What is your first impression of Singapore? Is it a clean, orderly, and prosperous city-state? Or is it an immigration hotbed and a haven for the wealthy? While Singapore is often associated with finance and the production of billionaires, it has long been a stronghold for Asia’s semiconductor industry. Hot money from around the world’s semiconductor industry is currently flowing back into Singapore.
01. Leading Southeast Asia
How did Singapore become a semiconductor powerhouse?
In this tiny country, which measures only 728.6 square kilometers – about the same size as Beijing’s Haidian and Fengtai districts combined and only 65% the size of Hong Kong – there is a shortage of water and a need to import even drinking water. Singapore lacks natural resources of any kind.
Among the Four Asian Tigers, South Korea has Samsung, Taiwan has TSMC, and Hong Kong has China Resources, but Singapore lacks any notable brands or companies. Do you know the restaurant chain Hai Di Lao, famous for hot pot from Sichuan?
It is undeniable that Singapore is a high-income country recognized globally, a world-class financial center ranked third in the world in terms of wealth, and the largest foreign exchange center in the Asia-Pacific region, second only to New York and London. The city is filled with well-dressed elites who work in finance.
With limited land and resources, and a thriving financial and IT industry, where is the basis and energy to develop local manufacturing?
India, Malaysia, Thailand, and Vietnam all have a presence in the semiconductor industry and are more resource-rich than Singapore. US Semiconductor Fabs Status
However, Singapore, this tiny and resource-deprived nation, has managed to create a fairly advanced manufacturing world through the tsunami of oil and money.
In 2020, the manufacturing industry contributed approximately 21% to Singapore’s GDP, making it one of the few countries in the world where manufacturing accounts for more than 20% of its GDP. Germany and Japan, the tech manufacturing powerhouses, have their manufacturing industries’ contribution to GDP maintained at around 20%.
Singapore’s manufacturing sector is dominated by high-value industries, which suits its small size and limited land and resources. The country has developed high-tech manufacturing clusters in aerospace, semiconductors, chemicals, and biomedical sciences.
Singapore produces four out of the top 10 highest revenue-generating drugs globally, and its hearing aid market represents about 30% of the global market. Singapore is also the world’s fifth-largest producer of refined oil and has over 100 global petroleum, petrochemical, and specialty chemical companies situated there.
In addition, Singapore is a crucial node in the global aerospace value chain, providing maintenance, repair, overhaul, and manufacturing services to over 130 aerospace companies worldwide.
Singapore manufactures approximately 70% of the world’s semiconductor wire bonders and accounts for 20% of the global semiconductor equipment market.
According to EDB reports, by the end of the first decade of the 21st century, there were over 300 semiconductor-related companies in Singapore, including 40 IC design firms, 14 silicon wafer fabs, eight wafer fabs, and 20 packaging and testing companies. Many Asia-Pacific headquarters of IC design companies such as Texas Instruments, STMicroelectronics, Infineon, and Micron are located in Singapore.
Major semiconductor equipment companies such as ASM, KLA, Edwards, Teradyne, Tokyo Electron, and Lam Research also have significant production bases in Singapore.
Among the eight wafer foundries, three of the world’s largest wafer foundries are present in Singapore.
Globalfoundries has five wafer foundries in Singapore, with a total production capacity accounting for about 30%.
United Microelectronics Corporation (UMC) and World Advanced Packaging Electronics (APE) each have one 8-inch factory in Singapore. The factory originally belonged to Globalfoundries’ Fab 3E, and the production capacity accounts for around 15% of both companies.
Taiwan Semiconductor Manufacturing Company (TSMC) operates the Singapore SSMC wafer foundry, which primarily focuses on 0.25-micron and 0.18-micron processes. By 2002, it had gradually introduced 0.15-micron and 0.12-micron processes and its maximum monthly production capacity can reach 30,000 8-inch wafers.
Many packaging and testing companies from Taiwan and mainland China have also opened testing factories in Singapore. For example, ASE Technology’s revenue from its Singapore automotive electronic-related testing plant accounts for about 20-25%, making it an important base for automotive electronic chip testing. In addition, JCET’s revenue from its Singapore testing plant accounts for about 12% (in 2018).
In the semiconductor distribution field, Singapore is also home to the Southeast Asian headquarters of companies such as Ampleon, Future Electronics Asia, and Arrow Electronics.
Singapore’s strategic location at the southern end of the Malacca Strait, one of the busiest shipping lanes in the world, and a vital link between the East and the West have made it a key player in the semiconductor industry.
As the global semiconductor supply chain shifts to Southeast Asia, the region has become a new destination for the global electronics industry to outsource packaging, zero components, and assembly businesses. Singapore, as the center of Southeast Asia, has a complete and mature semiconductor industry chain, covering IC design, manufacturing, and testing.
How did Singapore establish its position in the semiconductor industry and lead Southeast Asia in this field?
02. Titans flock to Singapore
Singapore did not start from scratch. Due to its rich port resources and its location at the throat of the Malacca Strait, colonial Singapore was used by the United Kingdom to develop transit trade.
