Singapore wins more investments from major chipmakers as they seek to de-risk supply chains

Singapore continues to assert its status as a global semiconductor production hub, with more chipmakers and related businesses moving in to set up new plants.

The total amount of investment flows may vary from one year to the next, but the trend is clear.

Major global semiconductor players are setting up new plants and research and development campuses in Singapore, and also in other select Southeast Asian countries, to boost their supply chain resilience and avoid getting entangled in the intensifying geopolitical conflict between the world’s two largest economies – the United States and China.

While Singapore and Malaysia are the only Southeast Asian countries where semiconductor foundries produce wafers, from which chips are carved out, downstream processors such as assembly, test, and packaging (ATP) companies are spread across the Philippines, Thailand, and Vietnam as well.

The investments – whether they are in greenfield projects or expansions of existing capacity – have also reinforced Singapore’s strength in several segments of the chip industry.

They are trailing-edge logic chips, leading-edge memory chips, semiconductor materials, chipmaking equipment and tools, and ATP.
 

Investments surged after a spike in the demand for electronic goods during the COVID-19 pandemic made the industry realise that it needs to add more production capacity.

Even after that global electronics demand eased, amid a glut of inventories, the rising production of electric vehicles and solar panels and the recent red-hot demand for chips needed to power artificial intelligence (AI) applications have kept the industry on its feet.

In Singapore, the past two years have seen the announcement of several investment commitments. New investments are pouring in even as some of the companies are just beginning to start initial production.

In June 2024, Vanguard International Semiconductor – an affliate of Taiwan’s TSMC, the world’s largest contract chipmaker – said it will invest US$7.8 billion (S$10.5 billion) together with leading European chipmaker NXP to build a new chip foundry here.

The joint venture, named VisionPower Semiconductor Manufacturing Company, will start making semiconductor wafers in 2027.

It follows a similar manufacturing facility here worth US$5 billion announced by Taiwan’s United Microelectronics Corporation in 2022 and expected to begin operations in 2024.

Analysts such as Mr Justin Feng, HSBC’s Hong Kong-based Asia economist, believe that more foreign investments are likely to follow as the global semiconductor industry, which is now in the crosshairs of US-China tensions and subject to rising tariffs, export controls and even critical mineral restrictions, seeks to de-risk its supply chain.

“The largest eventual beneficiary of Asia’s supply chain reconfiguration could be ASEAN,” said Mr Feng.

He added that Singapore and Malaysia are the only two ASEAN economies with significant chip-manufacturing capabilities.

Both countries were among the early recipients of investments from US chipmakers, which in the 1960s started to offshore parts of their production process to Asian economies – including Hong Kong and Taiwan – with lower labour costs and sufficiently skilled workforces.

Over the past two decades of globalisation, export-led industrial policies, infrastructure investment and domestic innovation promotion, mainland China, Taiwan, South Korea, Singapore, and Malaysia have cemented themselves as semiconductor-exporting powerhouses.

“However, a continuation of these macroeconomic trends no longer appears so certain,” Mr Feng said.

He noted: “To succeed in the post-pandemic global economy, Asian chipmakers must grapple with geo-fragmentation, industry overcapacity, and advancements in AI applications.

“After all, these developments have the potential to structurally alter Asia’s semiconductor supply chains and change the trajectories of chipmakers across the region.”
 

So far, both Singapore and Malaysia have held their ground.

Singapore accounts for one-fifth of the global semiconductor equipment market and supplies 11 per cent of chips worldwide. It is also one of the top producers of cutting-edge memory chips, which are used in tech devices such as smartphones for general storage and transfer of data.

Meanwhile, Malaysia commands a seven per cent share of the global chips market. It also recently secured a US$5.5 billion commitment from Germany’s Infineon to build its third foundry, which will make power chips used in electric vehicles.

Although behind Singapore in chips sales, Malaysia has Southeast Asia’s largest ATP ecosystem, which is set to grow in the coming years.

Around 13 per cent of global chip testing and packaging already takes place in the country, placing it second to China, which controls about 38 per cent of the ATP market.

In recent years, Malaysia secured a US$7 billion investment for a chip packaging and testing plant from Intel that is expected to start production in 2024, and a US$3 billion one for an assembly and test factory from Texas Instruments.

Some Chinese test and assembly companies, such as ATX Semiconductor Group, have also announced fresh investments to boost their output from Malaysia.

Singapore has also seen interest from companies that produce semiconductor materials and processing tools necessary to build and package a chip.
 

Earlier in 2024, Japan’s Toppan Holdings, which makes materials used in packaging chips, broke ground on its first Singapore plant to produce high-end substrates. In June, Pall Corporation – which holds a vast portfolio of processing tools and technologies used in chip manufacturing – opened a new plant in Singapore.

Mr Ang Wee Seng, executive director of the Singapore Semiconductor Industry Association, believes that chipmakers and related businesses on both sides of the Strait of Johor have always been and will continue to be complementary to each other.

For instance, German chipmaker Infineon has all its foundries in Kulim, but its Asia-Pacific headquarters and the global advanced backend test manufacturing and innovation site are in Singapore.

Micron has all its memory chip plants – which together form the largest production site outside the US – in Singapore. But it has an ATP facility in Malaysia.

“I think if both the countries coordinate their semiconductor sector strategy, they can help each other draw even more investments,” said Mr Ang. “In fact, I believe that there should be an ASEAN chip strategy to help coordinate and speed up the sector’s development regionwide.”
 

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.