S’pore factory output rises in June, with AI demand continuing to drive electronics production

SINGAPORE – June’s manufacturing output increased by 7.2 per cent year on year, on the back of increased demand in the electronics, precision engineering and transport engineering clusters.

This fell short of the 9.3 per cent forecast by analysts in a Bloomberg poll, as production declined across the other clusters of chemicals, biomedical and general manufacturing.

Excluding biomedical manufacturing, output increased 9.6 per cent, according to data released by the Economic Development Board on July 27.

Analysts say the near-term outlook for Singapore’s manufacturing industries remains positive, driven by global artificial intelligence-related tailwinds, though the uneven performance across the various clusters will likely remain.

Output from the electronics cluster saw the largest growth in June, at 21.3 per cent, driven by sustained AI-related demand that lifted the infocomms and consumer electronics segment by 32.1 per cent and the semiconductor segment by 21.1 per cent.

Production of other electronic modules and components also grew by 5.2 per cent, and output from the computer peripherals and data storage segment rose 8.2 per cent following a contraction in the previous month.

DBS senior economist Chua Han Teng said that supply constraints prevented electronics production from keeping pace with the surge in demand for chips, as growth in the semiconductor segment slowed down compared with in May.

But he added that despite the ongoing supply constraints, strong investments by hyperscalers – massive cloud computing and data centre companies – will continue to drive robust demand for electronics and precision engineering products, such as server-related products and semiconductor equipment.

The precision engineering cluster was the second-best performer, growing by 14.9 per cent.

This was supported by higher production of semiconductor equipment in the machinery and systems segment, which grew 16.6 per cent.

The precision modules and components segment saw an expansion of 6.6 per cent, with higher output of optical instruments, electronic connectors and dies, moulds, tools, jigs and fixtures.

The transport engineering cluster grew 4.6 per cent. The land segment saw the largest expansion at 41.2 per cent, while the aerospace segment grew 11.2 per cent, bolstered by higher production of aircraft parts and sustained maintenance, repair and overhaul jobs from commercial airlines.

This was partially offset by the marine and offshore engineering segment, which contracted 14.1 per cent as it recorded a lower level of activity and softer demand for oil and gas field equipment.

The biomedical manufacturing cluster shrank 11.4 per cent, led by the pharmaceuticals segment’s 34.4 per cent decline as a result of a different mix of active pharmaceutical ingredients being produced.

The medical technology segment contracted 0.7 per cent.

The chemicals cluster declined 11.7 per cent. Disruptions to feedstock supply led to lower production in the petroleum and petrochemicals segments, which contracted 10.2 per cent and 52.7 per cent respectively.

Output for the specialities segment remained flat, while the other chemicals segment grew 22 per cent.

Edward Lee, Standard Chartered Bank’s chief economist and head of foreign exchange for ASEAN and South Asia, said that the Middle East conflict continues to paint an uncertain outlook, especially with the drawdown in global energy inventories.

DBS’ Chua added that with renewed tensions in the Middle East continuing to overstrain feedstock supplies, the headwinds facing the chemicals manufacturing cluster – which contracted for the fifth straight month – are likely to persist into the third quarter of 2026.

General manufacturing industries declined 6.8 per cent. The food, beverages and tobacco segment contracted 16.9 per cent, recording lower production of milk powder as well as beverages and cocoa products.

The miscellaneous industries segment, however, recorded growth of 16.3 per cent, with higher production of structural metal products and wearing apparel, while production in the printing industries reversed a contraction in May to grow 2.9 per cent.