Speech by Minister Chan Chun Sing at the press conference for the sectoral company visit to Univac Precision Engineering

Speech by Minister Chan Chun Sing at the press conference for the sectoral company visit to Univac Precision Engineering

1. Good morning. Thank you for joining us.

2. Today we are here to talk about the manufacturing sector, in particular, the advanced manufacturing sector. Over the years, the manufacturing sector has allowed Singapore to capture value from the global export markets with strong linkages and spillover to the rest of the economy. Today, it contributes about 21% or around S$106 billion of our total GDP.

3. It has provided good opportunities for some 450,000 workers in Singapore, or around 12% of our workforce, with median wages at about S$4,700 which is approximately 10% higher than the economy-wide median. It comprises about 12% of our workers but produces about 20-21% of our total GDP. Therefore, the manufacturing sector provides good paying jobs with good prospects and a challenging job scope for many of our workers, including the younger generation.

4. Today, Singapore's manufacturing sector is globally competitive. In the 2020 Bloomberg innovation index, we ranked second globally for manufacturing value-add. We are also the world's fourth largest exporter of high value goods and home to leading companies in various manufacturing sub-sectors.

5. For example, in precision engineering, we produce about 60% of the world's microarrays and one-third of the world's thermal cyclers and mass spectrometers. For electronics, we account for about 11% of global semiconductor market share and about 20% of global semiconductor equipment output. For biomedical, we produce four out of the top 10 pharmaceutical drugs by revenue. On the chemical side, we are among the top 10 global chemicals hubs and top five refinery export hubs. On the aerospace side, we serve as a key Maintenance, Repair and Overhaul (MRO) and manufacturing node for global aerospace value chain. These are just some examples of where we stand today.

6. For a small country like us, it is quite remarkable to firstly have such a relatively high share of manufacturing in our economy, not just in terms of the size but also in terms of the quality of the sector. Many other more mature economies, including the advanced Western economies, have seen their manufacturing share in the economy decline over the years. We remain one of the few, together with examples like Japan, Korea and Germany, which have continued to maintain a strong manufacturing sector at around 20% of GDP or higher, despite the strong growth in the services sector.

7. We are committed to maintaining a strong manufacturing base in Singapore. In 2017, the Committee on the Future Economy (CFE), recommended to build a globally competitive manufacturing sector at around 20% of GDP over the medium term, and this has not changed.

8. More recently, COVID-19 has underscored the importance of the manufacturing sector in Singapore. Firstly, in both a COVID and a post-COVID world, having a more diversified economy is important for us. Performance in the biomedical electronics and precision engineering sub-sectors were bright spots in 2020 due to the increased demand of their products amidst the pandemic and lockdowns. This helped us to push up our overall performance when other sectors were down.

9. Second, having unique capabilities and products which cannot be easily found elsewhere also strengthens our resilience. In the fight against COVID-19, securing essential supplies sometimes become a barter trade. This may continue to be so as we see global supply chains continue to be disrupted. Whether people choose to sell to us, often depends on whether we have things that others value and wish to obtain. This goes beyond the issue of whether people are willing to pay the price for it. Therefore, in a COVID world, very often, it is about our ability to produce things that others want. It is not just about whether we have the money or if others are prepared to sell things to us.

10. We remain optimistic about our manufacturing outlook over the medium to long term. Having said that, today we want to announce our broad direction of where we are heading for the manufacturing sector.

11. First and foremost, to maintain manufacturing at about 20% of our GDP in a fast-growing economy like Singapore is already a challenge. Our vision for Manufacturing 2030 is for Singapore to become a global business innovation and talent hub for advanced manufacturing.

12. We must not underestimate this level of ambition. To give more depth to what we mean by this ambition, this will require us to grow the manufacturing sector by around 50%. The manufacturing sector has grown around 50% in the past decade, and we hope to continue to maintain this trend, which is from a much larger base now. This means that we have grown about 50% in the last decade, and we hope to be able to grow another 50% from a bigger base in the next 10 years. By any means, this is a stretched target. What are the challenges that we will face while achieving this target, and what do we hope to achieve?

