WhyItMatters

Bright spot amid gloom

A US$4 billion (S$5.4 billion) investment here by chip-making giant Micron Technology to expand its Senoko plant is heartening news on several levels.

First, the vote of confidence in Singapore by the US company will translate into 500 new jobs.

Second, the hefty investment is a bright spot amid generally gloomy data showing a manufacturing slowdown and stagnant exports. But perhaps most importantly, the new state-of-the-art facility to produce 3D Nand flash memory chips used by mobile devices shows that Singapore has not lost its relevance in the global tech supply chain.

CIMB Private Bank economist Song Seng Wun said: "For years, there has been a growing worry that electronics manufacturing - still a major contributor to the economy - has lagged behind mobile technologies. It looks like we still have that traction.

"And the fact that (Micron) is willing to invest here, even though Singapore is not the cheapest place to do so, is also encouraging. Thanks to technology, manufacturing processes are becoming more automated and, maybe, it makes sense again to do high-end manufacturing in Singapore."

But one swallow does not a summer make and the tough times facing the sector here are inescapable.

In the first half of this year, exports of electronic products - 28.8 per cent of Singapore's total - slid 4.2 per cent, after 0.5 per cent full-year growth last year. The long-term outlook may stay gloomy, Credit Suisse economist Michael Wan warned.

"The structural issue hasn't changed, the labour cost is too high and not commensurate with productivity. The challenge for economic restructuring remains - to move industries up the value chain without hurting companies' profit margins too much," Mr Wan said.

Still, the hope is that the Government's push to upgrade industries and labour skills will continue to pay off, even if big-ticket projects such as Micron's are few and far between. Micron's bold move is hopefully "the light at the end of the tunnel" for manufacturing here, Mr Song said.

Wong Wei Han

A version of this article appeared in the print edition of The Straits Times on September 28, 2016, with the headline 'Bright spot amid gloom'. Print Edition | Subscribe