SINGAPORE Foreign precision engineering firms are investing more in Singapore, drawn by strong semiconductor demand and government incentives aimed at re-tooling an economy short of skilled labor.
The city-state is running programs worth billions of dollars to support productivity, automation and research, attracting global chipmakers including U.S.-based Micron Technology Inc and Germany’s Infineon Technologies.
This investment rush into electronics helped the technology sector log 57 percent output growth on average in October-February from a year ago, and kept Singapore from recession late last year.
“I’ve lived in Europe, I’ve lived in Japan, I’ve spent a lot of time in Taiwan and other countries. From a proactive standpoint, Singapore is about as good as it gets,” said Wayne Allan, vice president of global manufacturing at Micron, adding the Singapore government’s long-term vision was key to Micron expanding its investment.
Taking advantage of government grants, Micron is investing $4 billion to make more flash-memory chips in Singapore. It increased output by a third in the second half of last year and expects similar growth in the first half of this year.
Linear Technology Corp, a maker of analog integrated circuits, has opened a third chip testing facility in Singapore, and will produce 90 percent of its global test equipment in the city-state.
All this has created something of a virtuous circle in the semiconductor supply chain, with chip testing equipment supplier Applied Materials reporting record shipments to Singapore last year, said its regional chief, Russell Tham.
It’s unclear how much of this revival in Singapore’s $40 billion chip industry is due to a so-called ultra-super-cycle in the global memory chip sector, and Singapore remains a smaller player than South Korea and Taiwan.
“It is vulnerable to a pull-back,” said Nomura economist Brian Tan. “If there’s a turnaround in the semiconductor industry … it becomes a lot more apparent that the underlying growth momentum is not great.”
-For graphic on ‘global memory chip market forecast’ click: tmsnrt.rs/2k8LOqk
-For graphic on ‘Singapore’s semiconductor industry performance’ click: tmsnrt.rs/2oLaZOi
However, there are real signs that the targeted government incentives are helping firms move up the value chain.
One of the larger programs is the Productivity and Innovation Credit, where Singapore has budgeted S$3.6 billion ($2.6 billion) for 2016-18. Another S$400 million automation support package is aimed at small firms, and a S$500 million Future of Manufacturing plan encourages testing new technologies.
The Ministry of Trade and Industry says it encourages manufacturers to “embrace disruptive technologies” such as robotics. “These measures will help ensure the manufacturing sector in Singapore remains globally competitive,” it said, attributing the strong…