Speech by the Minister of State for Trade and IndustryMr Lee Yi Shyan

at the Showcase of SPETA LEAD Projectsat Yishun SAFRA

on Wednesday, February 7, 2007, 10.15am

Distinguished GuestsLadies and Gentlemen

Good morning

Introduction

1. It is my pleasure to join you this morning to view some of Singapore Precision Engineering and Tooling Association’s (or SPETA’s) projects that are supported under the Local Enterprise and Association Development, or LEAD, programme.

2. SPETA is one of the first industry associations to embark on the LEAD programme, and I would like to commend SPETA for taking the lead in enhancing the competitiveness of Singapore’s Precision Engineering or PE industry.

Significance and Challenges of the PE industry

3. The PE industry is a key pillar of Singapore’s manufacturing sector. In 2005, the industry generated an output of $20 billion and contributed to 12% of manufacturing value added. It is also one of the largest contributors of manufacturing employment, accounting for one out of four jobs in the sector. The industry is expected to generate an output of $28 billion and double its value-add to $10 billion by the year 2018; as Singapore develops itself into a Centre of Precision Engineering Excellence offering cost effective manufacturing solutions for a diverse range of applications.

4. Our PE industry has played a critical role in attracting and retaining the key manufacturing clusters in Singapore by providing vital support for a wide spectrum of manufacturing industries ranging from the traditional electronics sector to new growth sectors such as medical technology and aerospace.

5. Over the years, our PE industry has established an international reputation for quality and reliability. Today, Singapore commands a sizeable global market share for several PE products. Our companies account for 70% of the global market for semiconductor wire bonder units, 60% for auto axial insertion machines and 10% for household refrigerator compressors. We are also home to 10 major semiconductor and industrial equipment manufacturers.

6. Last year, 19 Singapore companies made the Forbes Asia SME list, a ranking of the top 200 companies in the Asia Pacific with sales below US$1 billion. Amongst these 19 enterprises, four were from the PE industry, namely, Unisteel, First Engineering, Micro Mechanics and MMI Holdings. This speaks well of our PE companies’ standing and potential in the international manufacturing arena.

7. The PE industry is expected to grow in size, scope and relevance worldwide. Increased industrialization and economic growth, especially in the emerging economies of Asia, will lead to more business opportunities. Fueled by the soaring domestic demand of the growing middle class in China and India, the demand for PE components in electronics, automotive and other industries is expected to rise significantly. Under the leadership of SPETA, I am confident that our PE industry will be able to capitalise on these opportunities at our doorstep.

8. Notwithstanding the positive global outlook and our PE sector’s growing international repute, the industry still faces challenges.

9. A key challenge is the stiff price competition in the region. As a small economy, Singapore lacks the natural resources to match our competitors, such as China and India, which can offer lower land and labor costs as well as huge domestic markets.

10. To remain competitive, our PE companies cannot compete on cost and efficiency alone. Instead, they must differentiate themselves by providing products and services which cannot be easily duplicated, and enhance their technical capabilities to move up the value chain. By engaging in higher value added activities such as product design and development, and supply chain management, our companies will be able to offer a wider range of services and even total solutions which our regional competitors cannot match. Concurrently, our PE firms must seek new growth markets to make up for the loss of low value-added production. They must also continue to attract and retain talents and upgrade the skills of their workers who will otherwise be lost to competition.

11. In addition, I would like to urge companies to band together to sharpen their competitiveness collectively. Together, they can combine their resources, complement their product offerings, achieve economies of scale, reduce time-to-market and pursue bigger projects. This will enable the industry to capture a larger share of the burgeoning market.

SPETA’s LEAD

12. Strong industry associations, such as SPETA, are the backbone for vibrant industry clusters, and ultimately, a competitive economy. Industry associations that are constantly updated on the latest trends and business needs of their industries, are also in the best position to grow and develop their respective sectors. I am happy to note that SPETA is implementing a number of initiatives under its $5.6 million LEAD programme to address the challenges faced by our PE industry. The projects will cover four key areas:

13. First, SPETA will generate more business opportunities for our Precision Engineering companies. It will facilitate strategic partnerships with overseas companies with good technical capabilities, or access to growth industries. I am told that to date, SPETA has brought more than 10 companies to the US and Japan for trade exhibitions and has also arranged one-on-one business matching sessions for 5 local companies with 3 overseas companies. These activities are expected to generate sales of more than $20 million over the next three years.

14. The second area is in enhancing capabilities. SPETA, together with SIMTECH, has developed a simulator for training computer numeric control machinists, which can significantly reduce the hours and machine resources required, compared to traditional training methods. In other words, trainees would be

able to practice different and more types of machining requirements within the same allocated training time. With this additional preparation, trainees would have a shorter learning cycle when they start working with the companies. I am pleased to note that the Institute of Technical Education (or ITE) is already in discussion with SPETA to integrate this simulator into their training curriculum.

15. The third focus is to leverage on technology to raise the efficiency and responsiveness of tool rooms, and to streamline operations at various locations. In collaboration with SIMTECH, SPETA will be looking into developing user-friendly, cost-efficient web-based applications for enterprises to implement and maintain an integrated tool room management system.

16. Lastly, SPETA will help companies to explore new markets, to ride on the rapid growth of these sectors. One such market segment is the automotive industry, which has grown from S$480 million in 2003 to S$640 million in 2005. I have been informed that SPETA has already initiated discussions with the Regional Vendor Development arm of Lotus Engineering, a leading automotive engineering consultant for Original Equipment Manufacturers (OEM) and Tier 1 suppliers, to identify potential automotive collaborations. This project will complement Auto Ignite, a multi-agency programme launched in 2005 to encourage Singapore enterprises to move up the value chain by supplying automotive sub-systems and modules.

17. These LEAD initiatives, when fully implemented, are expected to bring about an increase in value-added of $150 million for the Precision Engineering industry over the next three years. I shall leave it to Director of SPETA, Mr Koh Seng Chee to provide further details about SPETA’s LEAD projects.

Conclusion

18. In conclusion, what the Government can do and has done through the LEAD programme is to provide some resources to encourage our industry associations to embark on upgrading efforts for their members. The rest is really up to you, the industry and the enterprises. I urge all of you to leverage on the SPETA LEAD award to expand, upgrade and move up the value chain. With the various SPETA LEAD initiatives in place, I am confident that the PE industry will continue to sustain good growth and spur the development of our manufacturing clusters in Singapore.

19. Thank you.