Singapore manufacturing expected to stay strong in 2025, though Trump’s trade policies cloud outlook

SINGAPORE’S manufacturing sector is set to sustain robust growth in 2025, though expectations have been tempered by uncertainty surrounding incoming US president Donald Trump’s trade policies.

“Overall, we view the manufacturing sector quite favourably for continued growth in 2025,” said Lennon Tan, president of the Singapore Manufacturing Federation (SMF).

“Of course, the caveat is always how the evolving geopolitical landscape may change things and disrupt supply.”

He expects 2025’s manufacturing growth to hold steady at this year’s rate, “barring any unforeseen situations”, though he did not state a specific estimate.

UOB associate economist Jester Koh expects full-year manufacturing output growth to be 4 per cent for 2024, rebounding from the 4.2 per cent contraction in 2023, after the release of November’s data on Dec 26.

OCBC chief economist Selena Ling, however, is less optimistic.

She expects full-year 2024 manufacturing output growth to come in at 3.7 per cent, but anticipates “a moderation” to around 2.7 per cent in 2025, partly due to expected tariffs under Trump’s incoming administration.

Powered by electronics

SMF’s Tan expects the lynchpin electronics segment – which contributes nearly half of Singapore’s total manufacturing output and is largely driven by semiconductors – to remain the sector’s leading driver of growth.

Semiconductor production is expected to maintain a similar growth trajectory to this year, he added. For January to November, semiconductor output was 5.8 per cent higher than the year-earlier period.

As for non-semiconductor manufacturing growth in 2025, Tan expects this to align with Singapore’s projected gross domestic product growth of 1 to 3 per cent for the year.

Electronics drove overall manufacturing growth in the second half of 2024, and is expected to “remain a key growth driver” in the quarters ahead, said DBS analysts in a Nov 29 report.

“We expect this ongoing factory expansion to continue into 2025,” they said.

For the first 11 months of the year, electronics output was up 7.1 per cent year on year. This drove overall manufacturing output growth of 3.5 per cent for the same period.

In a Dec 26 report, Barclays economist Brian Tan noted “solid expansion in electronics, which still appears to be in an upcycle”.

“The latest data suggest tech output broadly remains on an upcycle in Singapore, despite earlier signs that electronics exports may be losing momentum,” he said.

The DBS analysts said: “Singapore is a critical node in the global semiconductor supply chain, and is likely to benefit from a sanguine outlook for the global tech cycle.”

Demand for artificial intelligence (AI) data centres and servers, coupled with growing adoption of AI in consumer devices, is expected to bolster the memory chip segment and prompt consumer electronics manufacturers to increase inventories, they said.

“We expect electronics firms in Singapore to capitalise on the opportunities presented by the global tech expansion,” they added. “The ongoing electronics expansion and upcycle in Singapore should therefore have further room to run.”

US tariffs

But uncertainty over Trump’s trade policies could weigh on global electronics players – though the exact impact on Singapore’s manufacturers remains unclear.

In his election campaign, Trump proposed tariffs of 60 per cent on all goods from China and blanket tariffs of 10 to 20 per cent on other imports.

After winning the Nov 5 election, however, he lowered his threats to “an additional 10 per cent tariff, above any additional tariffs” on China, in a Nov 26 social media post. What he will do upon taking office on Jan 20 remains to be seen.

In 2023, semiconductor exports to the US accounted for just 1.1 per cent of Singapore’s total exports, noted OCBC’s Ling.

Even before Trump, the US has moved to restrict advanced chip exports to China in the past year. In response, China has bolstered domestic procurement and sought to reduce reliance on specific companies or economies, reflecting elevated geopolitical tensions.

“If semicon is a strategic industry that comes under close scrutiny by major economies, then technology restrictions may have some impact on the regional manufacturing supply chain, notwithstanding Singapore’s neutral stance and free trade agreement with the US,” Ling told The Business Times.

Should Singapore itself face tariffs on direct exports to the US, there would “obviously be an impact” on semiconductor fabrication plants here, said SMF’s Tan.

Meanwhile, China accounts for a larger 4.4 per cent of Singapore’s semiconductor exports.

Even if US tariffs hurt demand for certain China-based manufacturers, that might not necessarily have a knock-on effect on Singapore suppliers.

Tan does not expect Singapore’s semiconductor exports to China to be affected by US tariffs on China. This is because higher-end semiconductor components that might be targeted in a trade dispute are largely not manufactured in Singapore.

“For (our) mid-to-low-end semiconductor players, I don’t think they will have any big issues,” he added.

If anything, Singapore’s tech manufacturers could gain as more multinationals explore relocating production to Asean to mitigate the impact of potential US tariffs, UOB Kay Hian (UOBKH) analysts noted in a Dec 9 report.

“In addition, companies who serve US multinationals could see better times ahead as the US economy continues to show a recovery and increased capex requirements after the election,” the UOBKH analysts said.

Other sectors

Beyond electronics, biomedical manufacturing – particularly the medtech segment – could be a bright spot in 2025 despite its typical volatility, Tan said.

This optimism stems from Singapore’s strong emphasis on research and development (R&D) in medtech.

Based on SMF’s own data, about 70 per cent of medtech manufacturers in Singapore actively engage in R&D – a higher proportion than in other manufacturing segments.

“We know that Singapore (manufacturing) is not the greatest in terms of being a cost leader,” Tan explained. “Creating intellectual property through R&D is the way for us to ensure longevity.”

In the year ahead, Singapore’s manufacturers will continue to face challenges from high costs such as rentals, manpower, and utilities.

But the upcoming Johor-Singapore Special Economic Zone could provide some relief through offshoring, said Tan.

Although details remain unclear ahead of the deal’s expected signing in January, Tan anticipates that some firms may relocate lower-skilled operations to Johor.

“Overall, it will translate to some cost efficiencies, if your suppliers were to relocate some operations to Johor,” he added.