The chips aren’t down

The semiconductor industry has faced significant challenges in recent years, from the lingering effects of the COVID-19 pandemic to rising geopolitical tensions and supply chain disruptions. The pandemic led to factory shutdowns, labour shortages, and a surge in demand for chips, intensifying existing supply chain bottlenecks.

At the same time, escalating geopolitical tensions have created both challenges and opportunities for the sector. Disrupted supply chains, reliance on foreign manufacturing, and a shortage of skilled talent have posed considerable hurdles.

However, new opportunities have emerged, as countries like Singapore position themselves as regional hubs for innovation and manufacturing amidst the shifting global landscape.

Today, Singapore accounts for about 10 per cent of global semiconductor output, five per cent of global wafer fabrication capacity, and 20 per cent of global semiconductor equipment production. As global uncertainties continue to disrupt supply chains and reshape industry dynamics, can countries like Singapore continue to capitalise on this volatility and provide the stability the industry needs moving forward?
 

Lasting lessons from the pandemic

Even years after the pandemic, the aftermath of its disruptions remains evident in the semiconductor industry. Companies across the value chain are still grappling with supply chain vulnerabilities and responding to fluctuating demand patterns.

In parallel, original equipment manufacturers (OEMs) have also been refining their inventory management practices, adopting more robust inventory management practices to improve supply chain agility and further mitigate disruption risks. OEMs now maintain higher-than-normal chip inventories, a critical adjustment after the pandemic exposed vulnerabilities in meeting fluctuating demand.

By building buffer stocks and enhancing real-time tracking capabilities, they aim to better navigate demand volatility and minimise production disruptions. These proactive measures have set new benchmarks for supply chain management, now widely recognised as industry best practices.

There has also been a significant increase in collaboration among various players, including government, startups, and multinational corporations, to drive innovation.

Partnerships, such as Rapidus Corporation’s collaboration with IBM to develop advanced chiplet packaging technology for 2nm semiconductors, highlight how combining expertise and resources can accelerate technological advancements in the industry.

These partnerships leverage collective resources and expertise to foster technological breakthroughs, enhancing the industry’s resilience and ensuring its long-term adaptability and competitiveness.
 

Resilient ecosystem

While many countries have struggled to navigate the challenges and disruptions brought about by the global uncertainties, Singapore has emerged as a beacon of stability amidst the chaos.

By prioritising R&D, forging new partnerships, and moving up the value chain, Singapore has successfully positioned itself as a strategic hub for global semiconductor firms. Its integrated ecosystem, which spans manufacturing, assembly, testing, and packaging, makes it an attractive hub for global firms.

A key driver of this success is the Singapore government’s commitment of S$18 billion from 2021 to 2025, aimed at advancing research, development, and innovation within the semiconductor industry.

This funding is allocated for R&D grants, infrastructure upgrades, and tax incentives designed to reduce operational costs and foster growth. Singapore continues to play a critical role in meeting the growing demands of an interconnected world, establishing itself as a global hub for advanced semiconductor manufacturing.

Furthermore, the Singapore government has also launched various initiatives aimed at driving collaboration between government agencies, multinational corporations, startups, and academic institutions.

Programmes such as specialised training and internships are addressing talent shortages and equipping the local workforce with advanced semiconductor skills. These efforts not only close immediate gaps but also build a sustainable talent pipeline, ensuring long-term growth.

Through these initiatives, Singapore is establishing a resilient semiconductor ecosystem that mitigates supply chain risks and strengthens its global competitiveness.
 

Current landscape and future directions

As geopolitical tensions continue to shape global markets, countries must adapt their strategies to ensure resilience in their semiconductor sectors. For Singapore, this means doubling down on its strengths while fostering collaboration with regional partners like Malaysia and Vietnam to create a more integrated and secure supply chain.

Through initiatives like industrial parks along the Malaysia-Singapore border, and those under VSIP (Vietnam-Singapore Industrial Park), as well as attracting high-tech investments and streamlining semiconductor processes, Singapore strengthens its role in building a resilient and secure regional supply chain. Aligning efforts with neighbouring countries helps Singapore mitigate risks and diversify its sources of production and expertise.

Looking ahead, Singapore should focus on expanding its talent pipeline through educational initiatives that emphasise STEM fields and vocational training tailored to industry needs. This will ensure a skilled workforce ready to meet future demands.

These initiatives can help build a skilled workforce capable of meeting future demands while driving innovation in emerging areas. For instance, the Singapore Semiconductor Industry Association (SSIA) collaborates with educational institutions to tailor academic curricula to the semiconductor sector’s needs, offering training and conversion programmes to reskill professionals and address talent gaps.

In addition to talent development, continued investment in infrastructure is crucial. Expanding industrial land for wafer fabs and other semiconductor manufacturing facilities will provide the space needed for sector growth.

Furthermore, it will be important to ensure that these expansions align with global sustainability trends. Singapore’s industrial planner, JTC, is preparing 11 per cent more land in wafer fabrication parks to attract semiconductor giants capitalising on AI advancements. These strategic efforts position Singapore as a key player in the rapidly evolving global semiconductor landscape.

As Singapore navigates the challenges facing the semiconductor industry, it has transformed adversity into opportunity, reinforcing its position as a regional leader. While disruptions such as the lingering effects of the pandemic, rising geopolitical tensions, and supply chain shifts have tested the industry, Singapore’s forward-thinking approach, supported by strategic partnerships and government initiatives, has strengthened its competitive edge.

The ongoing commitment to innovation, talent development, and sustainability ensures that Singapore remains a leading player in the global semiconductor landscape.

Through resilience and adaptability, Singapore continues to thrive amidst these challenges, positioning itself to lead in the industry and drive long-term growth and innovation. Ultimately, every cloud has a silver lining – Singapore’s proactive approach amidst adversity is paving the way for a brighter future in this vital industry.
 

The writer is senior vice president of Asia sales and Asia president at Analog Devices.

This article was first published in The Business Times on 18 January 2025.