Wealth Wise - Could things get more grim for Singapore's manufacturing sector?

50.9 points. Still, the readings above 50% generally indicate growth, but we're very close to 50. Um, so we're not in contraction territory technically speaking, but should we be concerned about the slight drop?

Alvin Electronics, a big player for Singapore. It accounts for about a third of our manufacturing cluster. It had a slight dip to 51 points last month from January's 51.1 points. So are we still riding that AI wave? I think ah I'm not quite sure whether it was this program we talked about we did talk about this because um of course we know that we don't produce the AI chips. That's ah quite clear. Those are the productions are elsewhere.

But ah what we do have is the related functions related productions, like, I mean the AI chips we don't produce, but those chips need memory, right, and the memory chips, right. So the memory chips that are going goes along with that, right, is produced by um some of the companies, some of the semiconductor companies here. So that's how we are part of that wave itself. um to say that we are not ah that I believe that the wave is still on. But, um, of course, ah there are other variables that

ah we should ah be also mindful of. Of course, there's policy uncertainty that trade, trade developments, especially of the news that you you probably have just reported. Those things will still be kept in focus and probably some extent the uncertainty itself may have kept some parts of manufacturing may not be related to AI, but some other parts of the manufacturing. A bit on the cautious footing.

earlier than that. But ah I mean that's true that um The we have seen, if we, I think well our economists have reported that we have seen the peak in the electronic cycle somewhere, maybe in the middle of the second half of last year, somewhere there and in the in the bellwether economies in terms of electronics like uh Taiwan and South Korea, it has eased and we thought that that would have represented the peak of the cycle and it's coming down, um.

But I guess again this um the trade policies that have been announced, everything, these are real and the of course the continuous fear is there might be, there will be more that is to be announced and that would actually have a more serious bearing on how the global trade environment would turn out to be in the coming to the Uh, later half of 2025 itself. OK, Alvin, let's talk

about these protectionist policies. We know, like you just said, 12 hours ago, US President Donald Trump said that tariffs on Chinese imports and levies on Mexico and Canada will go ahead. Some people say, you know, you close one door, you end up with maybe another door opening. So will that impact us in more negative way or perhaps there's some positivity. That could come out, come out of this, you know. So maybe a mixture of both, or maybe, how can we make good on the situation too?

I think we can take the episode of 2018 as an example. So that was a pretty much a straight up between US China trade tensions, and with that itself, we have seen that the trade or the investments have gone to some parts of, especially like in parts of Asia. ASEAN and some of the economies have benefited from the trade diversion itself and but this time around, this has been a more the the trade fight is not.

Just going to be between US and China, as you have seen, it now also involve the allies of Canada

and Mexico, although they are for different reasons. Fentanyl was the basis of the for the the the the imposition of those tariffs on Canada and Mexico primarily, but on coming through to the 2nd of April where they are looking at The rest of the world in terms of that, um, I think if you look at the countries or economies that have a significant trade runs a significant trade surplus against the US, right, those countries might be in a

higher risk of tariffs being slap on their respective economies like what we are seeing right now and with that itself. Um, then while Singapore may not be directly impacted because we run a trade deficit with the US, US exports more to us than we export to US, but we are a global and trade dependent economy and with anything happening to the global trade system itself, right, then we will be negatively impacted.

Promotion of the private sector, technological innovation to lead the development of new productive forces, much like the AI, the deep sick as an example and to boost supply chain resilience. We are not expecting to see what took place in perhaps like 20 2008 whereby there was this huge fiscal stimulus that was pushed into the system that is not something that I think we are expecting. If you look at the EU, you know, it's, it's got a good relation.

Ship with Singapore when it comes to trade and bilateral ties. Do you see them pivoting even more towards Asia, wanting to trade more towards Asia because they're seeing these issues right now with the USA? Could that be of benefit to us in a big way? They trade with us, we trade with them, and it's win-win for the two sides.

Definitely in this current environment, you would like to look at markets that you can diversify your markets and if you want to diversify into markets, you want to be diversing your markets first with growth potential and perhaps also emerging middle class whereby the purchasing power is Ah, has been relatively set up, say, versus like maybe

1020 years ago. Then in many sorts of those based on those criteria, then I think ASEAN will fit the bill for ah for the EU to increase our our ties and relationships, but at the end of the day, if you're talking about replacing One growth, the one the demand from one economy as big as US right that is really a tall order

even for ASEAN to fill up. So it is difficult, but it's to, I would think that the divers diversification the principles would still work, especially like this region we are seeing that.

Uh, the growth, the economic growth in this region itself, the growing middle income itself, uh, of the middle income segment itself, those are really positive factors that actually will promote that kind of trade, uh, for the EU with this region, but like again, I mean we can be part of the diversification process, but we cannot fully replace what is the biggest market for them.

And uh of course, what we see is continue like there will still be a lot of uh uh high value activities that come here that will stay here, including um like I think the regional treasury centers and um I think the regional HQs here. But uh I think some of the production whereby some of these companies are looking for it would still need to go for uh places where there will be um

relatively comparatively cheaper production costs itself. So I think that's understandable and I think that kind of flow in terms of where the foreign direct investments would would still continue and especially in an environment where there's such Trade, uh, tensions and developments still ongoing, right? I think it it really is quite a strong factor as well to see the continued flows of FDI coming into this region.

Do you think because we know US President Donald Trump wants to see a lot of manufacturing returned to the USA. He's even said he's gonna put money in to compete against Taiwan because we know Taiwan does a lot of these semiconductors. So we know America has got huge investments here in Singapore. It's more than the investments in China, India, South Korea, and Japan. Do we see that as being

a problem as well? Because if he wants manufacturing to return to the US, some of these big companies, could they relocate and leave us? I think ah what you're referencing to perhaps was the the 100 billion that is ah um. I, I guess pledge for the investments into ah for semiconductors ah from Taiwan into into US. Yeah, that's why even today we saw huge drops in some of these big firms like TSMC and Nvidia too.

Yeah, but I'm not quite sure whether the the reasons is also is just plainly on that, but of course, um, I think we will continue to, I think like building on the previous question on the FDI flows, we will still see foreign direct investments coming into this region and

Singapore will definitely be still one of the beneficiaries. The problems of that itself, I again, um, they I somehow, some it really we are a very diversified, uh, we have a very diversified manufacturing base, even though I think when we look at it, we have I think great strengths in the electronics, but we also have other sorts of production which need not necessarily be just ah catering to um and the the the interesting point is again if we point to the

Ah, what I made comment earlier, right, is that we still run a trade. Ah, against the US, so is that still means that whatever that we are producing here, right, and we produce quite a fair bit of things here, right, they are going to a lot of other centers where they are served as intermediate goods or final goods itself, ah but more more likely to be for further production elsewhere and the direct ah the direct chain towards like the US itself is not so is.

As the numbers suggests, it's not as ah. or the, the, the, I would say that in as a consequence, we don't run that surplus. Against the US versus like many of these economies that we have mentioned before, such as ah Taiwan in terms of their electronics, yeah.

But also clearly that if we were to talk about the risk, the risk is on the downside for now given the trade developments, but um I think um if you look at where building on the budget itself that just was announced just a few weeks ago, right, I think we see that there is a healthy surplus from the government and they, well they have distributed a lot of positive. Ah, measures in the in the in the current 2015 budget, they also have kept a fair amount of ammunition behind.

So if things do turn, let's say, a more negative in the second half, right, we could see them having the ammunition left to come up with something a supplementary budget to help the economy over that uncertain period.