Singapore doubles down on chipmaking as AI lifts exports, but land and tariffs threaten growth

Singapore is strengthening its position in semiconductor manufacturing as AI-driven demand lifts electronics exports and supports the wider economy. According to reporting by the Financial Times, the city-state is pushing for a larger share of the global chip supply chain, even as land, labour and geopolitical limits cap how far it can scale.

Exports jump 132%

Singapore's electronics exports rose 132% year on year in August, helped by new capacity such as the $7.8 billion plant opened by VisionPower Semiconductor Manufacturing Company (VSMC), a joint venture between Taiwan's Vanguard and Dutch chipmaker NXP.

At the opening ceremony, VSMC chair Leuh Fang said the company is considering a second plant in Singapore to meet high demand. Moody's said Singapore posted its strongest first-half trade performance since 2010, with growth running higher in the following two months, while shipments of personal computers, including server racks used in data centres, rose 238%.

$23.5 billion in investment

Between 2022 and 2025 the semiconductor sector attracted more than $23.5 billion in investment, with Micron, Infineon, Siltronic, UMC and Applied Materials expanding their presence.

According to the Economic Development Board, Singapore produces one in 10 semiconductors worldwide and a fifth of the machinery used to make them. The industry accounts for nearly 7% of GDP, and the AI boom is adding momentum for chipmakers and other advanced manufacturers.

Land, labour and US scrutiny

Prime Minister Lawrence Wong said the country's ambitions are constrained mainly by its physical size. Last month he announced plans to merge several smaller islands into a larger reclaimed land area to support future industries, including advanced manufacturing. The plan will require resources, planning and investment over multiple terms of government.

Domestic constraints remain significant. Singapore relies heavily on overseas workers, and high costs and labour shortages make it harder to compete with lower-cost neighbours such as Malaysia and Vietnam.

Geopolitical pressure is rising too. In March, US Trade Representative Jamieson Greer began an investigation into several countries over alleged structural excess manufacturing capacity, highlighting Singapore's microchip and electronic equipment industries. The probe has not concluded, but it could lead to additional tariffs on Singapore-made goods.

Tan Yew Kong, general manager of Asia-Pacific manufacturing at GlobalFoundries, said AI is booming and Singapore has an advantage, but warned the chip industry is becoming a security issue. Angela Tritto, an honorary fellow at University College London who specialises in China's trade relations with Southeast Asia, said Singapore needs to show clearly that it complies with US export controls while maintaining China as a major economic partner.