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Singapore electronics manufacturing industry faces challenges

Singapore could face challenges in sustaining its economic revival spurred by strong global demand for electronic products and semiconductors in 2021, according to industry analysts.

The city-state saw its economy expand by 7.2% in 2021, rebounding from a pandemic-induced 5.4 contraction in 2020. The growth rate was at its fastest in over more than a decade. However, some economists have warned that the manufacturing-led momentum may have already peaked and is showing signs of slowing down.

According to Asia Times, the electronics industry is currently the largest manufacturing sub-sector in Singapore, contributing 8% to the country's annual gross domestic product (GDP). The manufacturing industry as a whole accounts for about 21% of GDP and 450,000 workers, making it one of Singapore's largest employers.

As electronics manufacturers around the world are experiencing an increase in their operational costs, China's strict "zero-COVID" policy is slowing down domestic demand for electronic products and affecting its trading partners, including Singapore.

According to DBS Bank, although China was a key driver of Singapore's export recovery in 2021, it could become a threat to the country's economic growth in the next 6-12 months.

Nevertheless, Singapore-based semiconductor companies have continued to expand operations.

In fact, Singapore is transforming into one of the most important semiconductor manufacturing hubs in Southeast Asia. It accounts for nearly 5% of the world's wafer fabrication capacity and has a 19% share of the global semiconductor equipment market. The country also has 21 wafer fabrication plants operated by major global IC companies and serves as a production base for Micron, NXP, and SSMC.

In June 2021, GlobalFoundries announced plans to invest US$4 billion in a new semiconductor factory in Singapore that will increase its annual capacity by 450,000 wafers. In October, Germany-based Siltronic invested US$2.2 billion in its Singapore-based operations, which will create 600 jobs and make Singapore one of the largest suppliers of high-end silicon substrates in the world. Both France-based Soitec and Germany-based Infineon have announced plans to scale up their operations in the city-state as well.