Singapore factory activity accelerates on demand for AI products and chips

SINGAPORE - Singapore’s manufacturing output picked up in January as demand for products and applications powered by artificial intelligence (AI) drove the orders of advanced semiconductors.

The purchasing managers’ index (PMI) – a barometer of the overall manufacturing industry’s health – rose to 50.5 points from 50.3 points in December 2025.

The electronics sector, which accounts for 40 per cent of manufacturing output, recorded a PMI of 51.1 points, marking its eighth consecutive month of expansion.

A PMI reading above 50 indicates growth; one below suggests a contraction in output.

“The latest PMI readings point to a continued positive outlook for the manufacturing sector, underpinned by strong demand for AI-related chips and memory products,” said Mr Stephen Poh, executive director at the Singapore Institute of Purchasing and Materials Management, which gathers and compiles the monthly survey.

The data came after

private sector surveys in Asia

found that solid global demand lifted export orders in China, Japan and South Korea.

A private survey for China, compiled by S&P Global, was more bullish than an official reading published days earlier, which showed that Chinese factory activity deteriorated in January.

Singapore manufacturers have benefited from AI demand, through the production of memory chips essential for storing large datasets for AI models, as well as servers, components and networking equipment that support the technology.

DBS Bank senior economist Chua Han Teng said the upward momentum from late 2025, supporting the headline and electronics PMIs, carried into the new year.

“This was reflected in faster expansion across multiple electronics sub-indices, including new export orders, output, imports, and order backlog, alongside an easing in stocks of finished electronics goods,” he said.

He noted the broader manufacturing PMI had yet to recover to its level in March 2025, before US President Donald Trump announced tariffs on almost every country in the world.

For this reason, he remains cautious about the outlook for non-electronics manufacturing, as the anticipation of higher tariff rates that drove some customers to place orders in advance in 2025 could start to fade in 2026.

Mr Chua added that the supplier deliveries index, which slipped into contraction in January after two consecutive months of moderation, “pointed to some supply chain challenges”.

OCBC Bank chief economist Selena Ling said this index’s performance “could be reflective of the capacity constraints and geopolitical and trade restrictions”.

She added that companies’ “extended delivery times revolved around logistical issues, like longer transit and turnaround times, amid the avoidance of the Red Sea and Suez Canal routes”.

Meanwhile, the employment and order backlog indexes returned to expansion territory, as the input purchases index recorded a slower rate of growth.

The future business index remained in expansion territory for the third straight month, reflecting sustaining business optimism.

Within the electronics sector, the supplier deliveries index recorded its third consecutive month of contraction, indicating longer delivery lead times.

The sector’s future business index expanded for the seventh consecutive month.

The latest PMI readings support what the Monetary Authority of Singapore (MAS)

said in its latest macroeconomic review

.

The central bank believes that technology-related activities, like the manufacturing of electronics and information technology equipment, could account for a greater share of Singapore’s economic growth in 2026 than in 2025, as demand soars for AI chips used in data centres.

Non-technology segments of the economy, such as the aerospace and finance and insurance sectors, are also expected to contribute materially to gross domestic product (GDP).

The electronics sector, which includes the semiconductor industry, was a key driver of GDP growth in 2025, buoyed by demand for AI-related products.