Singapore factory output jumps in August, driven by sustained AI demand

SINGAPORE – Singapore’s manufacturing output expanded in August, as all clusters except chemicals recorded output growth.

Total factory output climbed 15.4% year on year in August, after a revised 6.9% rise in July. However, the expansion missed the 18.3% growth forecast by economists in a Bloomberg poll.

Excluding the biomedical manufacturing industry, output increased 17%, data from the Economic Development Board on Sept 28 showed.

Economists expect sustained global artificial intelligence tailwinds to continue driving manufacturing activity in the coming months, though performance will be uneven across clusters.

DBS senior economist Chua Han Teng said Singapore will continue to benefit from strong global demand for AI-related hardware. He noted that the Republic’s position as a critical node in the semiconductor supply chain allows it to capitalise on the ongoing global AI infrastructure build-out dominated by hyperscalers.

“While factory performance in AI-exposed clusters is likely to stay resilient, the manufacturing sector will remain uneven, with certain clusters facing challenges and weakness amid rising energy and input costs, as well as supply chain disruptions,” he said.

He added that petrochemical firms face constraints because of a lack of feedstock, driven by the persistent closure of the Strait of Hormuz amid Middle East tensions.

Maybank economists Brian Lee and Chua Hak Bin said that booming semiconductor equipment demand represents another growth driver, given chip fabrication capacity expansions both globally and in Singapore.

The economists noted that TSMC affiliate Vanguard International Semiconductor inaugurated a US$6.7 billion (S$8.6 billion) 12-inch wafer fabrication plant – producing power management chips, analogue chips and advanced packaging components – in Singapore on Sept 28.

The new plant opened with new capacity already sold out, with a second facility under consideration, they noted.

Lee and Chua expect the Monetary Authority of Singapore to tighten its monetary policy “very slightly” at the mid-October meeting, amid rising inflation and resilient growth.

Output from the precision engineering cluster saw the largest growth in August, jumping 33.9% year on year, driven mostly by higher production of semiconductor equipment in the machinery and systems segment.

Within the cluster, the precision modules and components segment saw higher output of dies, moulds, tools, jigs and fixtures as well as precision components for the electronics industry.

The electronics industry saw an increase of 28.5% year on year, supported by strong production of servers and related products, semiconductors and data storage products amid robust AI-related demand.

Within the cluster, semiconductor output surged 26.1%, while infocomms and consumer electronics added 66.3%, and computer peripherals and data storage expanded 20.4%.

Other electronic modules and components fell 6%.

Transport engineering grew 9.5%, led by the land and aerospace segments. In particular, the aerospace segment recorded higher production of aircraft parts and sustained maintenance, repair and overhaul jobs from commercial airlines.

General manufacturing output increased 1.5%, supported by higher production of beverage products, commercial printing, and metal doors and windows.

Biomedical manufacturing output inched 0.4% higher.

The medical technology segment recorded higher output of medical devices amid stronger export demand. This was partially offset by a decline in the pharmaceuticals segment due to a different mix of active pharmaceutical ingredients being produced.

Beyond electronics and the other clusters that grew, the chemicals cluster declined 12.7%, weighed down by the petroleum and petrochemicals segments.

Petroleum output was affected by plant maintenance, while petrochemicals production continued to be constrained by softer demand and feedstock supply disruptions. In contrast, the specialities segment recorded output growth on account of higher production of industrial gases and food additives.