SINGAPORE: Caught between a Sino-US trade war, political concerns over Chinese telecoms firm Huawei and slowing consumer demand, chipmakers in Singapore have started slowing production and laying off hundreds of jobs, firms told Reuters.
The slump in a sector that made up nearly a third of Singapore’s manufacturing output last year is reinforcing expectations that the export-driven economy could slide into recession in the coming months. Making microchips for everything from cell phones to cars has long been central to the success of Singapore, the tiny trading island seen as a bellwether for the global economy.
“We are already seeing that this downturn is different,” said Ang Wee Seng, executive director for the Singapore Semiconductor Industry Association (SSIA). Ang said he was “preparing for the worst” and putting his staff on standby to help any laid off workers try and find new jobs.
The semiconductor industry is a broad term for firms making electronic components including memory chips and microprocessors.
Many of the world’s biggest chipmakers have operations in Singapore. John Nelson, CEO of UTAC, a Singapore headquartered firm which tests and assembles chips, told Reuters he had started a “consolidation process” in Singapore which may result in a 10-20 percent headcount reduction in the city-state by year end.
UTAC, backed by private equity firm TPG, has 10,280 employees worldwide of which around 1,700 are based in Singapore.
“We are taking the appropriate actions to make sure there is a future for our business in Singapore,” said Nelson, adding they may also add more days where the factory is closed and workers take unpaid leave. Nelson said while the global industry was suffering, problems were magnified in Singapore due to high overhead costs like rent, wages and utilities.
Lim Kok Kiang of Singapore’s Economic Development Board, a government agency which promotes the city-state as a business hub, said while the semiconductor industry faced challenges, Singapore remained competitive in the sector and has been attracting investment.
“The weaker global economic environment has affected demand in export-oriented sectors internationally, and the semiconductor sector is no exception,” he said. Global semiconductor sales are expected to decline 12-13 percent in 2019, according to industry association SEMI, on course for their biggest drop since the dotcom bubble burst in 2001.
While the industry is used to swings in demand for the latest tech products, this slump is exacerbated by trade tensions between the United States and China. The two superpowers have imposed tit-for-tat trade tariffs on a number of products, while the US has also banned firms from dealing with Huawei, the world’s biggest telecoms equipment maker, due to security concerns. – Reuters