How Singapore's electronic sector can end 3-quarter drought

Output rose 5.3% in 1Q13.

According to the MAS, the improved outlook for the global IT industry should lead to a cyclical uplift in Singapore’s electronics sector. This is tentatively borne out on several fronts.

Following three quarters of sequential contraction, domestic electronics output increased by 5.3% q-o-q SA in Q1 2013. Further, the overall electronics PMI posted an expansionary reading for the second consecutive month in March. Notably, the forward-looking sub-indices for new orders and new export orders have ticked up considerably since late 2012, although the latter still remained slightly contractionary.

Over the medium term, while domestic cost pressures from the restructuring drive could cause less sophisticated production to relocate out of Singapore,
high-end manufacturing activities should increasingly be anchored here.

Singapore’s share of high-end products, such as semiconductors, has been fairly stable since the latter half of the 2000s, suggesting that such activities tend to display greater stickiness location-wise given their higher skill content and
technological intensity.

Moreover, there has been a healthy pipeline of investment commitments in electronics over the past few years. This implies that a boost to high valueadded IT output is in the offing, once these production facilities come on-stream.

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