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Singapore and Semiconductor
Context:
Prime Minister Narendra Modi visited Singapore this week as part of a two-nation tour of Southeast Asia, following his earlier stop in Brunei Darussalam. This marked the first visit by an Indian Prime Minister to Brunei and fifth visit to Singapore.
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- During the Singapore portion of the Prime Minister’s visit, agreements were signed on semiconductors, digital technologies, health, and skill development.
- Prime Minister and Singapore’s newly elected leader, Lawrence Wong, oversaw the signing of a Memorandum of Understanding for an India-Singapore Semiconductor Ecosystem Partnership.
India’s Semiconductor Drive
- Supply chain disruptions during the Covid-19 pandemic and escalating geopolitical tensions due to China’s actions in the Taiwan Strait and South China Sea have accelerated India’s efforts to build its own semiconductor ecosystem.
- Currently, the global chip industry is controlled by companies from only a few countries, and India is a late entrant to this high-tech, capital-intensive field.
- In 2021, India launched the India Semiconductor Mission, featuring a ₹76,000 crore incentive scheme that offers government subsidies covering half of a semiconductor plant’s capital expenditure.
- In February, the Cabinet approved semiconductor projects totaling ₹1.26 lakh crore in investments.
- Additionally, a partnership between Tata Group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) was announced to establish a semiconductor fabrication plant.
- So far, the government has approved five semiconductor units, including four assembly plants, under the incentive scheme.
Singapore’s Semiconductor Journey
- Singapore boasts a well-established semiconductor industry, largely thanks to its early start under the vision of its first Prime Minister, Lee Kuan Yew.
- As detailed in Chris Miller’s Chip War: The Fight for the World’s Most Critical Technology (2022), Lee told US President Richard Nixon in 1973 that he aimed to boost employment through exports.
- Following this, Singapore’s government supported Texas Instruments and National Semiconductors in establishing assembly plants in the country.
- By the early 1980s, the electronics sector already contributed 7% of Singapore’s GDP and provided a quarter of its manufacturing jobs.
- Today, Singapore is responsible for around 10% of global semiconductor output, 5% of global wafer fabrication capacity, and 20% of semiconductor equipment production.
- Nine of the top 15 semiconductor companies globally have a presence in Singapore, and the sector plays a significant role in the nation’s economic growth.
Key Lessons
- Singapore’s success in semiconductors is attributed to its strong infrastructure, stable business environment, connectivity, and a critical mass of leading companies across the value chain.
- Semiconductor plants are clustered in four wafer fabrication parks covering 374 hectares, where the government provides customised infrastructure to investors.
- Universities in Singapore offer majors in microelectronics and IC design, working closely with semiconductor firms to develop talent through research.
- As global attention shifts to enhancing supply chain resilience, Singapore, seen as a stable option amid the US-China rivalry.
Challenges and Opportunities
- From India’s perspective, Singapore’s semiconductor industry primarily focuses on “mature-node chips” (28 nm and larger), used in products like appliances and vehicles, rather than cutting-edge logic chips for AI (7 nm and smaller).
- Rising production costs are driving companies to move some labour-intensive operations out of Singapore, as seen with Utac relocating older operations to Thailand.
- Singapore also shows little interest in offering large incentives to attract semiconductor investments, unlike other countries.
- India’s abundant land and lower labour costs could make it an attractive option for Singaporean companies looking to expand.
- Additionally, there is potential for collaboration between India and Singapore in the semiconductor equipment and material manufacturing sectors, helping India to develop its own semiconductor ecosystem.