climate, and key advantages such as its international trade hub status, strong IP protection and highly educated workforce.

These very same qualities have also made Singapore an attractive destination for leading infocomm services companies from around the world. In fact, of the top 100 software and services companies in the world, Singapore is home to more than 80 of them. Many, including the top 15 software companies, have regional or Asia Pacific headquarters here.

At the same time, Singapore is also home to a thriving technology startup ecosystem. Nowhere is this more evident than at the JTC LaunchPad @ one-north development, which initially comprised of a single building block but added on two more in January 2015. This addition will enable the cluster to house an estimated 500 startups and 35 incubators. And beyond just the number of startups, there is also the increased amount of investor money awash in the system, with more than 20 Singapore-based startups having been acquired in the last three years, in corporate buyouts totaling more than US$500 million.

Benefiting from IT growth

Singapore has steadily built up its strengths in electronics, infocomm products and services across the years, riding on its advantages in trade connectivity, R&D and access to talent. Ultimately, this puts it in good stead to benefit from the growth and resurgence of the global IT markets, as well as revolutionary new technologies such as the nascent Internet of Things (IoT) sector.

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