Semiconductor chips are the base building blocks for electronic devices, from mobile phones to computers to smart cards, and Singapore produces $37.3 billion worth of these chips, comprising 15 per cent of its manufacturing output last year.

More than 50 semiconductor companies here, like Chartered Semiconductor Manufacturing and SSMC employ, tens of thousands of workers.

The sector, said semiconductor industry association Semi's senior director for research and statistics Dr Dan Tracy, had 'fallen off a cliff last November', as consumers and companies cut back on electronics.

This led to many companies, including Singapore's Chartered, posting losses and laying off staff as demand for their products dried up.

While the year's chip sales are still expected to fall by about 20 per cent compared to the previous year, chip orders have gone up in the last two months, pointing to a possible recovery, said Dr Tracy.

Systems on Silicon Manufacturing Company (SSMC) chief executive Jagadish CV agreed.

He said the first quarter of this year was the worst he has seen in the last five years. But demand is picking up and should continue to improve in the next few months.

Privately-held SSMC is a joint-venture between NXP and Taiwan's TSMC.