Singapore’s Growing Role as a Production Hub in the Chip Industry Supply Chain
Soitec, a French semiconductor company, unveils their factory expansion project in Singapore scheduled for completion by 2024 (Illustration courtesy of Soitec). Source: Nikkei Asian Review
Big Western chipmakers are increasingly turning towards Singapore as a production hub, both to meet growing demands and to diversify their supply chain risks.
The Economic Development Board of Singapore claims that the chip-making industry is a market expected to almost double to $1 trillion USD ($1.4 trillion SGD) by the end of the decade. This insatiable appetite for tiny computer chips seems further highlighted by the increasingly digitized world where electric cars and remote working are starting to be considered the norm.
The US-China tech rivalry, which is partly centered on American efforts to curtail China's semiconductor industry, has meant that firms in the industry are looking to expand outside of China. The rising tension in the Taiwan Strait has also meant that companies are seeking to diversify away from Taiwan by building new plants overseas. With this, Southeast Asia -- and Singapore in particular -- seems to be the most compelling alternative.
French substrate manufacturer Soitec will invest 400 million euros ($430 million USD) to double the capacity of its wafer plant in Singapore. Additionally, a American semiconductor manufacturing equipment maker, Applied Materials, has declared its plans to invest 600 million Singapore dollars ($450 million USD) to expand manufacturing facilities in the city-state.
This investment in Singapore is a strategic move from Western chipmakers who are willing to accept the trade-off between capital expenditure for expertise, stability and geographical desirability.
Soitec’s investment in Singapore is part of Soitec's five-year, 1.1 billion euro capital spending program it announced in 2021; their silicon-on-insulator (SOI) wafers prevent leakage of electrical current using layers of insulation and are used in smartphones for energy efficiency. Similarly, Applied Materials intends to boost its capacity to meet growing demand from its main customers, including Taiwan Semiconductor Manufacturing Co. Its new plant is part of their eight-year expansion plan dubbed "Singapore 2030”. Both companies have committed to devote more resources to Singapore for the foreseeable future, where high land and labor costs are compensated for by the already existing supply chain.
The American chip making giant, GlobalFoundries, also recently announced a $4 billion expansion plan in Singapore; this seems to be a common theme ever since the US Chips and Science Act was passed in August with $52 billion USD, where an expansion on chip production base is focused.
South East Asia’s role in the global semiconductor supply chain. Source:Singapore Economic Development Board
According to the country’s Ministry of Trade and Industry, the semiconductor sector represents Singapore’s largest manufacturing segment, contributing to 7% of its GDP last year.
This makes further investment in Singapore even more consequential, especially as many countries around the world are competing to attract chip-related companies.
In his book, Chip War, Chris Miller claims that “microchips are the new oil—the scarce resource on which the modern world depends.” While Singapore’s size and stature would force them to perpetually balance competing pressures from the US and China, their growing influence in the chip industry supply chain can be seen as ubiquitously positive. Their geopolitical neutral stance, coupled with human capital, infrastructure, and business-friendly environment has seemed to have paid dividends for the country. It might not be there yet – but Singapore’s semiconductor industry is starting to become an intrinsic part of the global supply chain.