Singapore’s bet on chipmaking

Singapore’s ambitions to seize more of the global chip industry are limited only by its size, according to Prime Minister Lawrence Wong.

Last month Wong announced a project for the city-state to merge several of its smaller islands into a bigger piece of reclaimed land, saying it could “help shape Singapore for the next 50 years” by supporting a new generation of industries, including advanced manufacturing.

While best known as a trading and finance hub, Singapore has also become a key producer of the semiconductors that drive the global economy.

On Monday VisionPower Semiconductor Manufacturing Company — a joint venture between Taiwan’s Vanguard and Dutch chipmaker NXP — opened its doors on a $7.8bn plant, becoming the latest high-tech company in the country.

Speaking at the opening ceremony, VSMC chair Leuh Fang said the company was even considering opening a second plant in Singapore in order to meet the high levels of demand.

Singapore’s economy has this year been turbocharged by chips and other advanced manufacturing, from medical devices to aerospace components and speciality chemicals. The global AI boom, in particular, has been a boon for its chipmakers.

“Singapore has done very well in becoming an established base for this emerging area of growth,” said Tan Yew Kong, general manager of Asia-Pacific manufacturing at GlobalFoundries, one of the chipmakers in Singapore. “AI is booming and Singapore has an advantage.”

The country makes one in 10 of the world’s semiconductors — though a smaller share of the most advanced chips — and a fifth of the machinery that makes them, according to the country’s Economic Development Board. The industry accounts for nearly 7 per cent of Singapore’s GDP.

Singapore had its strongest first-half trade performance since 2010, according to Moody’s, and growth has been higher in the two months since. Electronics exports surged 132 per cent in August compared with a year earlier, while shipments of personal computers — including server racks used in data centres — rose 238 per cent.

Between 2022 and 2025, Singapore attracted more than $23.5bn in semiconductor investments. Among the companies that have set up fabrication plants to make chips are Micron, Infineon, Siltronic and UMC. Applied Materials opened a $500mn campus in June.

But the success has brought geopolitical risks. The chip industry is “becoming a security problem”, Tan said.

In March, US trade representative Jamieson Greer began an investigation into several countries over alleged structural excess manufacturing capacity. Singapore’s microchip and electronic equipment industries were highlighted, with the expectation that “Singapore’s trade surplus in the semiconductor supply chain will grow”.

The probe, which is yet to conclude, could bring additional tariffs for Singapore-made goods, though the government insists it has a trade deficit with the US.

“Singapore increasingly finds itself caught between the US and China,” said Angela Tritto, honorary fellow at University College London, who specialises in China’s trade relations with south-east Asia.

She points to the pressure on Singapore from Washington to ensure high-end US chips are not smuggled to China.

“Singapore has to demonstrate very clearly that it complies with US export controls while maintaining China as an extremely important economic partner,” she said.

Singapore set about trying to attract global companies in high-tech industries in the 1960s, with US chipmaker National Semiconductor the first to pitch up. The country attempted to create a national champion chipmaker, Chartered Semiconductor Manufacturing, in 1987 to compete with Taiwan’s TSMC. But the business floundered and was eventually sold to GlobalFoundries in 2009.

“Unlike its Taiwanese competitors, Chartered focused on technology that was harder to manufacture and tougher to scale,” said Daniel Chow, principal at management consultants Arthur D Little.

GlobalFoundries makes 1.25mn silicon wafers a year from its facility in Singapore, which employs 4,300 people. It mostly produces chips for mass-market electronic products and data centres, while as many as 40 per cent of chips made in Singapore are used in cars.

Tan said Singapore’s role as a semiconductor manufacturing hub became more prominent after the Covid-19 pandemic. Chipmakers with factories in the US and Europe started looking for additional destinations “to achieve supply resilience”, he added. “Singapore is a suitable place for anybody who considers doing investment in Asia.”

Still, high costs and labour shortages are also perennial problems for the country of 6mn people, which relies on importing workers from overseas.

This can be a strength and a vulnerability, according to Tritto. While “Singapore can effectively snatch some of the best talent from the surrounding region” because of higher salaries, it is also harder for the country to keep costs down compared with neighbours with similar ambitions in advanced manufacturing, such as Malaysia and Vietnam.

Singapore is wary of manufacturers favouring the southern Malaysian state of Johor — which is less than a mile away — due to its cheaper land and workforce, especially since the two sides launched a special economic zone together last year.

Roughly half the size of Greater London, Singapore has always struggled with a lack of land for development — hence the plan to merge islands, as previously happened to expand another island, Jurong, into a big petrochemical hub.

“[It] will require resources, planning and investment over many terms of government,” Wong said in his National Day Rally speech. “That’s what long-term planning is about.”