How a S$50m investment spells hope

How a S$50m investment spells hope
ASM Pacific's second plant in Yishun
PHOTO: Lianhe Zaobao

1. What do you think was the most significant thing that happened this week?

The story wasn't front page stuff. But the opening of two facilities in Yishun by Hong Kong-listed semiconductor giant ASM Pacific Technology this week was significant.

The firm, which calls Singapore its global headquarters, had invested more than S$50 million in the two new facilities. One is a new building to consolidate two major business segments together. Another is an innovation centre, the company's first outside Germany, for its customers to run tests, say on built-in electronics for cars.

ASM Pacific is a huge, or as a certain brash New York businessman-turned-politician would pronounce it, a yuuuge company. It is the largest semiconductor assembly, packaging equipment and surface-mount technology equipment supplier in the world.

The company made some HK$13 billion (S$2.4 billion) in revenue in 2015 and close to HK$1 billion in net profit. By 2018, the more optimistic analysts are projecting revenue to be HK$18 billion or more, and net profit to be HK$2 billion. The stock has enjoyed a significant rally in recent months.

If semiconductor jargon sounds gobbledygook to you, just try to take apart an old smartphone some day to see the circuits inside. ASM Pacific makes machines that print and inspect semiconductors, which other companies use to assemble end-products such as Android phones. In its Singapore factory, ASM Pacific makes wire bonders, the metal pieces that connect circuits to one another. It also makes the machines that make the wire bonders.

2. Why is this a big deal?

That a company like ASM Pacific continues to base itself here and can keep growing is something to cheer about. As a key supplier in the smartphone supply chain, ASM Pacific is an "old economy" capital goods manufacturer deeply connected to the "new economy" of technology.

The firm's staff count has grown from 50 in 1990 to over 1,400 today, including more than 300 research and development (R&D) engineers. The company's engineers in Singapore are reportedly also working with teams in the UK and China to develop manufacturing products for the solar and fuel-cell industry. It will hopefully be able to offer Singaporeans good jobs in the years ahead.

Singapore's transformation into one of the wealthiest nations in the world in the last few decades was partly because we let foreign multinational companies base themselves here, enjoy tax breaks and hire a well-educated labour force in a place with infrastructure that works. Looking ahead, this growth model might yet still remain relevant. Companies such as ASM choose to base their global headquarters here presumably because Singapore is a well-connected hub that is easy to do business and run corporate operations out of. We might not manufacture much anymore. But whatever higher value-added processes we get can still be a source of jobs and national pride.

3. Did you see it coming?

No. We're not omniscient.

But we try to be.

4. Should anyone be worried? Excited, maybe?

ASM Pacific is involved in some pretty exciting parts of the global economy, although Singapore will only reap the benefits indirectly. For example, think about those funky dual cameras that you now see at the back of some Android smartphones. ASM Pacific makes machines that make the image sensors that are needed in these cameras. Also think of LED lights and display panels, which are essentially light sources made from semiconductors. ASM Pacific is plugged into this burgeoning market, making the assembly equipment used by LED players such as China lighting giant MLS.

From what The Business Times understands, the firm's manufacturing operations in Singapore are relatively small, limited to final assembly and some high-end modules. But Singapore is its corporate headquarters, and the firm's customers in Asia will probably come here to interact with salesmen and test out new products. The continued existence of ASM Pacific in Singapore shows how we are, however indirectly, still involved in growth areas in the global electronics and technology space.

5. What happens now?

The future is not all about Internet services. Good old manufacturing has a role to play yet. And Singapore has to stay on top of things.

This article was first published on Jan 21, 2017.
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