Singapore factory output expands in July, driven by precision engineering and sustained AI demand
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Total factory output climbed 6.8 per cent year on year in July, after a 7.2 per cent rise in June.
ST PHOTO: AZMI ATHNI
- Singapore's manufacturing output grew 6.8% year on year in July, led by precision engineering and electronics sectors, surpassing economists' 6.7% forecast.
- Precision engineering rose 17.7%, driven by semiconductor equipment and optical instruments; electronics grew 11.2%, boosted by AI-related demand.
- Biomedical manufacturing and chemicals declined, with pharmaceuticals and petrochemicals falling due to lower demand and supply disruptions.
AI generated
SINGAPORE – Singapore’s manufacturing output grew in July, as all clusters except biomedical manufacturing and chemicals recorded growth.
Total factory output climbed 6.8 per cent year on year in July, after a revised 7.5 per cent rise in June. The expansion surpassed the 6.7 per cent growth forecast by economists in a Bloomberg poll.
Excluding the biomedical manufacturing industry, output increased 8 per cent, data from the Economic Development Board on Aug 26 showed.
Economists said that there are early signs that artificial intelligence-related tailwinds may be moderating, given that electronics output growth slowed, but external demand is still strong.
Standard Chartered chief economist Edward Lee and senior economist Jonathan Koh noted: “Two consecutive monthly declines in electronics output warrant monitoring, but strong order books, electronics exports, re-exports and Purchasing Managers’ Index indicators suggest that external-sector momentum has further to run.”
Even as electronics output growth cooled, Maybank economist Brian Lee said it is unlikely the AI boom is coming to an imminent end.
“Singapore’s electronics industry still has durable tailwinds from the global AI infrastructure build-out. Demand for semiconductor equipment remains robust amid a global expansion in chip fabrication capacity,” he said.
DBS senior economist Chua Han Teng noted that external demand for Singapore’s electronics and precision engineering exports could remain supported by substantial AI infrastructure investment, particularly from major US hyperscalers.
Brian Lee added that the global AI hardware boom is unlikely to stall abruptly even if hyperscalers temper future spending plans amid mounting scrutiny over cash flows.
This is because of the long lead times and sizeable sunk costs associated with data centre projects. Many facilities already in the pipeline will continue to drive demand for chips, storage and networking equipment, he noted.
Chua warned that overall performance will continue to be uneven, with pockets of weakness persisting amid rising input costs and ongoing supply chain disruptions.
“The petrochemicals segment, which contracted by an average of 44 per cent year on year from March to July following the onset of the Middle East conflict, will remain weak, with any rebound potentially modest, given feedstock constraints arising from ongoing disruptions in the Strait of Hormuz amid the unresolved war,” he added.
UOB associate economist Jester Koh said the bank foresees headwinds in oil refining activity and petrochemicals output, given the re-intensification of the Middle East conflict.
Output from the precision engineering cluster saw the largest growth in July, jumping 17.7 per cent year on year. Within the cluster, the machinery and systems segment expanded 18.2 per cent, driven by higher production of semiconductor equipment.
The precision modules and components segment grew 15 per cent, led by optical instruments, electronic connectors, metal precision components and dies, moulds, tools, jigs and fixtures.
The electronics industry, which accounts for nearly half of Singapore’s manufacturing output, saw an increase of 11.2 per cent year on year, after a 21.3 per cent rise in June and a 35.8 per cent rise in May, led by the infocomms and consumer electronics as well as semiconductors segments, on the back of sustained AI-related demand.
Within the cluster, semiconductor output surged 8 per cent, while infocomms and consumer electronics added 51.7 per cent and computer peripherals and data storage expanded 0.8 per cent.
Other electronic modules and components grew 2.5 per cent.
General manufacturing output increased 4.9 per cent, with most segments reporting growth.
Within the cluster, the printing segment grew 2.7 per cent, and the food, beverages and tobacco segment expanded 10.4 per cent, while the miscellaneous industries segment shrank 5.9 per cent – due to lower production of structural metal products and furniture.
Transport engineering was up 10.8 per cent, as land and aerospace segments expanded within the cluster, but growth was partially offset by the marine and offshore engineering segment, which recorded lower production of oil and gas field equipment.
The aerospace segment, which rose 15.8 per cent, was supported by higher production of aircraft parts and sustained maintenance, repair and overhaul jobs from commercial airlines.
Beyond electronics and the other clusters that grew, Singapore’s other manufacturing industries fared worse in July.
Biomedical manufacturing output declined 5.3 per cent from a year ago.
Within the cluster, the pharmaceuticals segment fell 14.3 per cent on account of a different mix of active pharmaceutical ingredients being produced compared with a year ago. The medical technology segment also dipped, by 2.2 per cent, due to softer export orders for medical devices.
Chemicals output fell 10.6 per cent compared with a year ago.
Within the cluster, the petroleum and petrochemicals segments shrank 7 per cent and 48.7 per cent, respectively, amid plant maintenance, softer demand and feedstock supply disruptions.
This was partially offset by growth in the other chemicals and specialties segments, due to higher production of perfumes and fragrances and additives respectively.
