Mr Lim Hng Kiang at the Launch of the Precision Engineering Productivity Roadmap, 28 Sep 2011

SPEECH BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY, AT THE LAUNCH OF THE PRECISION ENGINEERING PRODUCTIVITY ROADMAP ON WEDNESDAY, 28 SEPTEMBER 2011, 10:30AM AT MEIBAN INTERNATIONAL PTE LTD

Mr George Goh, Chairman, Meiban Group,

Distinguished Guests,

Ladies and Gentlemen,

Good morning.

I am pleased to join you this morning at Meiban Group’s headquarters for the launch of the Precision Engineering Productivity Roadmap.This roadmap, developed by EDB and SPRING in consultation with companies, partner agencies and educational institutes, aims to address productivity challenges and lift the industry’s long-term productivity.Three key initiatives have been identified to triple the value-added per worker in the precision engineering industry from $67,000 in 2008 to $178,000 by 2020.This will raise the industry’s productivity level to that of advanced economies such as Germany, Japan and the USA.

First, the industry will be transformed through the growth of higher value activities in Singapore.Second, we will work with companies to improve firm-level operational efficiency.Third, the precision engineering workforce will be further upgraded and equipped with the ability to undertake more complex manufacturing activities.These initiatives have been endorsed by the National Productivity and Continuing Education Council (NPCEC).

A.Industry Transformation

Singapore’s precision engineering industry must compete with the world’s leading players in knowledge-intensive activities such as highly complex manufacturing and cutting-edge R&D.

This industry is the foundation of Singapore’s manufacturing sector.From the 1970s to the early 2000s, precision engineering played a key supporting role in the success of the electronics industry, supplying parts and tooling to the consumer electronics and hard disk drive sectors.Today, we see the industry re-defining itself beyond its supplier role with two key pillars: precision components and complex equipment.Companies are shifting their emphasis from the mass-production of simple parts to the manufacture of technology-intensive precision components for international markets.They are also actively engaged in the design, development and manufacture of high-mix, low-volume complex equipment.

For example, Applied Materials, the global leader in semiconductor equipment, opened in Singapore its first manufacturing plant outside of the USA to produce state-of-the-art vacuum chambers for semiconductor wafer deposition.It recently established a joint R&D centre for advanced wafer-level packaging with A*STAR’s Institute of Microelectronics.This switch to advanced manufacturing demands greater knowledge and skilled manpower to generate higher value-adding activities.This in turn, will help boost the sector’s productivity.

In tandem with the switch to advanced manufacturing, the precision engineering suppliers such as contract manufacturers and surface treatment specialists need to upgrade to stay relevant.Our manufacturing landscape has shifted from serving mainly the electronics sector, to a more diverse mix of industries such as aerospace, medical devices and offshore equipment today.These industries require deeper knowledge, innovation and skills.Suppliers will, therefore, need to broaden and strengthen their business and manufacturing capabilities to meet the new requirements for larger scale operations, high-mix low-volume manufacturing and advanced technology know-how.

Our host today, Meiban, in particular, exemplifies the transformation of Singapore suppliers.It was established 20 years ago as a small plastic injection moulding shop supplying plastic parts to the consumer products industry in Singapore.Over the last decade, Meiban has expanded more than 5 times in size to reach revenues of half a billion dollars, serving both local and regional markets. It has diversified into the manufacture of electromechanical components as well as oil and gas parts.Meiban has also built up new capabilities in product and process design and development.

Another example of a local company that has transformed itself is Wah Son Engineering.This company specialized in build-to-print manufacturing of metal-machined parts.In its transition to higher value-added activities, Wah Son developed the necessary capabilities to serve the aerospace industry.Today, they are a recognized quality manufacturer of high complexity tooling and ground support equipment for aerospace companies.

B.Improvement in firm-level operational efficiency

The second initiative aims to improve operational efficiency through capital productivity, automation, process improvement and job redesign.This will enable companies to make the best use of their resources.

Capital productivity entails using equipment better to maximise production output.Automation can be applied to production processes involving hard physical or monotonous work, while allowing employees to focus on higher-value activities.

To illustrate, Seiko Instruments Singapore, a watch movement maker, has implemented extensive automation and process improvements to achieve cycle time reduction of over 30% and lower production costs. As a result, Seiko’s Singapore plant with 500 workers is far more productive and competitive than their competitor’s plant in China, which employs four times as many workers.

The Singapore government is committed to support companies in their efforts to improve operational efficiency.The enhanced Productivity and Innovation Credit (PIC), a broad-based scheme announced in Budget 2011, allows businesses to deduct 400% on up to $400,000 of their expenditure on productivity improvements per year, including investments in training and automation.

EDB and SPRING also have variousprogrammes and incentive schemes which support productivity-related projects for precision engineering companies.These projects may include technology adoption, process improvements and job redesign.I encourage companies to embark on productivity-led growth with the support of these programmes and incentives to ensure long-term sustainability and competitiveness.

C.Manpower development

The third initiative is the upgrading and rejuvenation of the precision engineering workforce to meet the growing complexity of our manufacturing activities.This industry will need deeply skilled craftsmen as well as a pipeline of younger craftsmen to sustain our manufacturing edge.These craftsmen will complement the technologists and engineers from the polytechnics and universities, to offer a comprehensive range of skills and knowledge in Singapore.

I am pleased to announce that the NPCEC has therefore approved a $52million budget from the National Productivity Fund to support a skills-upgrading initiative for the precision engineering workforce.This includes the creation of a Master Craftsmen Programme at Nanyang Polytechnic.The programme, to be launched later this year, will offer advanced vocational training and accord recognition to Singapore’s top craftsmen.These master craftsmen will be equipped with advanced skills to lead productivity improvements, carry out more complex operations and utilise their deep technical knowledge to train the next generation of craftsmen.

Developing this pool of highly skilled craftsmen will enable Singapore to match the mastery seen in countries like Germany, Switzerland and Japan which have long histories of vocational training excellence.For generations, they have produced craftsmen respected for their manufacturing expertise.Similarly, this initiative aims to create recognition and establish a rewarding career path for our skilled craftsmen.

In the long run, a comprehensive pool of precision engineering talent will help strengthen the foundation of our manufacturing sector.

Precision Engineering remains a vital part of the Singapore economy

The precision engineering industry contributes 3% of Singapore’s GDP, and 9% of manufacturing output.More importantly, its 2,700 companies employ over 90,000 workers, or about 22% of Singapore’s manufacturing workforce.As an essential provider of equipment, components and specialist services to Singapore’s manufacturing sector, the precision engineering industry must remain strong and sustainable. Towards this end, we must work together to increase productivity at both industry and firm levels. This will help our companies remain competitive, in the face of fierce global competition and challenging economic times.

Our productivity roadmap focuses on industry transformation, operational efficiency improvement and manpower development to achieve sustainable growth for the industry and create better jobs for Singaporeans. PE companies moving up the value chain will be able to perform higher value-added activities, require higher-skilled workers but can also charge more and even increase profits. Supported by the vocational training, workers taking on higher-skill jobs will be able to earn higher wages to commensurate with their skills and contributions to the company.

I look forward to the continued strong partnership with the industry and wish you all success in your productivity efforts.

Thank you.