Speech by Minister Chan Chun Sing at the press conference for the sectoral company visit to Rohde and Schwarz

Thank you for joining us this morning. This week, we are visiting one of the precision engineering companies. The precision engineering sector is a very interesting sector with huge growth prospects. Notwithstanding COVID-19 this year, the sector has grown by about 10%. We see bright prospects for this sector, as the advent of 5G technologies, Internet of Things (IoT) and the new breakthroughs that we see in technological fields will require precision engineering behind-the-scenes. It is not just about the kind of software that we are familiar with when it comes to many of these new products, be it the smartphones or computers that we use. There is a lot of back-end engineering that is required. 

2 This is the reason why in the coming few years, there will be a huge demand for precision engineering products and services. Besides 5G, IoT and autonomous vehicles, the other areas that will require a lot of precision engineering work are in the biotech and biomedical sectors. The combination of ICT and biomedical sector needs will converge to the precision engineering sector. This is the reason why we are making a strong push to help our companies in the precision engineering sector to continue to grow from strength to strength to meet the increasing demand for such products and services in the world. 

3 Beyond the production of many of the products that are required for the precision engineering sector, it is also important for us to have the ability to conduct the testing and measurements, and the product qualifications in this sector. These are niche areas where not many companies in the world have such capabilities. The company that we are visiting today, Rohde & Schwarz (R&S), is one of those examples whereby they have niche capabilities that can allow them to support the global demand for such precision engineering services, not just in production, but also in testing and qualifications. 

4 We are confident that if we continue to invest in this sector and build up core engineering capabilities, Singapore will be able to stand out as one of the precision engineering hubs in this region and in the world. There will be tremendous opportunity for this sector as Asia continues to grow from strength to strength. 

5 The other interesting fact about this sector is that it is not just a sector whereby people do things within the company itself. There is an entire SME ecosystem that have to work with companies like R&S. Engineering talent is also required to build this ecosystem in Singapore for the industry to continue to do well. This is the reason why we will  enhance support under the Partnerships for Capability Transformation (PACT) scheme to strengthen our investments in the sector. 

6 When it comes to engineering talent, we cannot take a feast and famine strategy in our investments. Engineering talent should be groomed on a sustained basis over the long haul. This is why we will continue to invest for the long-term, notwithstanding the short-term challenges that we might face because of COVID-19 or geopolitical tensions. It is perhaps all the more because of these factors that we want to continue our investments in this area to distinguish ourselves as one of the engineering hubs of the region and as part of the global value chain.

7 Let me highlight the PACT scheme, which started in 2010. Over the last 10 years, we have progressively refined the scheme to allow more companies to benefit from this scheme. Since 2010, we have supported more than 280 projects from more than 1,500 Singapore-based firms of different sizes and focus areas. Since 2013, we have also expanded the scheme to cover new sectors such as food manufacturing, retail, and food services. It was also enhanced to support productivity improvements, knowledge transfer and test-bedding of innovative solutions. 

8 In 2015, the scheme was enhanced to cover a broader spectrum of co-innovation activities such as joint product development by large enterprises and suppliers at the proof-of-concept stage. In 2018, the scheme was further enhanced to encourage partnerships between all parties, beyond large organisation and SME collaboration, and to cover new scopes such as hunt-in-a-pack for companies to band up and pursue common business development opportunities and tech push to SMEs to help adopt or incorporate niche technologies into their processes and products. 

9 Today, we will be supporting the following three PACT enhancements until March 2022. First, we will increase the support rate for qualifying costs to promote closer partnerships between companies. The support rate for PACT qualifications will be increased to 70% for all manpower categories from 50%, and increased to 50% for all other cost categories. Currently, they are at 50% for equipment, 30% for materials and consumables, 30% for software and 30% for professional services. This will move up to 50% for other cost categories and 70% for manpower. 

10 Second, we will extend PACT coverage to support the qualification of new suppliers and new or existing products as long as an OEM contracts with a new supplier. 

11 Third, we will internationalise the manufacturing footprint of Singapore companies with more than 30% local shareholding and allow them to be potential suppliers to more original equipment manufacturers (OEMs). We will enhance the support for Singapore companies with manufacturing activities carried out overseas. 

12 These are the three changes. First, the support rate for qualifying costs will increase to 70% for manpower costs and 50% for all other cost categories. Second, we will support the qualification of new suppliers and new or existing products as long as the OEM contracts with a new supplier. Third, we will support the firms that are venturing overseas. This will expand the number of companies that will benefit from the PACT scheme. There are currently at least 16 other prospective partnership projects between the OEMs and suppliers in discussions. After today’s announcement, we hope to enlist more companies to take up this scheme so that we can help them to strengthen their engineering capabilities for the long-term.

13 The government will continue to work with key stakeholders to ensure that the precision engineering sector continues to grow and create good jobs for Singaporeans. On 14  September 2020, the Ministry of Manpower (MOM) reported in their Jobs Situation Report that since April 2020, more than 270 precision engineering companies have offered close to 1,500 jobs, traineeships and attachment opportunities, the majority of which are PMET positions such as product engineers, electrical and electronic engineers and quality assurance inspectors. 

14 We are heartened that many companies, including R&S, have played their part to uplift the precision engineering ecosystem by continuing  the development and skills upgrading of our workers. For example, R&S made a commitment in localising its workforce, and they have achieved a localisation rate of about 80% to undertake critical functions in R&D, supply chains and manufacturing. We hope that more companies will also groom their local engineering talent for the long haul. We will continue to work closely with our industrial partners, trade associations and chambers, Workforce Singapore (WSG) and SkillsFuture Singapore (SSG) to ensure that we have the core engineering talent for the long haul. 

15 This is a brief snapshot of how we see the precision engineering sector going forward. We see bright prospects for this sector. We would like to attract more engineers into the sector and develop them into higher-end engineers that can support not just the production, but also R&D and test and qualification works.

16 Thank you.