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From volume to value: Singapore electronics industry matures

Posted: 29 Sep 2014 ?? ?Print Version ?Bookmark and Share

Keywords:Singapore? higher value-added activities? R&D?

Singapore's electronics industry has taken a turn for the better, registering a 7.2 per cent increase in manufacturing output in August. Released by the Singapore Economic Development Board (EDB) Friday, Sept. 26, the recent numbers broke the spell of a four-consecutive-month drop in output, which, in turn, caused the electronics exports to suffer.

The slowdown has been blamed on soaring production costs that prompted closure of manufacturing plants to be transferred elsewhere. However, taking into account the industry's movement during the past 12 months, can it be said that the weakened numbers in the April to July period indicate economic progress and not decline?

Singapore's electronics industry is more than what the manufacturing output suggests. Whereas some companies opted to shift part of their operations from the city-state, many remained with their R&D operations. EDB reported several R&D investments by semiconductor companies in the past year, focusing on the design of disruptive products and custom-made solutions, as well as the creation of new technologies.

Manufacturing out, R&D in

This year two chipmakers have already moved some of their operations out of Singapore. Renesas said in March it would outsource production at its Singapore facility to Japan-based J-Devices, dismissing up to 720 workers in the process as part of the company's restructuring efforts (see Renesas shifts production at SG site to J-Devices). Shortly after, Broadcom announced it is transferring part of its operations to Ireland after its tax incentives were terminated on March 31, according to Strait Times.

The manufacturing output of the electronics cluster took a hit in April, posting a sharp 8.8 per cent drop on a year-on-year basis compared to the March performance of 8.7 per cent increase, as reflected in EDB's manufacturing performance reports.

The decline should be a particular worry for Singapore, which boasts the second largest electronics industry in Asia Pacific. Electronics account for a third of the manufacturing sector, which then contributes between 20 per cent and 25 per cent to the total GDP. The low electronics output set the country's economic growth back to 2.4 per cent in the April to June period, falling from 4.8 per cent in the first quarter.

Fabless IC designers Mediatek and Realtek, as well as Maxim Integrated Products Inc., each set up design centreswith the first two to harness growth opportunities in the IoT arena, while Maxim plans to enable close collaboration with its customers in Asia in the smartphone and tablet segment. International Rectifier opened a wafer processing facility that also undertakes research and development of new technologies to further shrink power management ICs. Rohde & Schwarz, which has established a strong presence in Singapore, also invested in a new R&D centre to support its growth in Asia.

R&D activities are clearly thriving in the electronics industry. The companies' efforts to step up their flight from volume to value underscore Singapore's attractive position in the world of innovation. From this, it can be said that the low physical electronic good exports, far from being an economic ill, characterises an economy that is moving up the value chain, driven by R&D and innovation.

Hotbed of R&D investment

Andrew Chong

Chong: Our manufacturing processes in Singapore are more intelligent and more integrated to the supply chain.

Germany's chipmaker Infineon Technologies AG and U.S.-based test equipment vendor National Instruments see Singapore as a hotbed of R&D investment, providing favourable business and regulatory environment that encourages companies to adopt high value-added product strategies.

It is widely held that innovation increases the level of productivity and boosts economic growth. Technology demands semiconductor companies to deliver higher-value products in order to stay ahead of the game or survive at the very leastwith a rule that states they either innovate or stagnate. In the same way, countries also introduce changes or measures to support higher value-added activities for sustained economic growth.

With over 40 years of presence in Singapore, Infineon's activities evolved from labour-intensive production to sophisticated manufacturing processes and R&D. Andrew Chong, president and managing director at Infineon Technologies Asia Pacific Pte Ltd told EE Times Asia that their climb towards high-value function succeeded because of an established rule of law, including stable and transparent policies for development and exploitation of intellectual property.

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