Diverse capabilities, infrastructure help drive chips industry in Singapore

Image courtesy of SPH Media.

As the world marches steadily towards a smarter, more mobile and connected future, Singapore as a semiconductor hub has kept in step, plugging itself higher up the value chain over the decades.

The Republic's semiconductor industry is one of the region's most diverse, having drawn global giants and an ecosystem of small and mid-sized firms up and downstream.

The semiconductor industry contributed almost 7 per cent of Singapore's gross domestic product last year, and is the backbone of electronics manufacturing output. Growing the electronics sector is part of the country's ambitions to expand its manufacturing sector by 50 per cent by 2030.

Chip multinationals including GlobalFoundries, Siltronic and United Microelectronics Corporation have poured billions into building new plants here, with high-value jobs to come alongside.

Business-friendly Singapore's political stability has also made it a bright spot as growing geopolitical tensions drive corporations to diversify their manufacturing bases and supply chains.

With its capabilities in areas such as wafer fabrication, assembly and testing, Singapore can capitalise on shifts towards Southeast Asia, analysts said. Mr Rakesh Agarwal, partner, advisory, KPMG in Singapore, expects the island to continue attracting investments from big players.

"Several factors are driving this trend, from the price of raw materials to investment incentives and logistics costs, but a significant factor is the geopolitical imperative to diversify global supply chains in the semiconductor industry, and Singapore is expected to play a major role in it.

"With its favourable tax and regulatory environment, and pool of competent, high-skilled workers, Singapore is an attractive destination for investment in high-value added manufacturing."

Singapore accounts for about 11 per cent of the global semiconductor market share, and about one-fifth of global semiconductor equipment is manufactured here.

Many large semiconductor equipment suppliers have a footprint in Singapore, noted Mr Jan Nicholas, executive director for the technology, media and telecommunications industry at Deloitte Consulting, Southeast Asia.

"A key component of that is that Singapore is considered 'safe' from an intellectual property (IP) perspective. To avoid IP losses, these companies spread their component and sub-assembly manufacturing across multiple countries and suppliers, and Singapore is where all the pieces come together to build the final machine," he said.

Singapore is home to not just some of the world's biggest semiconductor foundries, but also three of the top outsourced semiconductor assembly and test companies.

Aside from MNCs, about 70 per cent of the Singapore Semiconductor Industry Association's (SSIA) 200 members are home-grown small and medium-sized enterprises, including those which provide design, prototyping, production and testing services for semiconductors.

For example, mainboard-listed AEM Holdings, which provides advanced chip testing solutions, is a crucial partner of United States chipmaker Intel.

The Republic is also climbing the ranks globally in terms of research and development, integrated circuit design and sub-system equipment production, noted EY Asia-Pacific supply chain leader Atul Chandna.

Government support has been crucial in developing the industry, attracting MNCs to set up manufacturing operations here, which has in turn drawn other suppliers and service providers to the Republic's shores, said SSIA's executive director Ang Wee Seng. "This has benefited local companies by providing them with more opportunities to collaborate and learn from MNCs."

Deloitte's Mr Nicholas noted how Singapore has anchored higher value-add semiconductor operations here, such as wafer fabrication as well as semiconductor capital equipment manufacturing.

More labour intensive work tends to go to other countries in the region, he noted.

While Singapore enjoys the advantage of a highly skilled workforce, it needs to expand this pool to keep up with the semiconductor arena's rate of growth. To this end, SSIA has been working on boosting awareness about the industry, with an eye to attracting younger workers, said Mr Ang. Continuing education and training is crucial to future-proofing the current workforce, he added.

The semiconductor industry employs more than 33,000 people in Singapore, according to figures reported last year. With the slate of investments lined up, at least another 2,000 jobs are expected to be created in the next three to five years.

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.