In 1960, when Singapore began to take off, its per capita GDP was $428, compared to $479 for Japan, which began taking off at the same time.
In the early 1960s, Singapore’s transit trade gradually declined. Lee Kuan Yew, the ruling prime minister, realized that Singapore was too small and could not establish a local industrial chain, nor could it protect local industries.
Lowering its posture and getting rid of its burden, Singapore began to open its doors and welcome foreign companies to set up factories in the country. The requirements were not high, providing employment, paying wages, and teaching production and management experience were sufficient.
In 1968, Singapore abolished foreign exchange controls and established completely free trade. That same year, the Jurong Industrial Park was completed.
Some European and American companies in China, Taiwan, and Hong Kong were in the midst of industrial transfers. The mainland’s environment was full of unknowns, and corruption was rampant in other Southeast Asian countries. Eventually, they chose to set up factories in Singapore.
The first one to come was a big one, Texas Instruments, which is the most representative multinational company that Singapore has attracted. In 1968, Texas Instruments established two subsidiaries in Asia, one in Japan and the other in Singapore. Its semiconductor plant in Singapore mainly does packaging and testing and has become an important starting point for Singapore’s economic development.
Texas Instruments enjoyed meticulous treatment in Singapore, and other European and American companies came in droves after hearing about it. In the next ten years, Singapore became the most important center for exporting electronic products in the world.
At that time, Texas Instruments was still doing storage, and it handed over the storage business to Micron. Micron entered Singapore after acquiring the business in 1998.
By 2019, Micron had established its third NAND wafer plant in Singapore. Today, the world’s leading storage head enterprise Micron’s capacity in Singapore accounts for nearly 50%, including a large amount of NAND/NOR flash memory capacity.
Infineon can also be regarded as one of the first semiconductor companies to settle in Singapore, tracing back to Siemens in 1970. Infineon has a history of more than 50 years in Singapore. In 1970, Siemens established a semiconductor packaging and testing plant in Singapore. At that time, Infineon had not yet been established and was still a semiconductor department of Siemens.
Today, Singapore has become the location of Infineon’s Asia-Pacific headquarters, a key node in its global distribution channel, and the only microelectronics research and development center for Infineon in Southeast Asia (excluding Greater China and Japan). As of 2020, in the past decade, the company has invested about $700 million in Singapore, making it a leading base for smart factory solutions and a global test center for automotive microcontrollers.
In the 1980s, Hewlett-Packard and ST (STMicroelectronics) came to Singapore. By then, Singapore’s manufacturing industry had gone through about 20 years of development and gradually turned to capital- and technology-intensive industries.
As a competitor of Texas Instruments, Hewlett-Packard chose Singapore as the location of its first chip design center in Asia, making it the first semiconductor company to introduce chip design to Singapore. In 1987, it also established the first overseas chip production manufacturing plant in Singapore. This shows Hewlett-Packard’s obsession with Singapore.
In 1985, SGS-Thompson (renamed STMicroelectronics in 1998), became the first semiconductor
The semiconductor industry accounts for 7% of Singapore’s Gross Domestic Product (GDP). As a manufacturing powerhouse, Singapore’s semiconductor output represents over 25% of its manufacturing industry, which accounts for at least 20% of its GDP. This has attracted a significant amount of foreign investment, driving Singapore’s value-added output and employment.
According to IC Insights, in 2021, Singapore accounted for nearly 5% of global wafer fab capacity and held a 20% market share in the global semiconductor equipment market. Currently, nine of the top ten wafer manufacturing equipment companies purchase from Singaporean suppliers.
A large number of semiconductors are manufactured in Singapore and ultimately exported worldwide. As the fourth-largest exporter of high-tech products and an important exporter of electronic products, electronic exports account for over 30% of Singapore’s total merchandise exports. In global trade, Singapore exhibits a surplus in electronic product trade and a deficit in trade with China.
It is worth mentioning that Singapore has the largest Chinese population outside of China and shares many cultural similarities with China. At the turn of the century, Singapore’s Chartered Semiconductor was a training and gathering place for Chinese chip talent to develop semiconductors in China. When various regions established semiconductor industry funds, many Singaporean semiconductor talents were attracted to participate.
03. Why Singapore?
Singapore is not only geographically well-positioned, but it also has a favorable business environment that attracts companies from around the world. A vast ecosystem of suppliers and partners from all over the world has established itself above Singapore, covering the entire semiconductor industry chain from upstream to downstream. There is a friendly commercial environment, tax incentives, a professional regulatory framework, and a sound intellectual property (IP) system.
In terms of taxation, Singapore is a typical “wealthy-friendly” country. It has a network of double taxation agreements (DTAs) with over 80 countries/regions worldwide, which aims to avoid double taxation, promote fair and equal tax treatment of Singaporean enterprises and their foreign partners, and reduce the cost of their overseas expansion. The highest corporate tax rate for taxable income in Singapore is 17%, and there is no capital gains tax or dividend income tax. Post-tax dividends paid from Singapore are not subject to withholding tax. Additionally, all foreign-sourced income is exempt from tax as long as it is taxed in a country/region with a total tax rate of at least 15%.
