End of Manufacturing in Sight for Singapore

Seagate Technologies

The announcement that Seagate Technologies was going to close its Ang Mo Kio factory in Singapore by 2010 was not a major surprise.It was always on the cards and the fact remains that Singapore is a very expensive country to have an operations for high labour intensive manufacturing facilty. A typical operator in Singapore can gross S$ 1000 (with overtime) from a basic of S$ 650. Convert this to Malaysian Ringgit and you get RM 2,400 per month. A similar Malaysian production operator will probably draw the equal amount in Ringgit Malaysia or RM 1,000 to RM 1,200. So the difference per operator is more than 50%.

For a high labour intensive manufacturing business like Seagate's it doesn't make economic sense then to continue operations in Singapore.True, Singapore's produtivity levels and ease of logistics save some costs but all things being equal they add up to the overall cost of business operations worldwide.Additionally, disk drive margins are falling quarter after quarter and for Seagate to survive for so long in Singapore (25 years) is nothing short of a miracle.
I wonder how many of their vendors and suppliers from Small and Medium Sized Enterprises (SME) are affected by this or have seen their business whittled down from 100% to just 10% because of this development.

In the end, there will be only 2 factories left in Singapore for Seagate,one in Woodlands making the higher value added disk head media and the other in Science Park doing development work.

This begs the inevitable question,whats left of manufacturing for Singapore after this exodus ? Many top brand names have been downsizing their operations quietly, such as Philips, Panasonic, Emerson and Motorola to name a few. The typical electronics and semiconductor companies are few and far between with many of them focussing on the higher end research and development. The so called new green companies such as REC, Oerlikon Solar, Bosch Solar and others are moving slowly due to this economic crisis leaving a vacuum for many a retrenched engineer and tehcnician. The life sciences sector is still in the infancy stage, and again only the top brains with at least a Masters degree in Biomedical Sciences are selected.

The Singapore Government had better take stock of this dire situation to alleviate the plight of many Singaporeans caught in this 'structural unemployment trap' whereby the unemployed are experienced in one sector but the new industries emerging have requirments which require totally new skilsets. I refer to the Integrated Resorts and gaming industries which will kickoff in early 2010.

We live in very uncertain times.