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How Singapore’s Manufacturing Strategy Attracts Major Chip Investments

Introduction

Singapore, a small and highly-developed Southeast Asian country with a population of just under six million, has been making headlines in the tech world for its success in attracting major chip manufacturing investments. Despite not having a large budget like the United States, Japan, or Germany, Singapore has managed to beat these bigger countries in the race to become a leading destination for chip manufacturing.

In mid-September, GlobalFoundries, the world’s third-largest contract chip manufacturer, opened its new 23,000 square meter plant in Singapore, creating 1,000 new high-skilled jobs. This was a surprising move, as many major economies are offering significant subsidies and incentives to attract domestic chip manufacturing. However, instead of opting for countries like the U.S., Japan, or Taiwan, which are known for their advanced chip plants, GlobalFoundries chose Singapore as its new home.

In this article, we will explore the factors that have contributed to Singapore’s success in attracting major chip manufacturing investments. Despite not having a large budget, Singapore has managed to create a consistent strategy for manufacturing and a mature ecosystem for semiconductors, making it an attractive destination for chip companies. Let’s dive into the key points that make Singapore stand out in the chipmaking race.

Singapore’s Consistent Manufacturing Strategy

One of the main reasons for Singapore’s success in attracting chip investments is its consistent manufacturing strategy. The country has been committed to developing its manufacturing sector for decades, and this has paid off in the tech industry. According to the Economic Development Board (EDB), the manufacturing sector contributes about 7% of Singapore’s GDP, and the country has committed $18 billion between 2021 and 2025 to support R&D and innovation.

Moreover, Singapore’s government has been proactive in creating a favourable business environment for chipmakers. The country offers various incentives, such as tax breaks and grants, to attract foreign investments in the tech sector. This support goes beyond financial aid, as Singapore also helps with working visas and regulation issues, which significantly improves project efficiency for chip companies.

According to United Microelectronics Corp (UMC), a Taiwanese chipmaker that also has operations in Singapore, the country’s support goes beyond money. UMC’s competitors in Japan receive 50% more money in subsidies, but Singapore’s attention to detail and support in other areas make it an attractive destination for manufacturing investments.

As a result of this consistent strategy and support, Singapore has managed to attract billions of dollars in fixed asset investments, especially in the electronics and semiconductor sectors. And this is just the beginning.

A Mature Ecosystem for Semiconductors

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Apart from its consistent manufacturing strategy, Singapore also boasts a mature ecosystem for semiconductors, which has been key to its success in attracting chip investments. The country has been a player in the chip industry since 1968, when the National Semiconductor Company established operations in Singapore. Over the years, the country has built a robust supply chain and a highly-skilled workforce, making it an attractive destination for chip companies.

According to Professor Rakesh Kumar, an expert in electrical and computer engineering, Singapore’s advantage lies in its well-trained workforce and supportive ecosystem for chip manufacturing. Unlike other countries that heavily rely on subsidies, Singapore’s existing presence in the chip supply chain has been crucial to its success. Attracting manufacturing investments is a challenge, and countries with an established chip industry tend to be more attractive to companies. Singapore’s well-developed ecosystem has been a significant factor in its success in the chipmaking race.

Furthermore, Singapore’s government has been proactive in creating a conducive environment for semiconductor companies. The country offers various programs and initiatives to support R&D and innovation in the tech industry, making it an attractive destination for chipmakers looking to expand their operations.

The Future Looks Bright for Singapore’s Chip Industry

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With its consistent manufacturing strategy and mature ecosystem for semiconductors, Singapore’s success in attracting chip investments is set to continue in the future. According to UMC, the outlook is very bright, and there are plans for a second phase of investments in the country.

Recently, the country announced a $5 billion expansion plan for its semiconductor industry, which includes the development of a new research and development center and the expansion of existing facilities. This shows that Singapore’s government is committed to further developing its tech industry and solidifying its position as a leader in chip manufacturing in Southeast Asia.

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    Singapore’s Manufacturing Strategy

    Free Person Soldering Chip Stock PhotoSingapore has long been known as a global leader in manufacturing, with a consistent and well-planned strategy that has attracted major investments in the sector. The government’s proactive approach in promoting and supporting the manufacturing industry has played a crucial role in Singapore’s economic growth and success.

    Consistent Strategy for Manufacturing

    One of the key factors that have contributed to Singapore’s success in the manufacturing sector is its consistent strategy. The country’s Economic Development Board (EDB) has been instrumental in formulating and implementing policies that have created a conducive environment for businesses to thrive. The EDB’s “Singapore Manufacturing 2030 vision” is a 10-year plan aimed at achieving a 50% growth in the manufacturing sector by 2030.

