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Is Singapore hitting the skids as electronics hub?

Posted: 20 Sep 2005 ?? ?Print Version ?Bookmark and Share

Keywords:electronics? asian? semiconductor? wafer-level packaging?

Despite this city-state's loss of some manufacturing operations to cheaper destinations such as China and Malaysia, officials and analysts insist Singapore can still count on its skilled workforce, first-rate infrastructure and pro-business policies to maintain its status as an Asian electronics hub.

Lim Swee Nian, director for electronics at Singapore's Economic Development Board (EDB), acknowledged that the emergence of lower-cost locations "will always pose a challenge to Singapore" but said the country saw itself "competing on the grounds of overall costs instead of just labor costs alone."

This year has proved to be mixed for Singapore's electronics industry, with companies such as hard-drive maker Maxtor and consumer electronics firms Creative and Aiwa all cutting jobs or shifting manufacturing elsewhere. In July, National Semiconductor announced the closure of its local facility to consolidate production at its other assembly and test plants in Melaka, Malaysia and Suzhou, China. In August, Agilent Technologies announced the sale of its Singapore-based semiconductor operations and the transfer of some1,800 local staff to two private equity buyers.

Gartner semiconductor analyst Philip Koh said the reallocations were the culmination of a trend that began in the 1990s with China's emergence as an economic power. "We saw China start to suck more electronic equipment manufacturing, not only from Singapore but also from Malaysia and Indonesia," he said. "In recent years more and more manufacturing has been shifted to the mainland. Companies are looking for lower-cost destinations, especially in manufacturing, to make their products more cost competitive."

Koh said Singapore's ability to attract investment in more leading-edge technologies would prove the deciding factor in the continued success of its manufacturing sector, which currently accounts for about a quarter of the economy.

"Singapore needs to continue to move up the value chain in order to stay competitive in the semiconductor industry," he said. Singapore is moving "towards value-added/high-end manufacturing and also into the R&D marketplace, where we continue to attract IC design, product and investments."

Koh added that Singapore should concentrate on developing its front-end wafer fabrication capabilities, expanding on the 14 fabs based here already.

EDB's Lim agreed that Singapore needed to continue cultivating areas such as design and research, but said this "does not imply [the] phasing out of manufacturing."

On the contrary, he said, Singapore is positioned to offer the "integration of the whole value chain of [manufacturing] activities," from marketing and logistics to regional management.

He said the government had no immediate plans to introduce specific incentives to lure more electronics firms, but would instead concentrate on making Singapore a place where companies could thrive.

"Incentives can only make sense if the operation here is successful and competitive. As such, our focus is to continue to enhance the overall competitiveness of the environment. This includes continuously upgrading our manpower skills, physical infrastructure and technology infrastructure, implementing pro-business policies, strengthening our logistics and supply chain landscape, and enhancing our intellectual property protection," Lim said.

Schott's decision to open a new $47 million wafer-level packaging facility here in April and Micron's move this month to invest $250 million in expanding its Singapore assembly and test operations showed that Singapore can still attract major electronics manufacturers, he added.

Koh of Gartner added that despite China's ability to attract "huge investments," it was no match for Singapore in many chip market segments. "We have seen the packaging assembly market growing significantly [in China] in recent years," he said. "Right now, we are seeing growth coming in from the foundry services market, mainly SMIC, competing with big players like TSMC and UMC."

"To be a world semicon hub, [China] needs to cover the whole chain, from IC design, software design, intellectual property capability and wafer fabrication to test and assembly," he added. China's "not strong in the IC design, IP protection and software services areas."

Jonanthan Hopfner

EE Times

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