4.3. PE Industry Transformation Map

one of the sectors to be covered by this initiative with productivity roadmap launched in 2011 with a 10 year horizon.

The key highlight from this roadmap was setting a productivity target, aiming to reach, by 2020, an average 178.000 SGD level of value-added (VA) per worker in the industry, from the baseline level of 67.000 SGD in 2008. To support this goal, a 52 million SGD budget was set aside from National Productivity Fund (NPF) to support skills upgrading activities for the precision engineering workforce. This included the creation of a Master Craftsmen Programme to offer advanced vocational training and recognition for PE professionals. The roadmap consisted of three major priorities (“thrusts”): growing higher value added activities; improving firm-level operational efficiency; and further upgrading PE workforce.

Growth of higher value added activities was seen to be achieved by broadening and strengthening manufacturing capabilities for larger scale operations, designing, developing and production of highmix low-volume manufacturing equipment and other advanced technologies and know-how as well as diversifying as history showed, to become a supplier to a broader mix of industries including aerospace, medical devices or offshore equipment.

The improvement of firm-level operational efficiency was aimed to be reached via increasing capital productivity, automation, process improvement and job redesign. The enhanced Productivity and Innovation Credit (PIC) was to be used as an important measure supporting such transformation activities and reducing their costs.

The promotion of higher skills for the industry – the third and last priority of the productivity roadmap, saw the proposal of establishing a Master Craftsmen Programme at Nanyang Polytechnic, reserving for this initiative 52 million SGD from the NPF. Modelled on successful examples of vocational training programmes in Europe, this programme was expected to provide a new pathway to attract talented individuals to PE carriers and equip them with necessary skills to support productivity upgrading of the industry.

The progress of productivity upgrading in PE has not been sufficiently rapid to enable achieving the productivity targeted, furthermore it was highly influenced by the one-off jump between 2010 and 2011 in output and value added, also driving up productivity level. Besides this jump, since 2011 sector growth and productivity upgrading has been very limited, with value added per worker increasing by 10% from around 88.000 SGD in 2011/2012 to 97.000 SGD in 2014/2015.

4.3.PE Industry Transformation Map

In October 2016, following the announcement of Industry Transformation Programme earlier in the year, the Industry Transformation Map for Precision Engineering industry was launched by the Minister for Trade and Industry. It set a number of specific targets, to be achieved by 2020, including the creation of 3000 PMET jobs, expected growth of the value added created by the industry from 8.8 billion SGD in 2014 upwards to 14 billion SGD in 2020. By 2020, the share of PMET jobs were also set to increase from 48% to 58% while the overall output of the sector is expected to grow from 32 billion SGD to 42 billion SGD.

Key elements supporting the implementation of the ITM include the complementarities with Research, Innovation and Enterprise (RIE) 2020 plan, in which 3.2 billion SGD were set aside for R&D in Advanced Manufacturing and Engineering; the 450 million SGD National Robotics Programme announced in 2016 budget; the National Additive Manufacturing Innovation Cluster (NAMIC) housed 89

at Nanyang Technological University with its dual mandate to support R&D in additive manufacturing and adoption of the technology by SMEs.

The ITM is supposed to implement two dedicated initiatives to encourage innovation: Model Digital Factories will be set up in A*STAR’s Singapore Institute of Manufacturing Technology (SIMTech) and Advanced Remanufacturing & Technology Centre (ARTC) to develop digital technologies and solutions for MNCs and SMEs as well as grooming locally based companies to become Digital Champions, i.e. digitalise their factory operations. Providing the needed skills for the industry was also seen as an important goal, with the supporting launch of dedicated Skills Framework for Precision Engineering, development of Professional Conversion Programmes under the Adapt and Grow initiative as well as advanced manufacturing master classes.

As part of the ITM, it was envisage to also enhancing tripartite collaboration and consultation to improve joint work with industry, associations, unions and various government agencies. The plan also includes strengthening the Singapore Precision Engineering and Technology Association (SPETA) aiming to increase its membership from 170 in 2016 to 400 by 2020.