13. First and foremost, we are not just talking about the increase in value of about 50%. We are also concerned with the mix of the manufacturing sector. Many of the older generation manufacturing activities that depend on cost competitiveness for contract manufacturing will increasingly be displaced by cheaper alternatives in other countries. Instead, beyond the 50% increase in value, we want to see a greater proportion of our manufacturing going into advanced manufacturing, where the competition is not based on cost, but is based on the intellectual property that we can generate. This is based on the quality of the products and the precision that we can provide for the sector. It will indeed be quite a different manufacturing sector in terms of quality, beyond the quantitative size of another 50% growth that we aspire to.

14. It is not a given that we can achieve this target easily. In fact, I set this goal as a very stretched target for the sector, and for MTI to try to pursue. Because in the next 10 years, we will have to achieve this with a much smaller manpower footprint. The era whereby we can bring in cheaper, foreign manpower labor to augment the Singaporean workforce will increasingly become more difficult. Therefore, we will have to do this with possibly a smaller pool, but a much higher quality talent pool so that we can go into the area of advanced manufacturing, whereby we can complement the local workforce with high quality machines.

15. It is the depth of intellectual property required for such sector operations and the kind of niche areas that we need to go in that will make us hard to displace in the global value chain. It will be a very exciting journey, different from how we see manufacturing in the past, whereby it might be more labour intensive and repetitive. Another dimension that will change in the manufacturing sector, particularly the advanced manufacturing sector, will be the way we innovate both the products and services, as well as the production system.

16. Today, here at Univac, we are able to see the different generations of production systems that they have gone through. From the previous machine tooling generation to now, where they are entering the biomedical side. When it comes to the biomedical sector, it is the quality of the product and the certification that is critical. It is no longer about competition based on costs.

17. A few weeks ago, I visited Siemens. It is yet another example of advanced manufacturing whereby people are not competing based on costs, but competing based on the speed at which they can improve their product. To give an example, in the past, an individual might produce something, and after a few years with a bit of market knowledge, they will improve the products that they are producing. And maybe in another one or two years, they are able to revamp the production system and their entire production chain. Usually, the cycle will be quite long. But going forward, in the era of advanced manufacturing with the combination of Industry 4.0 technology, where they have lots of data and artificial intelligence, they have a huge computing power to develop many generations of products in a very compressed timeframe. When they design the product, not only are they designing the product, they are also designing the processes that design the product at the same time.

18. This is the kind of competition that we will have to be in going forward in the advanced manufacturing sector. It is no longer about cost of production, and lower labour costs or lower land costs. These may still play a part, but they are not the key part of the competition. The key part of the competition is about how fast we are able to use data and technology to innovate the product and have the production system keep pace to produce those products. Generally, they are in very high precision sectors that require certifications and qualifications that are not easily obtained by other competitors that are just competing on the basis of cost alone.

19. This is where we are currently. Therefore, if we are successful, we will see our manufacturing sector grow significantly by 2030, compared to today. More importantly, beyond any headline figure, the source of our growth will rely on our ability to do much more much higher quality work with lesser manpower than ever before. I want to emphasise we are not just going for the headline number in terms of the value, but also in terms of the kind of quality behind those value products.

20. To do this, we will adopt a three-pronged strategy in order for us to achieve our ambition.

21. First, we will continue to attract frontier investments to Singapore. Over the years, we have attracted many best-in-class firms to anchor their operations in Singapore. For example, today in Singapore, we are the key manufacturing location for some of the biggest semiconductor companies in the world such as Micron, Broadcom, Infineon and GlobalFoundries. These firms have contributed to the building of our manufacturing sector and continue to drive advanced manufacturing adoption and development.

22. In January 2020, the World Economic Forum named Infineon Singapore and Micron Singapore as two of the 54 Lighthouse factories in the world. These two world-leading Industry 4.0 factories are recognised for their efforts to digitalise their shop floor and implement smart factory tools to achieve higher productivity and capital efficiency. These lighthouses are the most advanced factories across the globe and serve as an example for the rest of the industry to follow. Thus, having two of them in Singapore is good news. But of course, we aspire to do much better and have many more of our companies in the same league as these companies.

23. Despite the uncertainties brought about by the COVID pandemic, the investments secured by EDB last year - which we announced last week - are encouraging signs that we continue to be an attractive location for global MNCs to anchor their key operations here –, where we provide a safe harbour for their intellectual property and for them to service a bifurcating world, and guard against the vagaries of geopolitics.

