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DPM Heng Swee Keat optimistic about Singapore’s future as microelectronics hub — but slow production and retrenchments reveal otherwise

With strong fundamentals comprising “good connectivity, a pro-business environment and a skilled and adaptable workforce”, Singapore has the capacity to fulfil the worldwide demand for semiconductors as a manufacturing hub, said Deputy Prime Minister Heng Swee Keat.

Speaking at the unveiling of US semiconductor firm Micron Technology’s new and expanded facility on Wed (14 Aug), he said that while he recognises that the semiconductor industry is experiencing a downturn on a global level, such “headwinds” are part of the ‘semiconductor super cycle’ in the past several years.

The semiconductor industry refers to the slew of firms that manufacture electronic components such as memory chips and microprocessors.

Heng added that “global demand grew by more than 35 per cent” during said ‘semiconductor super cycle’, and that companies in Singapore survived the downturn, transformed and “emerged stronger”.

He also noted that the semiconductor industry in Singapore is projected to grow between two per cent and nine per cent in the next few years as a result of rising consumer demand for smart technological tools and devices beyond mobile phones.

“Beyond smartphones and tablets, the consumer demand for other smart devices ranging from TVs to wearables is growing,” said Heng.

The “rapid advancement and deployment of new innovative technologies” such as artificial intelligence, the Internet of Things and 5G which will make up a huge part of smart devices beyond mobile phones will also serve as a catalyst in increasing the demand for semiconductor manufacturing in Singapore.

While Micron’s president and CEO Sanjay Mehrotra told reporters that Micron has made a “multi-billion-dollar investment” in Singapore that will create 1,500 new jobs for locals, the firm also enjoyed tax breaks of US$2.1 billion for the first nine months of FY2018 and FY2019 combined, which indicates that the tax savings given by the Singapore government are even more.

Only a portion of the “multi-billion-dollar investment” has gone into the Woodlands facility, whereas the rest will go into other developments in the future, depending on market trends. Furthermore, it is not known how many of the job positions will be filled by Singaporeans instead of foreigners.

Microchip production slowing down, hundreds of staff retrenched in Singapore’s semiconductor industry due to ripple effects of U.S.-China trade tensions

Reuters also reported in Jul this year that a slowing down in microchip production and the retrenchment of hundreds of staff has made a dent in Singapore’s semiconductor industry.

Sino-U.S. trade tensions have contributed directly to the dent, as both countries impose trade tariffs on various products, while the U.S. has banned companies from dealing with Huawei, the world’s biggest telecoms equipment maker, due to security concerns.

Executive director for the Singapore Semiconductor Industry Association (SSIA) Ang Wee Seng told Reuters that “this downturn is different”, and that he was “preparing for the worst”, particularly in helping workers seek new employment opportunities in the event that they face retrenchment.

John Nelson, CEO of UTAC, a Singapore headquartered firm which tests and assembles chips, told Reuters that a “consolidation process” has begun under him in the Republic, which may result in downsizing around 10 per cent to 20 per cent of its 1,700-strong staff in the city-state by the end of this year.

According to Nelson, the firm is “taking the appropriate actions to make sure there is a future for our business in Singapore”, and that high overhead costs like rent, wages and utilities have contributed to the decision to start the “consolidation process”.

He added that UTAC may also add more days to close its factory and give its workers unpaid leave.

However, Nelson highlighted that his firm was also making “millions of dollars of investments” in Singapore on equipment for new clients and projects, including for 5G networks.

Austrian chip maker AMS, which manufactures facial recognition technology for Apple, is also one of the firms that have been laying off its staff in Singapore in order to “adapt to more muted demand trends in the consumer market in the first half”.

AMS spokesperson Patricia Moosburger also told Reuters via email that the retrenchments were also intended to “reflect improvements in manufacturing efficiency”.