The manufacturing industry has undergone profound changes in recent decades, driven by globalisation, technological advances, and Asia’s emergence as a major player.
However, in certain Asian and ASEAN countries, these changes have often fuelled a cutthroat competition focused on pricing, rather than innovation-based value.
Amidst this is Singapore, which while primarily known for excelling in financial services and tax incentives, now has its eyes on becoming a leading global manufacturing hub, with electronics manufacturing playing a significant role within the broader manufacturing sector.
Global firms such as Procter & Gamble (P&G) and Siemens are setting up manufacturing facilities there as part of strategic initiatives to nurture Singapore’s position as an international base for talent, trade, and innovative technology.
So, how does Singapore stand out from the rest in terms of its manufacturing landscape?
The city-state has emerged as an example of forward-thinking that is embracing Industry 4.0 to transition from a manufacturing hub to a value-adding hub. This strategic move is designed to consolidate its leadership position in the global manufacturing space.
This ambition takes tremendous foresight and investment in technology, skills, and infrastructure, which is something Singapore excels at. Let us take a look at the state and future of Singapore’s promising manufacturing industry, and how you can be a part of it.
Overview of the Manufacturing Sector in Singapore
Brief History and Current State of the Manufacturing Sector
Singapore’s manufacturing sector has undergone a remarkable transformation since the nation gained independence in 1965. Initially, the focus was on low-cost, labor-intensive production, which laid the foundation for the country’s industrial base. However, as global competition intensified and labor costs increased, Singapore strategically shifted towards high-value manufacturing. This transition was driven by significant investments in technological advancements and innovation.
Today, Singapore’s manufacturing sector is a cornerstone of its economy, contributing around 20% to the country’s gross domestic product (GDP). The sector has evolved into a hub for advanced manufacturing, leveraging cutting-edge Industry 4.0 technologies such as artificial intelligence, robotics, and the Internet of Things (IoT). This shift not only enhances productivity but also positions Singapore as a leader in the global manufacturing landscape.
Importance of the Manufacturing Sector to Singapore’s Economy
The manufacturing sector is a vital pillar of Singapore’s economy, playing a crucial role in driving economic growth and providing employment opportunities. It is a significant contributor to the country’s GDP and a major player in international trade, with a substantial portion of Singapore’s exports originating from this sector.
Moreover, the manufacturing sector is a key driver of innovation. Many companies within the sector invest heavily in research and development (R&D) to stay competitive and push the boundaries of technological advancement. This continuous investment in innovation ensures that Singapore remains at the forefront of global manufacturing trends and maintains its competitive edge.
Key Statistics and Rankings
- Singapore’s manufacturing sector contributes around 20% to the country’s GDP.
- The sector employs approximately 12% of the country’s workforce.
- Singapore is ranked 2nd in the world in terms of robot density in manufacturing.
- The country is home to over 2,700 precision engineering firms.
- Singapore’s semiconductor industry accounts for 20% of the world’s output.
These statistics underscore the significance of the manufacturing sector in Singapore’s economy and highlight the country’s strong position in the global manufacturing arena.
Embracing Industry 4.0: Singapore’s Pioneering Approach
Singapore’s approach to the Fourth Industrial Revolution, often termed Industry 4.0, is characterised by its forward-thinking strategies and relentless pursuit of innovation.
Recent global disruptions, such as the pandemic and the Suez Canal blockage, have significantly impacted the global supply chain, prompting Singapore’s manufacturing sector to reassess its strategies to enhance resilience and leverage data for improved transparency and management.
From rolling out robust initiatives to cultivating an ecosystem conducive to digital advancement, Singapore’s transition to Industry 4.0 is an instructive model for nations and industries worldwide.
Related Read: Industry 4.0: The Growth of Advanced Manufacturing in Southeast Asia
Noteworthy Initiatives and Strategies
Industry 4.0 Human Capital Initiative
The Industry 4.0 Human Capital Initiative aims to equip Singapore’s workforce with essential Industry 4.0 skills. It aims to aid businesses in these aspects, with the aim of increasing productivity levels:
- Adopting tools
- Using data
- Garnering relevant insights
- Automating processes
- Determining crucial skills for digital transformation
Productivity Solutions Grant (PSG)
The PSG supports businesses in their quest for technological adoption. It extends funding for off-the-shelf solutions, from digital solutions, and equipment, to consultancy services that can improve productivity.
