Singapore repositions manufacturing for higher-value production

Companies are redesigning regional value chains as automation alone cannot offset rising costs or replace lower-cost production.

Singapore manufacturers are redesigning their regional operating models, retaining higher-value production locally whilst relocating labour-intensive activities to lower-cost markets as automation reshapes, rather than replaces, manufacturing competitiveness.

Associate Professor Puay Guan Goh, Academic Director for the National University of Singapore's MSc in Smart Industries and Digital Transformation and Co-Director of the MSc in Supply Chain Management, said automation is only one element of a broader strategy that combines digital technologies, process redesign and regional value-chain planning.

“It's not just automation per se, but also how we reorganise our work processes,” he said.

Beyond automation, manufacturers are increasingly combining sensors, the Internet of Things, data capabilities, and artificial intelligence to improve productivity. Goh said Singapore also retains advantages through its connectivity, trusted business environment, and established industrial ecosystem, helping companies anchor activities that require specialised expertise.

Semiconductor manufacturing illustrates that advantage. Goh said the industry's reliance on capital-intensive equipment and highly skilled talent reduces the importance of labour costs, making Singapore well suited for advanced production despite higher operating expenses.

Rather than keeping entire production chains in one location, manufacturers are separating activities across the region. Advanced manufacturing, certification, testing, regional supply chain coordination and headquarters functions can remain in Singapore, whilst labour-intensive production shifts to lower-cost markets.

Technology can help ease cost pressures, but Goh said it will not eliminate the need for relocation across every industry.

“The use of technology will increase productivity, and that will mitigate the effects of rising costs,” he said.

Instead, manufacturers should assess each stage of their value chain individually to determine where production creates the greatest value. Goh said different industries will continue adopting different operating models based on their technology requirements, workforce needs and regional cost structures, with Singapore remaining strongest in activities requiring higher skills, greater automation and stronger business connectivity.