You are here


From the factory to the lab, manufacturing will need to change gears

The sector must see a marked transformation to reach the CFE target of about 20% of GDP.

THE face of manufacturing in Singapore in the years ahead will have to be markedly different from what it used to look like even five years ago if the country is to keep the sector's share of gross domestic product (GDP) at the "around 20 per cent" target proposed by the Committee on the Future Economy, economists and industry players say.

Boosting the sector's GDP share from the 17-18 per cent of the past couple of years to about 20 per cent in the future will require manufacturers to start focusing less on mass production and more on technology that can help them become intellectual property (IP) owners instead, they add.

That could mean moving more workers away from the factory floor into research and development (R&D) labs that will build and integrate the technology needed to help the sector start making products that are customised for each buyer but also priced competitively.

The sector made up about 17-18 per cent of GDP in 2016, according to economists. The CFE said in its Feb 9 report that manufacturing accounted for 14 per cent of total employment here.

Economists say that getting to "around 20 per cent" could be challenging due to weak external economic growth combined with domestic factors such as a manpower crunch, rising wages and higher industrial rents.

"It's both cyclical and structural . . . the two years of decline in the offshore and marine sector contributed to the decline too," says UOB economist Francis Tan, referring to the sector's GDP share. "It will be at 17-18 per cent for some years . . . I think it will even drop to 15 per cent soon."

Credit Suisse's Michael Wan says he expects the sector's GDP share to continue hovering around 17-18 per cent, adding that global trade remains weak.


To get to around 20 per cent, Mr Tan suggests more incentives to get manufacturers to adopt state-of-the-art technology and move upstream into R&D and design, while Mr Wan says Singapore can no longer rely on attracting multinational corporations and must start to develop homegrown companies.

OCBC economist Selena Ling says rapid adoption of cutting-edge and sophisticated technology, use of automation, openness to ideas and talent, and focus on R&D and connectivity "are going to be increasingly important".

"Increasingly the actual manufacturing processes may be outsourced to regional countries . . . only the very high-tech, customised and advanced manufacturing activities will stay," she adds.

As technology progresses, the number of workers that future high value-add (VA) manufacturing will require is likely to slide and the skills needed will change dramatically, economists note.

"The form of manufacturing will be very, very different from what it used to be," says CIMB economist Song Seng Wun. "There might just be a plant with 100 specialised engineers that produce goods worth a billion dollars."


Mr Wan says the country could also target high VA sectors such as space manufacturing, data analytics, and perhaps also 3D printing.

Douglas Foo, president of the Singapore Manufacturing Federation, says he envisions mass-produced products and services becoming "tailormade", using Internet of Things (IoT) technology, branding and collaboration between designers and factory owners. "The tech is there . . . it's about piecing it together."

The use of cutting-edge technology is low among local manufacturers but the eventual goal is for Singapore firms to engineer bespoke, high VA products such as designer clothing and outsource the production to lower-cost factories, he says, though he notes that the kinds of products considered high VA will evolve and it would be up to companies to keep on top of the game.

Knowing customers better will help, he says. "Now, we catch the fish, put it in the fridge and take it out when it's ordered, but things could come to a point where we know exactly when to catch the fish so that we don't have to store it so long."

BT is now on Telegram!

For daily updates on weekdays and specially selected content for the weekend. Subscribe to