Robust demand for Singapore’s electronics and semiconductors during the pandemic fueled the city-state’s fastest economic expansion in over a decade and big-ticket investments in chip-making capacity. Now, the notoriously cyclical semiconductor industry is in the grip of a deepening downturn as geopolitical and inflationary headwinds buffet the global economy.
Chip makers in the island nation are increasingly concerned about the near-term possibility of a recession, with many feeling the sting of soaring electricity prices linked to energy market disruptions worsened by Russia’s war on Ukraine. Singapore-based semiconductor and related firms are also contending with a tight domestic labor market and regulations that have raised the cost of and otherwise discouraged hiring foreigners.
“What is happening with Ukraine, with the shutdowns in China…when the uncertainty of a possible recession is coming up, or even stagflation in some countries, there is a fear that consumer demand will start to drop. Of course, this will have a direct impact on chip demand,” said Ang Wee Seng, executive director of the Singapore Semiconductor Industry Association (SSIA).
Faltering global demand is already being acutely felt in Singapore, with manufacturing sector growth falling to an 11-month low in August. All sector segments saw a fall in output, led by a 19.3% slide in the production of modules and components. It marked the third straight month of contraction in semiconductor production; the broad electronics sector has shrunk for two consecutive months.
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Nile Bowie is a journalist and correspondent with the Asia Times covering current affairs in Singapore and Malaysia. He can be reached at nilebowie@gmail.com.
