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Singapore still sunny on semiconductors despite global chip slump: Heng Swee Keat

THE outlook for the global semiconductor industry remains sunny, Deputy Prime Minister Heng Swee Keat has reiterated, as he opened his second major wafer fabrication facility here in as many months on Tuesday.

Meanwhile, leading foreign direct investments here are a vote of confidence in Singapore's economic policies, added Mr Heng, who is also Minister for Finance.

He was at the expansion of Swiss-based semiconductor company STMicroelectronics' wafer fabrication facility in Ang Mo Kio, which is ST's largest such production site by volume, making up more than two-fifths of all the company's output.

The facility, which ST bought from American rival Micron in a US$30 million leaseback deal in 2017 and took over this year, adds 15,500 square metres (sq m) of cleanroom space for 51,200 sq m altogether in Singapore. It is part of the company's "TechnoPark @ Ang Mo Kio", which also houses research, development and design, sales, and other business functions.

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Earlier on Tuesday, trade agency Enterprise Singapore reported that electronics shipments fell year on year by a steeper 25.9 per cent in August. And Micron had opened its own fab expansion in the north of Singapore on Aug 14 - a day after the Republic slashed its annual growth forecast, amid persistent weakness in the electronics industry.

But "ST's latest investment here is in line with its strategic perspective, because the future of the global semiconductor industry is bright, despite the slowdown today", said Mr Heng, citing growth on new technologies like self-driving cars. He had struck a similar note at the Micron opening in mid-August.

"The current slowdown is largely due to global economic uncertainties and weaker demand from some end-markets, especially consumer electronics.

"That said, the global semiconductor industry has enjoyed strong growth in the preceding few years, with fresh demand driven by new applications in the Internet of Things, artificial intelligence and mobility services."

ST, which targets industrial segments such as the automotive sector, makes six-inch and eight-inch wafers in Singapore, with a transition to eight-inch wafers under way. It can now churn out 27,500 eight-inch wafers a week from the expanded fab - more than twice the previous capacity - with an assembly and test site in Toa Payoh and a regional logistics base in Loyang.

Despite the global semiconductor downturn, "ST invests for the future", said STMicroelectronics chief executive Jean-Marc Chery at the opening ceremony. "We serve a secular, growing market addressing key societal needs."

The company has about 4,900 workers in Singapore, including 400 jobs at the new plant. Franco-Italian ST, which started its operations in Singapore in 1969, has invested some US$5 billion in Singapore in the last two decades, although the company would not give the sum that was put into its latest fab expansion.

“Our top focus is automotive, and you know that automotive today is not only about the fossil fuel engine control,” Mao Bor-Yen, general manager for Asia-Pacific manufacturing operations, later told reporters. “It’s also info-tainment, power management; and this fab is just compatible with all the technologies that we need for these applications.”

Mr Heng also said that "ST's investments here affirm our approach to the economy - one that is both pro-business and pro-worker" and called on more companies to commit resources to upgrading workers' skills.

"During challenging economic times, the Singapore government worked closely with companies like ST to retrain and upskill existing workers," he said. "As a result, our workforce could emerge stronger and more capable."

Singapore's labour market has softened in tandem with economic weakness, according to the latest Manpower Ministry data for the half-year, as the resident unemployment rate inched up to 3.1 per cent in June, from 3 per cent in March.

Meanwhile, semiconductor exports and sales data in Asia point to a growth recovery in the third quarter, Citi economists noted in a report on Sept 12, with potential for higher memory output in Singapore.

Still, they warned that possible macroeconomic headwinds could hit the semiconductor cycle even in its inchoate recovery, especially amid tensions between the United States and China.

"Recent demand recovery in tech supply chain could be front-loading activities before imposition of extra tariffs in September-December," the Citi report said, adding: "Deterioration of economic sentiment in overall manufacturing sector has already dragged growth outlook of the region."

ST most recently posted a net profit of US$160 million for the three months to June 29, 2019 - down by 38.7 per cent on the year before - as revenue fell by 4.2 per cent to US$2.17 billion on lower microcontroller and digital integrated circuit sales.

But with the group forecasting a full-year revenue of between US$9.35 billion and US$9.65 billion - compared with US$9.66 billion in 2018 - Mr Chery said that ST management expect the dip in the top line to still come out better than an industrywide double-digit decline.