JTC Corporation’s Agreement With Hyundai Motor Group
Singaporean government agency JTC Corporation reached a deal with Hyundai Motor Group in 2022 to team up on transport and logistics for the country’s upcoming industrial parks.
Advanced Manufacturing 2030
Singapore’s manufacturing sector is at the heart of the visionary roadmap, Manufacturing 2030, which targets a 50% expansion over the next decade by enhancing competitiveness through digital transformation and technology adoption. It involves fostering public-private partnerships, promoting research & development, and encouraging digital transformation.
The Pioneer Certificate Incentive (PC(M))
The Pioneer Certificate Incentive for manufacturing promotes capability growth and incentivises new or expanded economic activities in Singapore. It aims to encourage large-scale, desirable manufacturing and HQ activities that create tangible economic benefits.
Development and Expansion Incentive (DEI)
This government-led initiative is a tax incentive that encourages high-value-added manufacturing activities. It aims to promote growth in Singapore and offers a concessionary tax rate of 10% to qualified companies.
Key Industries in Singapore’s Manufacturing Landscape
Precision Engineering and Manufacturing
Precision engineering and manufacturing is a cornerstone of Singapore’s manufacturing landscape, known for its focus on high-value products such as medical technology, aerospace components, and semiconductor equipment. This industry is characterised by its commitment to technological advancements and innovation, with many companies investing heavily in research and development (R&D) to stay ahead of the curve.
The adoption of new technologies, such as additive manufacturing and Industry 4.0, has been pivotal in driving the growth of the precision engineering sector. These technologies enable companies to enhance their production capabilities, improve efficiency, and deliver high-quality products that meet the stringent demands of global markets.
Singapore’s precision engineering industry also benefits from robust government support. Initiatives like the Productivity Solutions Grant (PSG) and the Smart Industry Readiness Index (SIRI) are designed to help companies adopt new technologies and improve productivity. These programs provide financial assistance and resources to encourage the adoption of advanced manufacturing techniques and digital transformation.
In summary, the precision engineering and manufacturing industry in Singapore is a dynamic and innovative sector that plays a crucial role in the country’s manufacturing landscape. With strong government support and a focus on technological advancement, this industry is well-positioned to continue driving economic growth and maintaining Singapore’s competitive edge in the global market.
Expanding Business Opportunities: Understanding the PC(M) and DEI
At the heart of Singapore’s manufacturing growth strategy lies the latter two strategies in the previous list, the PC(M) and DEI.
Both are designed to promote a higher level of operations and bring economic benefits to the country through attractive tax benefits for those looking to take advantage of Singapore’s bright future as a global manufacturing 4.0 hub.
Expanding production facilities is a crucial part of this strategy, leveraging technological advancements and efficient production operations to enhance service offerings and grow business reach in Singapore and its neighboring regions.
Nurturing Innovation: The PC(M)
The PC(M) is a tax incentive that encourages companies to grow capabilities and conduct new or expanded economic activities in Singapore.
The incentive is aimed at encouraging companies to carry out desirable manufacturing activities in Singapore on a significant scale that generates tangible economic spin-offs. Additionally, the PC(M) incentive aims to enhance the value chain within Singapore’s manufacturing sector, focusing on advanced manufacturing and high-value electronics and biomedical products to improve its competitiveness as a global industrial hub.
PC(M) Assessment Criteria
The assessment criteria for the PC(M) are as follows:
- Introduction of Advanced Technology: The entity should introduce technology, skill sets, or know-how that are significantly more advanced than the average currently prevailing in Singapore’s manufacturing industry.
- Quantitative Aspects
- Employment Creation: The project should create new jobs, taking into account the skills, expertise, and seniority of the positions.
- Introduction of Advanced Technology: The entity should introduce technology, skill sets, or know-how that are significantly more advanced than the average currently prevailing in Singapore’s manufacturing industry.
- Fixed Asset Investment: There should be substantial investment in fixed assets like plants, buildings, or equipment.
