Singapore’s manufacturing sector began 2021 with a bang, with output expanding by 8.6% y-o-y in the first month of the year, following broad based expansions across most segments save biomedical manufacturing.
Excluding this segment, the increase in output widened to 12.1%, according to data released by Singapore’s Economic Development Board (EDB), a government agency under the Ministry of Trade and Industry (MTI).
This is more than twice the median forecast of a 3.6% in factory output in a poll by Bloomberg.
Still, January’s showing falls short of the 14.3% increase registered in the previous month.
Nonetheless, a substantial lift came from the 19.8% surge in output from the linchpin electronics sector. This follows a 23.8% rise in activity from the semiconductor segment which was supported by demand from cloud services, automotives and 5G markets.
The segment was however dragged by declines in output from infocomms & consumer electronics.
Output from the precision engineering cluster similarly expanded by 15.3% in January. This is thanks to a higher output of semiconductor equipment which drove the machinery & systems segment by 20.2%.
A 4.9% growth was also seen in the precision modules & components segment following increased production of optical products and metal precision components (6.3%).
SEE:Singapore manufacturing firms predict less favourable business outlook, lower output: EDB survey
Chemicals followed suit, with a 9.0% growth as all segments except petroleum expanded. Specifically, the other chemicals segment grew by 23.2% on account of higher output of fragrances, while output for specialities surged by 13.5% due to greater production of industrial gases and additives.
In the same regard, the general manufacturing sector saw its output inch up by 3.3%. This follows a 7.6% growth in the miscellaneous industries segment which benefitted from higher production of wearing apparel and batteries.
The food, beverage & tobacco segment similarly grew by 2.4%, while printing output saw a 4.5% dip.
Meanwhile, the output of the other clusters came in the red in January, with transport engineering registering the biggest y-o-y contraction of 19.0%.
This was led by declines to the marine and offshore engineering (-13.1%) and aerospace (-30.6%) segments as the order intake took a hit from the weak global oil and gas market as well as the travel restrictions imposed to curb the spread of coronavirus infections.
A further contraction in the cluster was mitigated by a 36.2% growth to its land segment that benefitted from higher output of parts and accessories for motor vehicles.
The biomedical cluster – which had previously been a key driver of Singapore’s factory output in 2020 – similarly, posted an 8.6% y-o-y plunge in January. This follows a 16.7% dip in its pharmaceuticals segment due to a different mix of pharmaceutical ingredients.
However, the cluster had still benefitted from a 15.2% increase in its medical technology segment that was spurred by higher export demand for medical devices, EDB explains.
Looking ahead, Howie Lee, an economist at OCBC believes that more telecommuting and earlier inventory de-stocking could push the full-year factory output growth forecast upwards.
"The global chip shortage is the biggest reason why Singapore's industrial production could continue to outperform in the near term”.
“The three largest semiconductor manufacturers in the region - Singapore, Taiwan and South Korea - are likely to benefit from the increased demand for semiconductor chips and other electronic goods,” he adds.
Agreeing, Maybank Kim Eng economists Chua Hak Bin and Lee Ju Ye remark that “the global chip shortage, most acutely felt by carmakers, are pushing Asian chipmakers to expand their production capacity”.
To this end, Lee expects industrial production to grow as much as 10% y-o-y in the first half of the year. Chua and Lee meanwhile expect the pace to ease in the second half “given tighter supply capacity limits and as the high-base effects for electronics come into play”.