24. We will continue to strengthen our ecosystem to support these companies’ innovation and connectivity and infrastructure needs, and to utilise the broad range of tools that we have to help them build an ecosystem that allows them to be most competitive in Singapore as part of their global operations.

25. Beyond that, we come to the second prong which is closely related to the first prong – we need to ramp up our efforts to groom and grow our local enterprises in advanced manufacturing. We need to take a leaf from how the Germans have developed their Mittelstand system, which is a tier of mid-sized companies that support the global MNCs. But each of these companies have very unique and niche capabilities, where they are world beaters in their respective fields. And we hope that our mid-tier companies will also be able to perform this role.

26. Companies like Univac are a good example, where they have specialised, niche capabilities that allow them to compete with the best-in-class across the world. We might not be in every part of the global value chain, but we certainly want to be in critical parts of the global value chain, where we can value-add and are not easily displaced by other competitors just based on cost alone.

27. Another example would be AEM which started about 30 years ago as an automation company. Their consistent efforts to transform and build up their core capabilities, especially in the past decade, have helped them grow into a leader in the testing and handling solutions. Today, AEM serves some of the world's largest global semiconductor manufacturing, including Intel. They are currently on ESG’s Scale-up SG programme to chart new growth strategies for their new business areas.

28. Another example is homegrown security firm Oneberry Technologies, which develops robots to perform security and patrol functions. Their robots, for example, have been deployed at high security events, such as the Trump-Kim summit in Singapore. They disrupted a traditionally manpower-intensive security industry with innovative technology and solutions, which have helped them to secure opportunities beyond Singapore.

29. Our goal is to help many more companies like AEM, Oneberry and Univac to grow from strength to strength, not just in terms of size, but in terms of the capabilities they can bring to the table for their customers across the world. In turn, this will create better job opportunities for fellow Singaporeans.

30. We will continue to offer promising enterprises in Singapore tailored support through programmes such as T-Up, Scale-up SG, Enterprise Leadership for Transformation, and so forth, to grow them into globally competitive companies. We will uplift our firms’ innovation capability and capacity through strengthening capability for market-oriented innovation. And part of this will require us to better tie up our companies’ capabilities with the research and innovation system upstream in our Institutes of Higher Learning and research institutions. With this combination, our companies will have real capabilities that will distinguish them from the competition, because we hold the IP to many of these things. We will also want to help our companies forge stronger collaborations with world-leading manufacturing companies to learn from them and to collaborate with them. This is part of the work of the Global Innovation Alliance (GIA) network and the co-innovation programmes that we have put in place.

31. Another part to grow the strength and capabilities of our local companies is for us to strengthen our industry ecosystem and accelerate the Industry 4.0 adoption amongst our most promising enterprises. We have established the Smart Industry Readiness Index (SIRI) to provide a data-backed snapshot of Industry 4.0 maturity levels, which firms such as Univac can benchmark against their peers. But beyond the benchmarking, it is also using SIRI as a roadmap to see how we can adopt the next tranche of technology and embed them into the production system and design system of our advanced manufacturing companies. This will then help them to accumulate the years of experience and level up quickly.

32. While we were walking along the shop floor earlier, I was able to meet some of our engineers with many years of experience, who are almost master craftsmen in their own right. It is not just about buying a machine from some place and operating the machine. In fact, many of them use the machines that we bought to hone their skills, and they are able to produce products which are of a quality that is significantly different from our competitors.

33. The question is, how do we knowledge capture all these years of experience combined with data to continuously strengthen our production system, strengthen our design and strengthen the way we elevate our production system? We have been able to do that in the initial steps, with the efforts in Univac and some other production systems that I visited recently. All these point to the direction which we want our manufacturing companies to move towards, and this is where I think there is a very significant role for our trade associations and chambers (TACs).

34. When I visited Siemens a couple of weeks ago, I suggested to them that we should get our TACs to visit some of these lighthouse companies to help the firms upgrade the design of their products and production systems using the technologies that they have. Through this, we can accelerate the product innovation cycle to beat the competition. This is where our TACs can really help our companies level up – by organising our companies, let them see what the available opportunities are, what the latest technology are, and help them to adopt some of these technologies.

35. I understand many of our companies may be of a relatively smaller size. Many will find it difficult to buy those technologies, and it may be very difficult for them to go and buy those technologies when they have not even used it yet.

