Singapore has long earned a reputation as one of the world’s most advanced economies in the Asia Pacific region. The Singapore economy is mainly driven by exports in electronics manufacturing and machinery, financial services, tourism, and the world’s busiest cargo seaport. Additionally, Singapore’s largest industry is the manufacturing sector, which contributes 20%-25% of the country’s annual GDP.
Hence, this article will provide you with information that is related to the manufacturing business in Singapore, and what are the opportunities for foreign investors in the area. Let’s find out!
The Manufacturing Business in Singapore
Singapore is located off the coast of the southern tip of the Malay Peninsula in Southeast Asia, making the country become one of the world’s leading manufacturing sites. Singapore has built a strong and diverse manufacturing base, with leadership positions in sectors such as aerospace, electronics, biomedical sciences, and precision engineering. Yet, in recent times, the Singaporean Government has directed the manufacturing industry towards the main focus on advanced manufacturing development. As robotics, artificial intelligence, 3D printing, smart sensor and the Internet of Things are transforming the manufacturing sector, advanced manufacturing is a burgeoning market expected to reach US$156.6 billion by 2024, growing at a rate of 16.9 percent a year
The manufacturing sector remains a significant contributor to Singapore’s economy, as it contributes about 20% to its GDP. Furthermore, manufacturing will remain a key part of the country’s economy as well. Singapore is also the sixth-largest global exporter of high-tech products. Particularly, Singapore’s manufacturing production grew 17.6% YoY in February 2022, exceeding market estimates of 6.3% and sharply picking up from an upwardly revised 2.4% rise in the prior month. The manufacturing sector is projected to continue to expand, albeit at a more moderate pace following the strong outturn last year, supported by sustained global demand for semiconductors and semiconductor equipment.
Singaporean Minister for Trade and Industry Gan Kim Yong has unveiled a new plan to strengthen local businesses in various sectors, with an aim to significantly grow the city-state’s trade volumes by 2030. In more detail, Mr. Gan Kim Yong noted the plan will be driven by separate strategies that will provide direction and coordinate actions across the four key pillars of the economy – services, manufacturing, trade, and enterprises. The Singapore Economy 2030 vision will continue to build upon the Manufacturing 2030 plan launched last year, increasing manufacturing value-added by 50% in 10 years. Especially, the vision emphasizes the development of advanced manufacturing, thereby introducing multiple initiatives to promote this sector. Mr. Chan Chun Sing – former Minister of Industry and Trade commented that “In the past, many of the older generations of manufacturing that depends on cost competitiveness will increasingly be displaced by cheaper alternatives in other countries,” He affirmed, “Instead, beyond the 50 percent increase in value, we want to see a greater proportion of our manufacturing going into advanced manufacturing, where the competition is not based on cost but based on the intellectual property that we can generate, the quality of the products and the precision that we can provide for the sector.” Thus, the evolving nature of the industry will change the composition of manufacturing to one of low-volume but high-quality products that will require greater skills to produce. Furthermore, Singapore’s strengths in innovation, its skilled workforce, and well-developed infrastructure position will bolster its role as a global manufacturing hub.
In addition, the manufacturing sector can continue to expand if the industry is closely tied to research and development (R&D) because the process would also enrich the country after all. Hence, Singapore has to get its intellectual property protection regime right and gives investors the confidence that they will be safeguarded here in Singapore.
Besides, Singapore has already embarked on a series of initiatives to ensure the economy is prepared for the future. For instance, Singapore has established the leading technology and solutions providers, and it offers the necessary technical expertise to maintain Industry 4.0 adoption. There are some biggest industrial names in the world that are now operating in Singapore, such as ABB’s robotics packaging center to Accenture’s IoT Centre of Excellence, and Siemens’s digitalization hub.
Singapore has invested 3.2 billion Singapore USD (2 billion euros) in R&D in Advanced Manufacturing and Engineering, to build up the innovation capacity of companies embarking on Industry 4.0.
In 2018, Singapore’s research institutions opened two model factories that will help companies accelerate the adoption of Industry 4.0 technologies by implementing a collaborative environment to research and test-bed solutions before deploying them. However, through this initiative, the industrial equipment supplier Feinmetall has successfully achieved productivity improvements of 10 to 15%.
The pursuit of advanced manufacturing itself is not about achieving a one-off boost in productivity, but it is about equipping companies with the right tools and mindset to meet future challenges. It is indeed an evolution rather than a revolution because the companies can go beyond traditional costs to continue reorientation, refine and innovate their products.
The MTI will also help to develop human capital for the manufacturing sector through an M2030 Careers Initiative announced in 2021 to train polytechnic and Institute of Technical Education (ITE) graduates. The initiative will offer at least 200 internships for ITE students from 60 companies by the end-2022, as well as a pilot grant to hire ITE graduates for critical technician and assistant engineer roles.
The initiative will see collaboration among companies, Polytechnics, and technical institutes to identify young graduates in engineering or technical education with relevant skills to the industry.
The Opportunities for Foreign Investors
In 2021, Singapore acquired investments committing 11.8 billion USD in fixed asset investments, fostered by large manufacturing projects from semiconductor and biotech firms despite the ravage of the Covid-19 pandemic. Investments from semiconductor and biotech companies accounted for more than half the commitments secured, which exceeded the Singapore Economic Development Board’s (EDB) medium- to long-term yearly target of between $8 billion and $10 billion. Hence, Singapore attracted 5.2 billion USD in total business expenditure (TBE) per annum in 2021, lower than the 6.8 billion USD TBE per year garnered in 2020, but within EDB’s medium- to long-term target of $5 billion to $7 billion.
If these projects are fully implemented, the commitments secured in 2021 are expected to create 17,376 jobs in the coming years, with an estimated contribution of 16.8 billion USD in value-added annually. Thus, foreign investors are presented with more opportunities to venture into advanced manufacturing in Singapore.
The Singaporean government is focusing on the key priorities to bolster the manufacturing business. Furthermore, the Singapore Economic Development Board (EDB) aims to strengthen two areas of the digital economy and work to attract leading manufacturers to invest in advanced manufacturing.
EDB also wants the country to become a regional platform for Singapore-based companies to export technologies and services through the Industrial Transformation Asia Pacific event.
More than that, Singapore will also look to become the digital hub for non-manufacturing companies, where people can learn best practices, access world-class capabilities, and embark on their digital transformation journey.
Singapore has become a part of Singapore’s shift toward a value-creating, innovation-led economy, and that means it will continue to connect companies with Institutes of Higher Learning to establish corporate labs. In addition, it will help companies that are looking to create new products, services, and businesses, and support them on the journey of experimentation, commercialization, and scaling out of Singapore.
The disruptive technology that happens recently will open up new possibilities. Some industries that were previously considered unviable are now becoming potential growth areas for Singapore, for example, mobility. The country can play a leading role in autonomous vehicles and smart mobility, which is supported by its advanced manufacturing capabilities and highly skilled workforce.
The investment in such areas will surely attract foreign investors for expanding their businesses here. The possibility to venture into the business of manufacturing is flourishing this year, and even in the future. Thus, the government keeps pouring incentives to impress more and more investors. In the end, it is always the right time to open up a business in Singapore, especially in the manufacturing business. If you intend to start your business journey in Singapore, Viettonkin will always stand by your side and help you navigate through the legal process. Our experienced professionals, who are insightful of the Singapore market and legal system, will assist you every step of the way! Contact us now for a better understanding!