Chips still king of Singapore exports amid non-tech upswing in Asia

[SINGAPORE] Economists from US investment bank Morgan Stanley, who observed a sharp rise in non-technology exports, recently posed this question: Is Asia’s macro story all about semis?

It is undeniable that semiconductors – powerful, ultra-thin wafers – have become a cornerstone of the modern economy.

Growth in the space, which supports the proliferation of artificial intelligence, is powering on in the region, alongside a jump in exports outside the technology sphere, according to the research published on May 20.

The economists noted that non-tech exports from China, India, South Korea and Taiwan – which account for around 60 per cent of Asia’s total exports – rose by an annualised 27 per cent in the six months to April 2026.

This mirrored a trend seen across a wider number of Asian economies, where non-tech exports rose by an annualised 25 per cent from October 2025 to March 2026.

Over the period, non-tech exports contributed 8.3 percentage points to overall exports growth, as compared with 3.7 percentage points during the first nine months of 2025.

“While semis exports have continued to accelerate into the second quarter of 2026, non-tech exports are also exhibiting sustained, broad-based strength,” the economists wrote.

“The strength of the capex cycle has been key in driving the recovery in non-tech exports,” they added. Capex is short for capital expenditure, which refers to the funds that businesses allocate to physical assets like property, technology and equipment.

Singapore, however, has bucked the trend. Electronics shipments, of which chips are a significant driver, have started to account for a bigger share of the Republic’s exports.

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Year-on-year growth of electronics non-oil domestic exports (NODX) more than doubled from 23.4 per cent in the last quarter of 2025 to 57.8 per cent in 2026’s first quarter, thanks to strong artificial intelligence demand.

Chips accounted for S$1.7 billion of the S$3.1 billion in electronics exports in March.

The Republic produces one in 10 chips globally and one in five pieces of semiconductor equipment.

According to the Economic Development Board, the semiconductor industry contributes close to 6 per cent of Singapore’s gross domestic product and employs more than 35,000 people.

Meanwhile, non-electronics exports reversed their gains and recorded a year-on-year decline of 3.5 per cent during the first three months of 2026.

DBS senior economist Chua Han Teng told The Straits Times that the weakness “partly reflected headwinds from US tariffs, as non-electronics NODX experienced a significant year-on-year contraction in the first quarter”.

He said US President Donald Trump’s administration has continued to explore avenues to impose import levies, even after US courts ruled its sweeping reciprocal tariffs and those based on the 1977 International Emergency Economic Powers Act as illegal.

Earlier in June, Trump’s trade office in Washington made the first move to replace the sweeping levies with ones he believes are less vulnerable to legal challenges.

Chua also said the results of a US Section 301 investigation into force labour – which, if implemented, will cause a moderate increase in the average effective tariff rate on Singapore – “would likely act as a continued drag on Singapore’s non-electronics NODX to the United States”.

“Singapore’s exporters operating in this space would likely adapt through market diversification efforts, as they brace themselves for continued US trade protectionism, with the US continuing to pursue other investigations under Section 301,” he added.

The Ministry of Trade and Industry (MTI), in response to the new US tariff proposed on Jun 2, said the 12.5 per cent duty will apply to around one-third of Singapore’s domestic exports to the US when it becomes effective.

Some critical exports will remain exempted, including semiconductors and pharmaceuticals and pharmaceutical ingredients.

Elsewhere in Asia, non-tech exports have seen an extended period of growth, driven by ships, networking and telecommunication equipment, and construction machinery, according to Morgan Stanley.

The investment banking firm’s economists said: “Part of the strength has come from AI-related products, including power equipment and components.”

But they also observed a “momentum in capital goods exports, including industrial equipment and non-passenger car transport equipment”.

They added: “Intermediate goods have been the second fastest-growing segment, lifted by the exports of parts which are linked to the production of capital and consumer goods.”

Electronics remained a key driver of Singapore’s NODX in April, surging 66.7 per cent from a year earlier. Shipments of integrated circuits, or chips, grew by 82.7 per cent.

During the month, non-electronics exports expanded 10.9 per cent, led by pharmaceutical shipments, which soared 97.1 per cent year on year.

UOB associate economist Jester Koh said: “This likely reflects some element of front-loading in response to the US’ announced 100 per cent tariffs on selected patented pharmaceuticals and their associated ingredients.”

The tariffs are expected to take effect at the end of July for certain large companies, and in September for smaller firms.

An MTI analysis, released earlier in 2026, noted that pharmaceuticals and non-monetary gold had contributed to nominal NODX growth in 2025, but that these exports “tend to be volatile and lumpy”.

Koh expects growth in Singapore exports to persist in the months ahead, with the electronics and semiconductor segments continuing to outperform the pack.

“In contrast, non-electronics exports may weaken, reflecting supply shortages in the chemicals segment and a surge in energy prices alongside broader spillovers weighing on external demand,” he said.

May’s export figures are due to be released next week. THE STRAITS TIMES