36. But today, we have many facilities like the ARTC and Siemens, where they provide such design capabilities and innovation capabilities as a service to complement what our companies are doing. I urge our TACs to help our companies to come together, leverage on the services available to level up the capabilities of our companies. Otherwise, even when we reach the stretch goal of growing our manufacturing output by another 50% over the next 10 years, we will not reach the kind of quality that we want.

37. I want to emphasise that this is not just a quantitative target, but it is a qualitative target to make our manufacturing sector much more resilient, much more competitive. Much more resilient because people cannot displace us through lower cost; much more competitive because we have the in-house capabilities and the ecosystem to compete on the basis of our design, our innovation, and how we can rapidly prototype the next generation of products and services. This will then make our manufacturing sector qualitatively different from what we have today.

38. The third prong that we have to embark on to realise our vision is really the manpower side. We want to attract more Singaporeans into manufacturing across all levels, especially in the critical roles. As companies evolve, as technologies evolve, the skillsets of our people must also evolve. There are two parts to this.

39. We will work with our Institutes of Higher Learning (IHLs), from ITEs to polytechnics to universities, to excite the younger generation to join engineering and manufacturing. Engineering and manufacturing are no longer about repetitive tasks done in a very structured environment. In fact, today, the biggest challenge for the engineering and advanced manufacturing sector is how fast we are able to innovate and prototype new products and services. The challenges are very interesting, and I think it will be very good for our younger generation to see the kind of opportunities in these sectors. It is no longer the previous type of work where people think of just going to a factory and doing the same thing for eight hours a day. It’s no longer that kind of work we are talking about.

40. Now, beyond working with our IHLs to step up recruitment of the younger people, we also must continuously upgrade the skills of the older workers in the sector itself. This is another role where many of our TACs can play a part. Each of the small manufacturing companies in Singapore might find it difficult for them to aggregate the workers in sufficiently large numbers for them to conduct the courses. It is also very difficult for them to have the course curriculum designed specifically for each of the smaller companies.

41. But this is where the TACs can come together and help aggregate the demand from the smaller companies, so that we can customise and design the courses with the IHLs to continuously upgrade the skills of our workers in the sector. When the older workers in this sector feel that they have opportunities to keep learning new things and to keep upgrading, that is also where we can be more successful in retaining them in the sector. Otherwise, we will lose them to other sectors as they grow old. And we want our older workers to understand that going forward in this sector, even as they grow old, it is no longer about the physical strength that is most important. It is really about the knowledge which they have accumulated over the years that can help us to continuously innovate new products and services, and also to innovate in the way we produce these new products.

42. We will continue to work with our IHLs to do many of these, and we will continue to work with our TACs to do many of these, so that we can provide meaningful opportunities for Singaporeans to work in this sector.

43. If I may conclude, yes, indeed COVID has disrupted the sector in more ways than one. But I will say this: even prior to COVID, the forces of digitalisation, Industry 4.0, reorganisation of the global supply chains were already in play. If anything, COVID has accelerated many of these trends. But this is also an opportunity for Singapore to reposition our manufacturing sector, beyond aiming for that stretch target of quantitative growth.

44. More importantly, we want to see the qualitative transformation of the Singapore manufacturing sector, particularly in the advanced manufacturing sector, where we are able to use data and the latest computing power to help accelerate the redesign of products and services, to help accelerate the redesign of production systems, so that we can capture a larger share of the knowledge-intensive, intellectual property-intensive market, where we will not be easily displaced by other people based on low cost.

45. While the workforce may shrink a bit in the manufacturing sector, the kind of work that the manufacturing sector will provide will be of a much higher quality, with much more exciting opportunities for Singaporeans in this sector.

46. If we are able to do that, we will create a virtuous cycle whereby the exciting work will allow us to attract the talent necessary into this sector, which will then allow us to be much more competitive, to win the contracts to do even more exciting work. And this is the virtuous cycle that we want to see in the advanced manufacturing sector.

47. We will continue to spare no efforts to groom our promising companies from AEM, Oneberry to Univac, in order for us to realise this vision; and for us to have a strong advanced manufacturing sector in Singapore, complementing what we are able to attract from overseas, in terms of investments from the key advanced manufacturing sector companies.

48. Thank you.

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