Singapore’s regulatory framework also provides a fair and competitive environment for foreign investors, with no foreign ownership restrictions or foreign exchange controls.
For the semiconductor industry, which is highly intensive in intellectual property, Singapore’s sound IP system is also advantageous. The government encourages innovation and development by Singaporean enterprises, while a reliable legal system and strong IP infrastructure protect them.
To ensure the smooth global circulation of chips, Singapore also provides an efficient logistics system, making it one of the world’s logistics centers. 24 out of the world’s largest 25 logistics companies have established themselves in Singapore.
Singapore is one of the most successful countries in the world for the development of multinational semiconductor companies. It has attracted a relatively large number of well-educated workers and engineers. In 2022, the number of wealthy individuals who chose to relocate to Singapore had increased to 2,800, and there were over 700 family offices in the country.
Despite having few local semiconductor companies, Singapore has played a pivotal role in the global semiconductor industry. It has had a close relationship with Temasek, a state-owned capital group, which has invested heavily in the semiconductor industry and also in many Chinese internet companies, including Alibaba, Tencent, Meituan, and Xiaomi.
In 2009, Singapore’s semiconductor industry accounted for 11.2% of the global semiconductor industry. Two major star companies were born from local semiconductor enterprises, Chartered Semiconductor Manufacturing (CSM) and STATS ChipPAC. Both were controlled by Temasek, with the former once being the world’s third-largest wafer foundry and a wholly-owned subsidiary of Temasek and the latter ranking fifth in the global assembly and testing industry.
With the rise of emerging industries such as the Internet, Singapore began to divest from capital-intensive and labor-intensive industries. These two foundries and testing factories were not spared either. In 2009, Temasek sold them to the parent company of GlobalFoundries, a state-owned enterprise of the United Arab Emirates Advanced Technology Investment Company (ATIC). In 2010, ATIC acquired Chartered Semiconductor in Singapore, which later merged with GlobalFoundries. STATS ChipPAC was eventually sold to China’s JCET.
By 2011, with the sale of the largest IC design company, Avago Technologies (the predecessor of Broadcom), Singapore’s semiconductor industry had declined in status, and the proportion of manufacturing in its GDP had fallen to 20.4%.
However, Singapore has all the necessary resources, such as capital, knowledge, technology, and talent, which are required by the semiconductor industry. In the process of attracting investment, Singapore has continuously absorbed foreign funds, technology, and experience in the semiconductor industry, continually positioning itself as an important hub for the world’s semiconductor industry.
04. Returning with renewed vigor
Amidst global trade friction, cost pressures, and regional competition, the semiconductor industry is shifting towards Southeast Asia, and Singapore’s position has become increasingly important.
Singapore remains a world-class hub for the semiconductor industry and a preferred location for multinational corporations to enter new markets, and launch products, processes, applications, and technologies.
In just one year, Singapore has repeatedly made the investment and expansion lists of major semiconductor manufacturers.
In terms of semiconductor materials, Soitec plans to invest €400 million ($430 million) in Singapore to double the production capacity of its silicon wafer plant, while Applied Materials has started construction on a new $450 million plant in Singapore.
In terms of wafer fabrication, UMC has executed a capital budget plan and plans to invest NT$32.417 billion (approximately $1.06 billion), some of which will be used to invest in a new Singapore factory. Meanwhile, GlobalFoundries is preparing to invest an additional $4 billion to build new plants, with production capacity expected to increase by about 30%. This project is one of the largest investment projects for semiconductor companies in Singapore in recent years.
The chairman of World Advanced recently revealed that, in response to customer demands for risk diversification, the company is evaluating overseas factory locations, with Singapore being one of the candidate locations. The Singapore government is willing to provide preferential policies such as land, water, electricity, and tax reductions, as well as sufficient human resources assistance, to encourage TSMC to reconsider building a 12-inch factory locally.
Singapore’s government is re-focusing on the semiconductor industry in its policies. In December 2020, Singapore unveiled its National Research Foundation’s “Research, Innovation, and Enterprise 2025 Plan”, in which the government will maintain investment in research, innovation, and enterprise as a percentage of the country’s GDP at 1% (about $25 billion) between 2021 and 2025 to support the electronics and semiconductor industry in seizing new growth opportunities.
Starting in 2020, Singapore has significantly expanded its manufacturing output, with the goal of achieving a total manufacturing output of $200 billion and a total manufacturing value-added of $50 billion. This includes nearly $10 billion in investments from HP and Texas Instruments.
For large chip manufacturers and supporting suppliers such as Texas Instruments and Micron, increasing production in Singapore to meet longer-term demand growth and diversify supply chain risks is a decision that is unlikely to go wrong, especially given Singapore’s geographic advantage.
References:
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[5] “Capitalist corner: Singapore,” Duo Minghai, Bilibili, 2021.
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