    The EDB’s strategy focuses on attracting investments in advanced manufacturing, such as electronics, semiconductors, automation, 3D printing, and robotics. These industries have been identified as key drivers of Singapore’s economy and are crucial in realizing the country’s vision of becoming a global leader in Industry 4.0.

    Mature Ecosystem for Semiconductors

    Free Photography of Singapore Skyscrapers Stock PhotoOne of the main reasons why Singapore has been able to attract major chip investments is its mature ecosystem for semiconductors. The country has successfully attracted frontier investments from leading semiconductor firms, such as GlobalFoundries, Siltronic, and UMC, to set up operations in Singapore.

    The availability of a highly skilled talent pool and the ease of doing business in Singapore have been major factors in the decision of these companies to invest in the country. In addition, Singapore’s strategic location and well-developed infrastructure have made it an ideal hub for the semiconductor industry.

    The impact of these investments on Singapore’s economy has been significant. The semiconductor manufacturing sector contributes about 80% of all electronic manufacturing in the country and accounts for 7% of its GDP.

    Examples of Successful Chip Manufacturing Companies in Singapore

    GlobalFoundries’ recent opening of a new 23,000 square meter plant in Singapore is a testament to the country’s success in attracting major chip investments. The facility, which comes with 1,000 new high-skilled jobs, is part of the company’s $4 billion expansion plan announced in 2021.

    Another major chip manufacturer, United Microelectronics Corp, is also investing $5 billion in a new advanced manufacturing facility in Singapore, expected to start operations in late 2022. These investments not only create job opportunities but also contribute to the growth of the local economy.

    SMEs in the manufacturing sector have also benefitted from the government’s initiatives. The M2030 careers initiative, launched by the government, aims to develop attractive career options in manufacturing and make them accessible to locals. In addition, the Industry 4.0 Human Capital Initiative helps companies adopt Industry 4.0 solutions, such as automation and robotics, while also upgrading the skills of their staff.

    Overall, Singapore’s consistent strategy and mature ecosystem for semiconductors have made it an attractive destination for chip manufacturing companies. With a strong focus on Industry 4.0 and continuous efforts to enhance the manufacturing sector, Singapore is well-positioned to maintain its leading position in the global chipmaking race.

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    Factors Contributing to Singapore’s Attractiveness

    Singapore has emerged as a top destination for semiconductor investments, thanks to its stable government, business-friendly environment, and comprehensive infrastructure. The country’s strong intellectual property protection and world-class education system have also contributed to its attractiveness for companies looking to set up or expand their semiconductor businesses.

    Political Stability and Business-Friendly Environment

    green treesOne of the key factors that make Singapore an attractive destination for semiconductor investments is its stable political climate. The country has a long-standing reputation for political stability, making it a safe and secure environment for businesses to operate in. This is especially important in today’s volatile global landscape, where geopolitical tensions can disrupt supply chains and manufacturing operations. In addition, Singapore’s business-friendly environment has also played a crucial role in attracting semiconductor companies. The country has a pro-business approach, with low corporate tax rates, minimal bureaucracy, and a strong commitment to free trade. This makes it easier for companies to set up and operate their businesses, allowing them to focus on their core operations and drive growth.

    Comprehensive Infrastructure and Strong IP Protection

    Singapore boasts a comprehensive infrastructure that supports the semiconductor industry. This includes state-of-the-art wafer fabrication facilities, advanced testing and assembly capabilities, and a robust supply chain network. This infrastructure is crucial for companies in the semiconductor industry, as it allows them to operate efficiently and meet the growing demands of the market. Moreover, Singapore’s strong intellectual property protection has been a key factor in attracting semiconductor investments. The country has a well-established legal framework for protecting intellectual property, providing a secure environment for companies to operate and collaborate. This has given companies the confidence to invest in Singapore, knowing that their innovations and designs will be safeguarded.

    World-Class Education System and Skilled Workforce

    Free A Person Drawing a Blue Print Stock PhotoSingapore’s education system is globally renowned for its excellence and has played a crucial role in developing a skilled workforce for the semiconductor industry. The country’s strong emphasis on science, technology, engineering, and mathematics (STEM) education has produced a pool of highly skilled workers with the necessary technical expertise and knowledge to support the semiconductor industry’s growth. In addition, the government has also implemented various initiatives to nurture talent and foster innovation in the semiconductor industry. This includes partnerships between industry players and educational institutions, such as the Semiconductor Active Youth programme, which provides mentoring opportunities for young talent in the industry. These efforts have helped to build a strong talent pipeline for the semiconductor industry in Singapore. In conclusion, Singapore’s stable political climate, business-friendly environment, comprehensive infrastructure, and strong intellectual property protection, combined with its world-class education system, have made it an attractive destination for semiconductor investments. As the country continues to invest in nurturing talent, fostering innovation, and embracing Industry 4.0 and sustainability, it is well-positioned to offer a thriving landscape for new and existing semiconductor companies. By choosing to establish or expand their operations in Singapore, businesses can tap into a robust and dynamic ecosystem, well-positioned to meet the challenges and opportunities of the ever-evolving global semiconductor market.

