The semiconductor segment has the highest level of production to date, and will help Singapore’s manufacturing sector pull through in 2017.
The manufacturing sector is being closely monitored by analysts as Singapore pushes through with its ambitious economic restructuring because an underperformance could spell disaster for the trade-dependent country. Hopes are high that manufacturing exports will hold up on the back of robust semiconductor demand, but domestic manufacturing industries will still face a tougher time due to slower consumption and an ongoing property price slump.
Singapore’s economy is undergoing restructuring towards higherwage jobs and increased labour productivity, which has led to worker layoffs. Whilst this transition to leaner manufacturing operations has caused some disruption, analysts hold a positive outlook for the sector.
“Overall, the island’s factories remain in good shape,” says RHB Group, forecasting manufacturing output to grow 4% in 2017, surpassing the 3.6% expansion in 2016. “The projected slight improvement in manufacturing output this year will be underpinned by three factors. First, key final demand destinations, namely, the
US, EU, and China should post stronger economic growth. Second, the ASEAN economies, supported by higher commodity prices, will also show improving growth. Finally, there will be stronger semiconductor demand, supported by the cyclical smartphone super-cycle,” it says.
Chia Shuhui, senior Asia analyst at BMI Research, shares this upbeat demand outlook: “The manufacturing sector continues to shed jobs amidst ongoing restructuring. However, near-term manufacturing weakness will be capped by still-high global demand for semiconductors, which will provide some support and have positive spillover effects on other sectors.”
EDB Singapore’s monthly manufacturing performance report for April 2017 shows the brisk growth of the semiconductors segment at 69.1%, which helped the electronics cluster’s output expand fast in April at 48.0% year-on-year. The machinery & systems segment also grew 23.1% due to higher export demand for semiconductor related equipment.
According to Chua Hak Bin, analyst at Maybank Kim Eng, this was the 14th consecutive month of double-digit expansion for the semiconductor segment and recorded the highest level of production to date, leading to a full-year GDP growth forecast of 3%.
“The global demand for semiconductors remains strong, as reflected by the global Purchasing Managers Index numbers that are still in expansion phase and the continued increase in Singapore’s electronics non-oil domestic exports (NODX). We think growth will continue to broaden from electronics and traderelated segments to other segments of services,” says Chua.
RHB Group expects semiconductor demand to remain a positive driver of electronics manufacturing growth in the second half of 2017, albeit at a more moderate pace after the strong gain in the first half of this year. This is in anticipation of lower flagship phones’ volume sales compared to mid-tier counterparts.
Most segments in the electronics cluster showed strength in April, recording higher output. Computer peripherals (+5.6%), consumer electronics (+4.4%) and other
Whilst this transition to leaner manufacturing operations has caused some disruption, analysts hold a positive outlook for the sector.
Manufacturing exports are expected to hold up