‘Made in Singapore’ must be made for the world

This article is more than 12 months old

High labour costs will not stand in the way of a country becoming an advanced manufacturing hub

During the last 20 to 30 years, one of the key strategies of developed countries has been to outsource manufacturing to benefit from cost advantages in emerging markets.

Thus, most multinational corporations shop around to find the cheapest location to produce their goods. Cost savings traditionally come from dramatically lower labour costs.

For example, Apple, the superstar of global innovation, locates its production and manufacturing in China (yet still reaps most of its profits in the US). Designed in California, sure, but made in China.

But a shift is starting as advanced robotics, artificial intelligence (AI) and automation technologies mature.

Singapore's Ministry of Trade and Industry has unveiled an Industry Transformation Map for the electronics manufacturing sector to gear it up for the future, by leveraging these new technologies. Labour costs will remain high in Singapore, yet the government thinks it sees an opportunity.

The aim is to ramp up output in high-value products and create 2,100 jobs for professionals, managers, executives, and technicians by 2020.

The roadmap includes plans to help electronics manufacturers diversify into new growth areas, transform existing factories, and deepen workers' skills.

AI, urban mobility, autonomous vehicles and healthcare are some of the new growth segments identified.

The map aims to help local firms seize growth opportunities in advanced manufacturing, where high-tech capability is becoming a key factor. Singapore hopes to be regarded as a leading global innovation hub.

Historically, Singapore has not been regarded as a high-potential manufacturing hub, because of its high labour costs and small domestic market.

Samsung Electronics opted to build one of its biggest factories in South-east Asia in Vietnam, where labour is cheap and the domestic market is fairly large.

The company accounted for 22.7 per cent of Vietnam's total export turnover last year, up from 20 per cent in 2015.

Clearly, the contribution to gross domestic product in these markets chosen as manufacturing hubs is unmistakable.

Samsung employed 140,000 workers in Vietnam, but is already using 18,000 robots, and the number of robots will continue to grow at the expense of the number of workers.

As powerful robotic, AI and automation technologies become widespread and take on a more central role in manufacturing, cheap labour costs will become less of an imperative.

High-tech facilities and capabilities, available at competitive pricing, will be key.

The shoe industry has historically relied on low-cost labour for manufacturing. But Adidas' new high-tech factory - which will make trainers with robots and 3D printers - is bringing production back to Germany.

I think the timing is perfect for "Made in Singapore".

The island nation has been developing its financial industry for decades, becoming a world-class financial hub as a result.

Indeed, the city-state has overcome the trust gap in financial services; soon, it will do the same for advanced manufacturing as industries move to high-tech production.

If Singapore can leverage its current leadership in trading and logistics, it will significantly help to overcome the disadvantage of having a small domestic market.

The World Bank recently published a report on the future of manufacturing. It concludes that new technologies such as AI, advanced robotics and 3D printing are changing global manufacturing.

And I would echo the World Bank's advice: Singapore should be ready to take appropriate policy action on the 3Cs - competitiveness, capabilities and connectedness.

In doing so, it could transform itself into a high-tech manufacturing hub for decades to come.

The writer is founding CEO of Marvelstone Ventures. This article was published in The Business Times on Tuesday.