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    Singapore’s Existing Ecosystem

    silhouette of building construction beside the riverSingapore has a long and successful history in the semiconductor industry, dating back to the 1970s. Over the years, the country has established itself as a key player in the global market, attracting major companies and fostering a diverse ecosystem. One of the key benefits that Singapore’s existing ecosystem provides to chipmakers is access to established supply chains. The country is home to a wide range of companies in the chip ecosystem, including designers, manufacturers, packaging and testing firms, and equipment suppliers. This allows for a seamless flow of materials and services, making it easier for chipmakers to operate and collaborate. In addition, Singapore’s ecosystem offers access to a highly skilled labor force. The country has a stable government and a business-friendly environment, coupled with a world-class education system. This has resulted in a pool of highly educated and trained talent, making Singapore an attractive destination for chipmakers. The expansion of other companies in the chip ecosystem in Singapore further strengthens its position in the industry. For example, in 2022, AMD announced a $50 million investment to expand its R&D footprint in the country. French semiconductor materials supplier, Soitec, also broke ground on a $424 million extension of its plant in Singapore. These expansions not only create job opportunities but also contribute to the growth and development of the ecosystem. According to Peter Hanbury, a partner at the consultancy Bain & Co, having a diverse ecosystem is crucial for chipmakers. He suggests that building a second facility near a pre-existing fab can save a company between 10 to 15% of the cost. This highlights the importance of Singapore’s ecosystem in attracting investments from major players in the industry. Singapore’s existing ecosystem also offers a secure environment for companies to operate and collaborate, thanks to its strong intellectual property protection. This is crucial for semiconductor companies to safeguard their innovations and maintain their competitive edge. In Singapore, companies can operate with peace of mind, knowing that their intellectual property is well-protected. The country’s local industry development and collaboration efforts also contribute to its strong ecosystem. The government has invested heavily in the semiconductor sector, committing $18 billion between 2021 and 2025 to support R&D and innovation, according to the Economic Development Board (EDB). This has resulted in a favourable tax and regulatory environment, making Singapore an appealing destination for high-value-added manufacturing investments. Singapore has also established itself as a leader in wafer fabrication, assembly, and testing. This competitive edge allows the country to capitalize on shifts towards Southeast Asia and attract investments from big players in the industry. In fact, Singapore accounts for approximately 11% of the global semiconductor market share and about one-fifth of global semiconductor equipment is manufactured here. In conclusion, Singapore’s existing ecosystem is a strategic win for the semiconductor industry. Its long history in the industry, coupled with its diverse ecosystem, attractive investment environment, competitive capabilities, intellectual property protection, and local industry development and collaboration efforts, make it a convincing argument for overseas firms to expand here. As the country continues to invest in the sector, its future outlook remains bright, making it a top destination for semiconductor companies.

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    Importance of More Than Just Subsidies

    While subsidies are certainly a major factor in attracting investment, they are not the only consideration for companies looking to establish a presence in the semiconductor industry. In fact, Singapore’s success in this sector can be attributed to more than just financial incentives.

    One key aspect that has played a crucial role in Singapore’s ability to attract major chip investments is its existing presence in the global chip supply chain. With a strong ecosystem and established partnerships with key companies in the value chain, Singapore has developed a reputation as a reliable and strategic location for semiconductor production.

    The city-state’s stability, robust intellectual property protection regime, and skilled workforce have also been major factors in its success. These factors have allowed Singapore to develop and grow its semiconductor sector over the decades, making it an attractive destination for companies looking to invest.

    Furthermore, Singapore’s strategic location in Southeast Asia has made it a desirable alternative for companies looking to diversify away from Taiwan, especially in light of the rising tension in the Taiwan Strait. With a strong presence in the region, Singapore offers a stable and geographically desirable location for chip production.

    As highlighted by the Minister for Trade and Industry of Singapore, Gan Kim Yong, the semiconductor sector represents the largest manufacturing segment in the city-state, contributing 7% of its GDP in 2021. This strong foundation and existing presence in the industry have made Singapore an ideal location for companies to invest in.

    It is also worth noting that Singapore’s success in the semiconductor industry is not solely reliant on subsidies. While the city-state does offer financial incentives to attract investments, its focus on building a robust ecosystem and fostering strong partnerships with key companies have been equally important in its success.