Given the rather dismal recent performance of the overall PE sector, a number of areas of PE globally were identified as potential markets to penetrate and ensure PE industry growth in Singapore. Notably, 7 high-growth sub-sectors should form the basis to drive PE industry growth until 2020. These 7 sub-sectors include: Semiconductor equipment; test& measurement instruments; lasers and optics; additive manufacturing industry; robotics industry; sensors industry and finally advanced materials industry (notably plastics). All these sub-sectors are expected to show relatively healthy growth internationally and therefore could become the drivers of PE industry growth in Singapore. The ambition is that together these 7 growth sub-sectors should by 2020 be able to increase their value added from around 4 billion SGD to around 9 billion SGD and their workforce from current 14 thousand to 42 thousand. Their international potential can be shown as:

 Semiconductor equipment market, expected to grow from USD 36.5 billion in 2015 to USD 51 billion by 2020, driven by proliferation of mobile and IoT applications that require increasingly energy-efficient and miniaturised semiconductor packages;  Test and measurement equipment market, expected to grow from USD 20 billion in 2015 to

USD 30 billion by 2020, driven by growing demand for sophisticated testing methods and equipment required for highly compact and integrated chips-sets and components;  Laser and optics equipment, expected to grow from USD 32 billion in 2015 to USD 47 billion by 2020, driven by low-cost high power innovations broadening applications space and industry leaders shifting into visual processing software;  Additive manufacturing, expected to grow from USD 5 billion in 2015 to USD 18 billion by 2020, anticipating mainstream adoption;  Robotics, expected to grow from USD 27 billion in 2015 to USD 45 billion by 2020, driven by global push into networked automation to increase productivity and higher flexibility, expected in both emerging and developed markets;  Sensors, expected to grow from USD 80 billion to USD 128 billion by 2020, driven by broader applications and demand growth enabled by increasing use of complex equipment and cloud connectivity;  Plastics (advanced materials), expected to grow from USD 64 billion in 2015 to USD 81 billion by 2020, driven by advanced manufacturing techniques requiring the development of new material formulations and processes.

Using some available indicative data on the size of VA of these sub-sectors in Singapore, a back-of envelop transformation of these measures into USD (with a 0.75 current currency exchange rate) and 90

then into output (with a conversion rate based on average VA-output relationship in the Singapore PE industry) is made. It is then possible to estimate the current and expected global market share for these specific SG PE industry sub-sectors.

Table 21. Forecasting estimated market share of Singapore PE growth sub-sectors.

V/A 2014 bSGD V/A 2020 bSGD

SG Output 2014 bUSD

SG Output 2020 bUSD Global Output 2015 bUSD

SG market share 2015 Global output 2020 bUSD

SG market share 2020

Semiconductor 1.8 2.5 5.3 5.6 36.5 14% 51 11% Test&Measurement 1.2 2.5 3.5 5.6 20 17% 30 19% Lasers&Optics 0.4 0.9 1.1 1.9 32 3% 47 4% Robotics 0.1 1.0 0.3 2.3 27 1% 45 5% Sensors 0.1 0.9 0.3 1.9 80 0% 128 1% Plastics 0.6 0.9 1.8 1.9 64 3% 81 2% Additive manuf. 0.0 0.6 0.0 1.2 5 0% 18 7% 7 growth sectors 4.0 9 12.0 20.3 n/a Rest of PE 4.8 5 14.4 11.3 n/a Total 8.8 14 26.4 31.5 n/a Source: calculations by the author using PE industry data and global market forecasts. Also based on PE ITM forecasts the VA-output relationship in Singapore is expected to change from 0.275 in 2014 to 0.33 in 2020.

To encourage productivity development in the PE industry, the key focus is on the promotion of automation technologies adoption. For that purpose the key demand-side bottlenecks for the adoption of automation technology will be addressed including the unattractive level of ROI, limited in-house expertise of companies to adopt such solutions. This is expected to be achieved financial support for adoption (making ROI more attractive), providing external expertise as well as supporting companies to develop internal know-how. Supply-side limitations like lack of standardised solutions as well as capabilities and know-how of local system integrators will be address via supporting the development of standardised solutions, develop interoperable modular solutions and strengthening capabilities of local system integrators.

With regards to skills pillar, the underlying instrument helping developed a supply of skilled workforce is the Skills Framework, developed for a number of sectors, including Precision Engineering, that should explain potential carrier paths, describe job profiles and the required skills in those jobs as well as indicating potential education and training programmes providing those skills. Sourcing labour for this sectors signified by contracting labour force might be challenging, particularly due to “leakage” from pre-employment education and training sector where only a limited number of graduates would choose to enter the sector (it is estimated that 60% of engineering students do not enter engineering professions, however there seems to be lack of direct links between study programmes and specific industry sectors). Therefore schemes to make initial jobs in industry more attractive are important, like earn and learn programmes as well as carrier conversion programmes for professionals from other sectors. Still, a system monitoring inflow-outflow of manpower from the sector, as well as linking to graduation and transition statistics from education and training programmes could be beneficial for planning sectoral manpower as well as educational opportunities.

An important role in supporting companies to upgrade their business models is expected to be played by SPETA association. It should provide additional consultancy help to business in particular when

91