S’pore factory output surprises with 13.8% jump in May as chip demand surges

SINGAPORE – Singapore’s manufacturing output performed much better than expected in May, bolstered by strong demand for semiconductors from data centres and 5G markets.

Factory output rose 13.8 per cent year on year, up from the revised 6.4 per cent increase in April, data from the Economic Development Board (EDB) showed on Friday (June 24).

May’s growth blew past the 5.5 per cent rise forecast by analysts in a Bloomberg poll. It also marks the eighth straight month that factory output has expanded.

Without biomedical manufacturing, which shrank last month, output grew by an even bigger 18 per cent.

Analysts said that while strong performance, especially in electronics, will contribute somewhat to gross domestic product growth, there are still looming headwinds.

OCBC Bank chief economist Selena Ling said: “I’m fairly confident that Singapore can achieve over 3 per cent growth this year despite downside risks from a China slowdown and rising fears of a US recession.

“This  is because our manufacturing sector, especially electronics, is holding up and is very resilient despite global supply chain bottlenecks.”

Singapore’s lynchpin electronics industry saw output surge 33.6 per cent in May on a year-on-year basis, compared with 10.4 per cent in April.

Within the cluster, the semiconductors segment grew by 45.7 per cent year-on-year, supported by strong demand from 5G markets and data centres amid the global chip shortage, EDB said. In April, semiconductors saw a 12.9 per cent growth.

Cumulatively, electronics grew 17.3 per cent for the period from January to May this year compared with the same period a year ago.

More major chipmakers, such as GlobalFoundries, are expanding capacity in Singapore, which can contribute to the sector’s resilience, said Maybank analysts Chua Hak Bin and Lee Ju Ye.

But manufacturing momentum is expected to ease, partly because of the slowdown in non-chip sectors – such as petrochemicals and pharmaceuticals – due to weakening global demand, they added.

Senior UOB economist Alvin Liew said that while the outlook continues to be positive, external risks, such as countries tightening their monetary policy and the possibility of new Covid-19 variants, are still present.

The transport engineering cluster saw a 12.9 per cent expansion in May. The aerospace segment recorded 27.2 per cent growth with higher production of aircraft parts and more maintenance, repair and overhaul jobs from commercial airlines following the easing of global air travel restrictions.

The marine and offshore engineering segment rose 8.2 per cent due to a higher level of work done in offshore projects.

Overall, the transport engineering cluster grew 14.7 per cent in the first five months of this year compared with the same period last year.

General manufacturing expanded 9 per cent, with all segments recording an increase in output.

Precision engineering notched a production rise of 3.2 per cent, with the machinery and systems segment growing 6.9 per cent largely due to the higher output of semiconductor foundry equipment.