    As noted by Chris Miller in his book “Chip War”, microchips are the new oil and a scarce resource that the modern world depends on. In this sense, Singapore’s growing role as a production hub in the chip industry supply chain is a testament to its strong fundamentals and strategic approach to attracting investments.

    Overall, while subsidies do play a crucial role in attracting investments, Singapore’s success in the semiconductor industry can be attributed to more than just financial incentives. Its existing presence in the global supply chain, stable business environment, and strong partnerships with key companies have all played a significant role in making it a top destination for chip investments.

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    Economic Development Board’s Confidence and Future Plans

    a group of people standing next to each otherDespite the current slump in the market for mature chips, the Economic Development Board (EDB) of Singapore remains confident in the long-term growth prospects of the semiconductor sector. This confidence is reflected in their plans to invest more in the industry, which currently contributes about 7% of the country’s GDP.

    According to a spokesperson from the EDB, the government is committed to supporting the growth of the semiconductor sector in Singapore. This is evident in the recent investments made by major chipmakers and related suppliers in the city-state.

    However, it is important to acknowledge that several of the newest chip facilities in Singapore are coming online at a time when the market for mature chips is in a slump. This has resulted in declining revenue for most chip companies, with the exception of AI-focused firms like Nvidia and AMD. This decline can be attributed to the slowdown in demand for consumer electronics such as computers, laptops, and smartphones.

    Despite these challenges, the EDB remains optimistic about the future of the semiconductor industry in Singapore. This is due to the country’s pool of highly educated talent, which makes it an attractive option for chip companies looking to expand their operations. In fact, Peter Hanbury, a partner at consultancy Bain & Co, suggests that building a second facility near a pre-existing fab in Singapore could save companies between 10 to 15% of the cost.

    Furthermore, the EDB’s confidence in the sector’s long-term growth prospects is also driven by the potential for further growth in Singapore’s chip industry. With the rise of emerging technologies such as 5G, artificial intelligence, and the Internet of Things (IoT), the demand for advanced chips is expected to increase in the coming years. This presents an opportunity for Singapore to solidify its position as a key player in the global chipmaking race.

    As part of its future plans, the EDB aims to continue attracting major chip investments and diversifying the supply chain in Singapore. This is evident in the recent announcements of Soitec’s 400 million euro investment to double the capacity of its wafer plant and Applied Materials’ groundbreaking of a new 600 million Singapore dollar plant in the city-state.

    In conclusion, while the current market for mature chips may be in a slump, the EDB’s confidence and future plans for the semiconductor sector in Singapore show that the country is well-positioned to remain a leading hub for chip production. With the government’s support and the strong pool of talent, Singapore is poised to continue attracting major chip investments and driving growth in the industry for years to come.

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    Conclusion

    In conclusion, Singapore’s consistent and holistic approach towards attracting major chip investments has proven to be successful in positioning the city-state as a key player in the global semiconductor industry. Through its mature ecosystem and existing infrastructure, Singapore has been able to attract major chipmakers such as Applied Materials and GlobalFoundries, who have committed to investing billions of dollars in expanding their operations in the country. One key factor in Singapore’s success is its consistent strategy in developing its manufacturing sector. The country has been investing in this industry for decades, creating a strong foundation for growth and attracting top talent in the field. This has allowed Singapore to develop a mature ecosystem, with a skilled workforce and a robust intellectual property protection regime, which is vital for the semiconductor industry. Moreover, Singapore’s existing infrastructure and supply chain have also played a crucial role in attracting chip investments. The country offers high-quality facilities and a reliable supply chain, making it an ideal location for chipmakers to set up their operations. This is further supported by the country’s strategic location in the heart of Southeast Asia, providing easy access to key markets and suppliers. It is also worth noting that Singapore’s success in the semiconductor industry is not solely reliant on financial incentives and subsidies. The country’s approach focuses on developing a holistic ecosystem that supports the growth and sustainability of the industry. This includes partnerships with key companies across the value chain, as well as investments in leading-edge manufacturing capacities. Looking ahead, Singapore’s chip industry is poised for continued growth and success. With major chipmakers committing to long-term investments in the country, Singapore’s position as a key player in the global semiconductor supply chain is set to strengthen. Additionally, the country’s government has shown its commitment to supporting the industry, as seen through its recent initiatives such as the Singapore Economic Development Board’s eight-year expansion plan and the US Chips and Science Act. In conclusion, Singapore’s consistent strategy, mature ecosystem, existing infrastructure, and holistic approach towards attracting investments have proven to be key factors in its success in the semiconductor industry. With a strong foundation and continued support, Singapore’s chip industry is well-positioned for further growth and success in the future.

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