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Electronics A Key Pillar For Singapore

The global electronics sector continues to look bleak. "Although chip sales worldwide improved earlier this year, it has leveled off in recent months and new orders in the US for electronic products have fallen in May and June even though inventory levels continued to slide," said Tharman Shanmugaratnam, senior minister of state, Ministry of Trade and Industry and Ministry of Education, at the opening of GlobalTRONICS 2002.

"The global book-to-bill ratio for semiconductor equipment, an important leading indicator of growth, fell to 1.16 in July - its lowest level in four months. It has renewed questions about the prospects for a recovery in consumer purchases of PCs and other electronic goods. Last week, Gartner Dataquest lowered its forecast of growth in global chip sales from about three percent to minus 0.1 percent for 2002. It also downgraded its forecast of global IT spending this year from eight percent to three percent," Shanmugaratnam added.

Despite the series of bad news, Shanmugaratnam is sanguine that the electronics industry will turn around and surges ahead, "that is why the major chipmakers worldwide are still investing substantial sums to build more efficient factories and more advanced chips."

Electronics Not To Be Neglected
Although Singapore has diversified into other areas such as biomedical sciences and service activities like logistics, finance, health and design services, electronics will remain a key pillar for Singapore. Among the key reasons given by Shanmugaratnam was that there are indications that the electronics sector will continue to grow rapidly, for at least another 20 years. In addition, the electronics industry continues to provide jobs to a large pool of workers and help harness value-added skills among the workers.

"The electronics industry in Singapore employs about 100,000 workers. Between 1990 to 2001, the value-added per worker in the industry has grown by more than three times in real terms, compared to 1.8 times for the overall manufacturing sector, and 1.3 times for services," said Shanmugaratnam.

He added: "Singapore started out with consumer electronics and semiconductor assembly and test activities in the 1970s, and moved on to hard disk drive manufacturing in the 1980s. Since the 1990s, we have moved into wafer fabs ... we have evolved from a low cost production base for labor-intensive electronics manufacturing to one that leverages on intellectual capital and an ability to operate highly advanced technologies ... it will be unwise to abandon this infrastructure," Shanmugaratnam added.

This year, Singapore has started to produce advanced liquid crystal display (LCD) screens for high-value electronics products such as PDAs and notebooks. As a result, "we should continue to evolve and reinvent the industry and ride on future areas of growth globally, including emerging areas such as photonics, microelectromechanical systems (MEMS), smart devices and network storage," Shanmugaratnam explained.

Costs Alone Is Not Enough
Although countries such as China that have lower production costs strongly rival Singapore as an electronics hub, Shanmugaratnam explained that costs alone is not the only competitive edge a country relies on.

Other factors such as a good and reliable infrastructure, availability of skilled manpower, a strong cluster of local and foreign suppliers and supporting industries as well as strong government's commitment also play apart. It is because of these other factors that Singapore possesses that enabled it to attract foreign investors of the electronics industry into the country last year despite the depressed state of global electronics.

According to Shanmugaratnam, fixed assets investments (FAI) commitments in the electronics and precision engineering (EPE) cluster in Singapore reached US$3.2 billion. This amounted to more than 60 percent of total manufacturing FAI commitments last year.

Companies such United Microelectronics Company (UMC) and Infineon Technologies have also joined hands to build Singapore's first 300mm wafer fabrication plant last year. UMC has since further underscored its confidence in Singapore by partnering Advanced Micro Devices (AMD) to open another plant in February this year. In 2005, this facility will roll out chips using 65-nanometer process technology - that's more than 450 times smaller than the width of a human hair. In the storage and peripherals sub-cluster, Seagate has chosen Singapore to house its highly automated 'factory of the future', the prototype for future Seagate factories in East Asia.

Focus On Value-Added Skills
Shanmugaratnam added that Singapore will continue to sustain its advantages in electronics and will move up the pole by focusing on producing value-added goods. He explained: "International Enterprise Singapore (IE Singapore) has helped more than 100 Singaporean electronics and support companies to set up operations in countries such as China, Mexico, Indonesia, India and Hungary to take advantage of their lower-cost environments while siting higher value-added activities in Singapore."

There are also intentions of making Singapore a leading international hub for industrial design as design is increasingly becoming a tool of differentiation, for enhancing product competitiveness, and for defining brand identity.

"Several Singapore based industrial design firms have already been providing design solutions to MNCs from around the world and have won international awards. We will continue to deepen our strengths and build new capabilities in design," stated Shanmugaratnam.

GlobalTRONICS 2002, the world's third largest electronics manufacturing event, is held at the Singapore Expo from September 3-6.