Mr Teo Chee Hean at the SSMC’s 10th Anniversary, 24 Mar 2010

SPEECH BY DEPUTY PRIME MINISTER AND MINISTER FOR DEFENCE MR TEO CHEE HEAN AT SYSTEMS ON SILICON MANUFACTURING CO. PTE. LTD (SSMC)’s 10THANNIVERSARYON WEDNESDAY, 24 MARCH 2010 AT 1430HRS AT SSMC

Dr Rene Penning de Vries, Senior Vice President and Chief Technology Officer of NXP Semiconductors

Dr Richard Thurston, Vice President and General Counsel of TSMC (Director of SSMC Board)

Mr C V Jagadish, CEO of SSMC

Distinguished guests

Ladies and Gentlemen

Introduction

1. I am pleased to join you today for this milestone celebration.

Since 2000, when Systems on Silicon Manufacturing Company, or SSMC, first set up operations in Singapore, it has grown and expanded significantly.

Today, it is one of the top wafer foundries in Singapore.

SSMC has extensively invested in wafer fabrication and process development and built up strong R&D capabilities.

In its decade long presence in Singapore, SSMC’s headcount has almost doubled from 685 employees in 2000 to 1,200 employees today.

Asia – Growth Opportunities for Businesses

2. SSMC’s success in Singapore reflects the promising outlook forSingapore’s semiconductor industry.

In 2008, it was the fastest growing segment in the electronics industry, with S$37.3 billion in revenue.

During the recent global economic downturn, the industry showed great resilience by growing its global market share from 10.9 per cent in 2008 to 11.2 per cent in 2009.

And as the world led by Asia emerges from the global financial crisis, the semiconductor sector is expected to rebound strongly this year.

3. China and India are fuelling the demand for a wide range of electronic products and business solutions in Asia.

By 2010, China and India’s share of global GDP is expected to be 13 and 5 percent respectively.

This is expected to rise to 19 and 9 per cent by 2030[1].

Recognising this, many MNCs are making the strategic decision to move a significant portion of their businesses to Asia.

Singapore – Strategic Asian Hub for Businesses

4. Singapore is capitalising on these growth opportunities.

We continue to upgrade our infrastructure and workforce.

And with strong IP protection and excellent connectivity, we are increasingly seen as the preferred base for companies to develop and drive their Asia business and operations.

To-date, 7000 MNCs have chosen to base their Asian operations in Singapore.

We are also a leading semiconductor hub in the world.

Top wafer fabrication companies such as SSMC are looking to invest more and expand further.

Mr Jagadish has just announced new investments and expansion plans for the next two years amounting to US$30 million.

Productivity Boost for the Electronics Industry

5. Electronics will continue to be a key contributor to the manufacturing sector in Singapore.

In 2009, the electronics industry was the largest contributor to manufacturing value Added, making up 31 per cent of the total manufacturing sector.

Recently, the Economic Strategies Committee recommended that Singapore retain a globally competitive manufacturing sector with contributions amounting to between 20 and 25 percent of the economy.

6. This means that Singapore must evolve from being an efficient support base for companies and transform itself into an essential hub that offers higher value adding activities.

The nature of manufacturing in Singapore for example, will therefore need to change.

We need to help companies manage their bottom line, and partner them to grow their top line; to move beyond production and towards the creation of new products and value.

7. We have set ourselves the target to grow Singapore’s productivity by 2 to 3 per cent per year over the next decade, more than double the 1 per cent that we achieved over the last decade.

This means that our growth must be based on quality rather than quantity.

Businesses need to have an eye on the growth opportunities ahead, at the same time, they need to focus on the ‘how’ - how they will upgrade their processes and their workers to help them capitalise on these opportunities.

New Growth Opportunities in the Electronics Sector

8. In this regard, the Singapore Economic Development Board (EDB) has identified four new growth areas for the electronics industry.

They are green electronics, bioelectronics, plastic electronics and security.

We expect these new growth areas to contribute 30% of total Electronics output by 2020.

A productivity-driven electronics industry with a highly educated and skilled workforce will put Singapore’s manufacturing industry in a good position to seize opportunities in these new growth areas.

SSMC is a good example of this.

The biometric chip that is embedded in the passports of Singaporeans was developed and manufactured by SSMC.

SSMC has leveraged on its capabilities such as automotive power management and banking security applications to make headway into a new growth area.

I look forward to more of such innovative products being created and made in Singapore for global markets.

Support for companies to embark on their productivity drive

9. While companies should look outwards for opportunities to create value in new areas and markets, I also urge companies to look inwards and review how they organise their processes and manpower.

The Government will support companies in doing this.

10. At this year’s Budget, it was announced that the government would invest S$5.5bil in the form of tax benefits, grants and training subsidies to help enterprises improve productivity over the next 5 years.

11 Tax deductions, through the Productivity and Innovation Credit program is one key initiative to help companies as they undertake investments to innovate and upgrade.

It will cover productivity-related investments ranging from R&D, design and automation to training.

I am pleased that several electronics companies have already embarked on productivity improvement initiatives.

SSMC, for instance, has implemented an Automated Material Handling System (AMHS) which shortens cycle time, boosts productivity and reduces the workload on operators.

12. A $2b National Productivity Fund (‘Fund’) has also been set up to support sectoral productivity efforts.

Government agencies will work with key industry partners such as business associations and/or the leading companies in the industry, to develop strategies and solutions to raise productivity in their respective sectors.

The agencies will be able to tap on the Fund to develop infrastructure and/or new funding schemes and programmes to support productivity initiatives in their sectors.

I would also like to encourage companies with good ideas to come together and work with EDB to surface such proposals, to boost the productivity of the sector.

Deepening skills

13 Another key prong of our productivity strategy is deepening the skills of our people.

Human capital is a key differentiator in today’s global economy.

Developing higher skilled workers will strengthen Singapore’s economic competitiveness and sustain growth.

14 We are building up our Continuing Education and Training (CET) system to provide more avenues for our workers to upgrade and deepen their skills.

The wafer fabrication WSQ, launched last September, is a good example of this approach.

Six wafer fabrication companies in Singapore including SSMC, have committed to send about 7000 engineers for training to achieve nationally recognized and certified engineering skills.

We plan to launch a similar certification and upgrading programme this year for 3000 operators and technicians.

15 All these efforts are part of the larger national strategy to propel Singapore’s productivity drive and remain internationally competitive.

It will require a concerted tripartite effort involving enterprises, workers and the government and I welcome leading companies such as SSMC to take the lead and work with the government and unions in developing strategies and solutions to further raise productivity in their respective sectors.

Conclusion

16 In conclusion, I would like to thank SSMC for its continued confidence in Singapore as a partner.

Let me take this opportunity to also congratulate the staff and management of SSMC on 10 years of successful growth in Singapore.

I look forward to seeing the SSMC-Singapore partnership continue to grow and reach new heights.

17 Thank you.

[1] Source: PricewaterhouseCoopers