Electronics, transport engineering clusters gloomy over prospects: EDB survey
Manufacturers in the key electronics and transport engineering clusters expect business prospects to worsen in the six months to June, an Economic Development Board survey showed today (Jan 30). Photo: Bloomberg
SINGAPORE — Manufacturers in the key electronics and transport engineering clusters expect business prospects to worsen in the six months to June, an Economic Development Board (EDB) survey showed today (Jan 30), but they are an exception to the overall outlook, with all other clusters remaining upbeat.
Within the electronics sector, which accounts for about a quarter of Singapore’s total manufacturing value-added and employs a fifth of manufacturing jobs, a net weighted balance of 22 per cent of firms also project a lower production level in the seasonally less active first quarter of this year. All segments expect output declines with the exception of the semi-conductors segment, the survey showed.
The pessimism in the electronics sector comes as businesses feel the strain of intense global competition that is squeezing margins.
Mr Song Seng Wun, regional economist at CIMB, said: “Technology companies are worried about tougher conditions. Demand continues to lag and there is the worry of excess supply … Demand from the United States is also selective even though we expect firmer growth from there. And competition is putting pressure on their margins.”
Meanwhile, the transport engineering cluster is also projecting weaker output in the first three months of the year. Within the cluster, the marine and offshore segment expects a lower level of activity following a high percentage of completion in the fourth quarter of last year.
These businesses expect orders to decline in the months ahead, as global oil and drilling firms cut back on capital expenditure after oil prices plunged by more than 50 per cent since last June.
All other clusters, namely chemicals, biomedical manufacturing, precision engineering and general manufacturing, are optimistic over business prospects in the six months to June, the survey showed.
The chemicals cluster is the most optimistic, with a net weighted balance of 12 per cent of firms expecting improved business conditions. In particular, the petroleum and petrochemical segments see a lower operating cost environment due to declining crude oil and feedstock prices.
“This performance from the chemicals cluster looks like it will be for selected segments and not the entire cluster, namely the petroleum refining and petrochemicals segment. A fall in input material costs will benefit some in these selected segments,” Mr Song said.
Overall, a large majority of manufacturers surveyed – a weighted 77 per cent - expects business prospects to remain stable for the first half of the year, the survey showed. Among the rest, a weighted 10 per cent expects better business prospects while a weighted 13 per cent foresees business will slow down.
“This looks like it is an extension of the fourth quarter last year into the beginning of the year. We wish to see busier growth, but it looks like at this point, overall output and exports continue to look subdued,” said Mr Song.
The survey, conducted from last December to this month, polled a total of 426 manufacturing establishments, of which 95 per cent responded.
