AI-fuelled electronics to keep Singapore exports resilient, but growth becoming increasingly concentrated

[SINGAPORE] Artificial intelligence-driven demand for electronics is expected to keep Singapore’s exports resilient in the second half, although economists warned that growth is becoming increasingly reliant on a single sector as non-electronics exports continue to weaken. 

This comes after Singapore’s non-oil domestic exports (NODX) rose 20.7 per cent year on year in June, moderating from the 38.4 per cent increase in May.

Although June’s NODX growth fell short of economists’ median forecast of 28.7 per cent, OCBC chief economist Selena Ling said electronics exports nevertheless recorded their “strongest... growth for as far back as 1998”. 

Electronics NODX surged 105.1 per cent, up from 94.8 per cent growth in May, which Enterprise Singapore (EnterpriseSG) attributed to robust global AI-related demand.

Growth in electronics NODX was mainly driven by integrated circuits, which expanded 115.4 per cent and added S$1.9 billion.

Other factors that drove growth were a 170.9 per cent rise in disk media products, which contributed S$8 million in value, as well as a 95.8 per cent expansion in the exports of personal computers, which added S$500 million. 

By contrast, non-electronics shipments contracted 2.9 per cent in June, reversing the previous month’s 17.7 per cent expansion.

This was driven by declines in non-monetary gold (-49 per cent), food preparations (-38.6 per cent) and petrochemicals (-27.9 per cent).

Growth increasingly concentrated 

Overall, Ling said, June’s resilient NODX performance was “single-handedly powered by electronics exports due to the AI boom”.

She added that the stellar H1 performance, during which NODX grew 18.6 per cent, suggests that full-year growth could exceed OCBC’s current forecast of 6 per cent.

This is higher than EnterpriseSG’s official forecast range of 3 to 5 per cent growth for the year.

“The global AI-investment momentum still appears to have some legs to run in the near term notwithstanding the stock market jitters and gyrations,” said Ling. 

Maybank economists Chua Hak Bin and Brian Lee expect exports and manufacturing to remain resilient in H2 2026, underpinned by sustained global spending on AI infrastructure.

They said the outlook is supported by a continued boom in AI capital expenditure, with the five largest US hyperscalers expected to increase capex by about 77 per cent in H2 2026. 

Rising capital spending and import demand from China are also expected to provide an additional tailwind, they added.

UOB associate economist Jester Koh said Singapore’s strong momentum in electronics NODX is likely to persist into the third quarter of this year, supported by several indicators. 

These include a 0.3-point rise in Singapore’s electronics purchasing managers’ index to 52.2 in June – its highest level since November 2018 – driven by improvements in the new export orders and order backlog sub-indices, which Koh said signals robust underlying demand.

Nevertheless, he noted that the divergence between electronics and non-electronics exports widened further in June.

This reinforces what Standard Chartered economists Edward Lee and Jonathan Koh described as an “uneven” expansion despite Singapore’s stronger-than-expected 5.7 per cent gross domestic product growth in Q2.

While lower non-monetary gold exports accounted for the biggest drag on non-electronics NODX, weaker petrochemical shipments also weighed on the segment. 

DBS senior economist Chua Han Teng attributed the weakness to feedstock disruptions in the Middle East, which he expects to remain a headwind into Q3. 

“A return to pre-war feedstock conditions is expected to take time, given the continued caution surrounding transit through the Strait of Hormuz,” he said. 

Given the renewed disruption around the strait as well as potential disruptions in the Red Sea, StanChart’s economists said that the Monetary Authority of Singapore (MAS) is likely to remain watchful of oil prices and upside inflation risks.

However, they noted that June’s strong export performance supports maintaining the current policy stance rather than easing it. The concentration of growth in AI-driven electronics and still-contained underlying inflation means the data does not necessarily justify further tightening at the July policy review.

Maybank likewise expects MAS to maintain its current modest appreciation bias in July. Its analysts noted that economic activity has been primarily capital rather than labour-intensive, helping to keep inflation contained.

Top markets

In June, key exports to all of Singapore’s top 10 markets increased year on year.

This was led by Taiwan (123.3 per cent), South Korea (62.9 per cent) and Thailand (41.5 per cent).

The US, Malaysia and Hong Kong posted growth of 36.7 per cent, 35.3 per cent and 25.9 per cent, respectively.

This was followed by the EU 27 (20.8 per cent), India (18.2 per cent), China (7.4 per cent) and Indonesia (2.7 per cent).

Total merchandise trade expanded 49.3 per cent year on year in June, extending May’s 39.6 per cent rise, with both exports and imports increasing.

The rise in total exports (48.9 per cent) was driven by growth in both non-oil exports (up 48 per cent) and oil exports (up 54.5 per cent).

Total imports climbed 49.8 per cent.