THE manufacturing sector has been hit hard in recent months by sluggish world trade and slow demand, prompting industry watchers to call for strategies to turn the industry around.
While companies push on with restructuring and prepare for orders to pick up in the second half of the year, some experts warn that efforts to diversify or raise productivity may be insufficient in the long run.
Manufacturing, which makes up a fifth of Singapore's economy, has contracted 2.5 per cent since the start of the year and was the main drag on economic growth in the first quarter.
It has been hit hard by the ongoing restructuring, rising business costs and the strength of the Singapore dollar, which has made exports more expensive.
Cost pressures have pushed some companies to move operations to lower-cost places such as Thailand, Indonesia and the Iskandar region of Malaysia.
A Singapore Business Federation (SBF) survey released this year showed that 35 per cent of its members in the manufacturing sector reported that the pace of economic restructuring was too fast for them to keep up. The survey cited manpower constraints and high costs as key challenges faced by businesses.
A preliminary employment report released last Saturday showed that employment in manufacturing contracted more quickly in the first quarter (6.4 per cent) compared with the same period last year (1.4 per cent), amid weakening exports.
Manufacturers told The Straits Times that they have been going through tough times.
Mr Clifford Lim, managing director of Precision Circuit Manufacturers, said sales have declined 30 to 40 per cent over the past year. This is in spite of the firm, which fabricates printed circuit boards, spending two years or so diversifying into assembly projects in order to boost takings.
Marine engineering company Rotating Offshore Solutions has reported a 30 per cent dip in revenue over the past six months since oil prices began to plunge last June. Managing director Victor Lim said oil companies are restructuring and putting projects on hold. "We are using this period to train staff and optimise processes in the company," he added.
The Singapore Manufacturers' Federation (SMF) said performance across the industry has been patchy but there are some bright spots. The electronics cluster has been doing poorly, but higher-value-added segments such as aerospace and pharmaceuticals have seen stronger growth.
Dr Michael Teng of the SMF said Singapore is also increasingly moving towards higher-value-added segments like robotics, automation, advanced materials and additive manufacturing, such as 3D printing.
Mr Sean Looi, general manager of 3D printing solutions provider Creatz3D, said the firm has seen strong demand for its services.
The company has grown significantly since it began recruiting in 2011. It now has 18 staff members.
But the manufacturing industry as a whole will remain in the doldrums unless local firms develop their own products and intellectual property, said SBF chief operating officer Victor Tay. "We need to develop our own Singapore-based intellectual properties, like in infocomm, socialised services and engineering competence, for nationwide programmes, like Smart Nation 2025, rather than have our companies be subcontractors of lower-value and commoditised activities," he said.
Small and medium-sized enterprises have traditionally relied on contracts from multinational firms, but this model will not help them survive in the long term, Mr Tay added.
Dr Teng said: "Many manufacturers are struggling because their business models have been outpaced by disruptive technologies such as the Internet, cloud computing and mobile technologies."
But others say there is hope yet for Singapore manufacturers.
Mr Richard Tan, general secretary of the United Workers of Electronics and Electrical Industries, said firms and older workers have become more receptive to new technology. Union members say orders are returning, albeit at a slower pace, he added.
The latest manufacturing layoffs that Mr Tan is aware of were announced last October and there have been no news of fresh retrenchments since, which he said is a good sign that the industry is slowly getting back on its feet.
Singapore firms are facing growing competition from manufacturers in the region but this should be no deterrent to expanding abroad, said SMF's Dr Teng. "While Singapore manufacturers cannot compete with the emerging countries on low cost, they can partner with companies from these countries to expand to other parts of the world."
Companies can also consider selling complementary services instead of just a product, Dr Teng added.
This article was first published on May 4, 2015.
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