- Capability Growth: There should be a commitment to enhancing capabilities in Singapore, which could include aspects like technology, skill sets, and know-how.
Application Process for PC(M)
To start the application process for the PC(M), your entity is obligated to submit a formal application to the Singapore Economic Development Board (EDB), consisting of two main components:
- Core Form: This form requires your entity to offer details about its anticipated incremental investment. Such investment considerations include aspects such as employment growth, fixed asset investments, and total business expenditure.
- Supplementary Form: This additional form necessitates your entity to supply further details regarding the products to be manufactured and the employment of skilled personnel. The information should be closely aligned with your business strategy and investment plans.
Expanding Business Opportunities: Understanding the DEI
The DEI is a tax incentive that encourages companies to engage in high-value-added manufacturing activities in Singapore, either through a new setup or an expansion of existing operations in Singapore.
The incentive aims to encourage companies to grow their capabilities and conduct new or expanded economic activities in Singapore. The DEI incentive also aims to increase total manufacturing output through high-value-added activities.
Companies that are awarded a DEI certificate will benefit from a concessionary tax rate of 10% for 5 years, considerably lower than Singapore’s statutory tax rate of 17%.
DEI Assessment Criteria
The DEI has specific terms and conditions that your entity needs to fulfil, in addition to meeting the standard conditions stated in the Letter of Award (LOA). The terms of the DEI are:
Qualifying Period: The incentive is valid for five years.
Your entity must fulfil the following conditions:
- Incur an additional Fixed Asset Investment (FAI) of a minimum of S$6.5 million by the end of Year 5
- Employ at least 15 additional skilled employees, all of whom must be based in Singapore by the end of Year 5
The additional FAI and employment numbers are calculated based on the entity’s last Financial Year FAI and employment.
Please note that EDB reserves the right to revise/update these conditions from time to time. In terms of assessment, your entity will be evaluated on its ability to meet these quantitative conditions.
Qualitative aspects of the project, including the quality of jobs created from the project, the generation of spin-offs to the economy, and the commitment to grow capabilities in Singapore, will also be considered during the assessment.
Application Process for DEI
To start the application process for the DEI, your entity must submit a formal application to the EDB, consisting of two main components:
- Core Form: This form requires your entity to offer details about its anticipated incremental investment. Such investment considerations include aspects such as employment growth, fixed asset investments, and total business expenditure.
- Supplementary Form: This additional form necessitates your entity to supply further details regarding the products to be manufactured and the employment of skilled personnel. The information should be closely aligned with your business strategy and investment plans.
How Can You Be Part of the Singapore Manufacturing 4.0 Future?
Singapore’s manufacturing industry, underpinned by its strategic embrace of Industry 4.0, holds immense prominence for both local and foreign investors.
A resilient supply chain is crucial in navigating the manufacturing landscape, especially in light of recent global disruptions. However, to navigate the landscape successfully and take full advantage of the opportunities available, including the DEI and PC(M) incentives.
Engage With InCorp and Expand Your Reach to Singapore
At InCorp, we are equipped to provide you with the tailored advice and assistance you need. Contact us today. Let us explore how your company can be part of Singapore’s bright Manufacturing 4.0 future and make it a reality.
FAQs About Manufacturing Industry in Singapore
What is the scenario of the Singapore manufacturing industry?
- Singapore’s manufacturing industry is being driven by a robust digital infrastructure, government initiatives, favourable demographic trends, and the strategic adoption of Industry 4.0 technologies.
Which initiatives are launched by Singapore to support Industry 4.0?
- Singapore has launched several notable initiatives to support Industry 4.0, including the Industry 4.0 Human Capital Initiative, the Productivity Solutions Grant, and the Manufacturing 2030 roadmap. These programmes aim to foster a digitally literate workforce, increase productivity, and transform the manufacturing sector.
What are the complexities and challenges of supply chains in the context of recent global disruptions?
- The increasing complexity of supply chains has been highlighted by recent global disruptions such as the pandemic and supply route blockages. Manufacturers need to adapt and restructure their supply chain networks to enhance transparency and resilience. Utilising data to manage these challenges is crucial for maintaining efficient and robust supply chains.
Engage InCorp and expand your reach to Singapore with our help and advice!
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