On December 4th, VisionPower Semiconductor Manufacturing Company (VSMC) officially began construction on their new US$7.8 billion ($10.5 billion) wafer manufacturing facility in Tampines. The plant is set to open in 2027 and is estimated to produce 55,000 wafers per month by 2029, creating 1,500 job opportunities. The company is a joint venture between Taiwan’s Vanguard International Semiconductor Corporation and the Netherlands’ NXP Semiconductors.
However, VSMC is not the only player expanding their operations in Singapore. In March, Japan’s Toppan Holdings also started building a semiconductor packaging materials factory in Jurong Lake District, with an investment of around $450 million. According to Leonard Tay, head of research at Knight Frank Singapore, many chipmakers and related businesses are setting up new production plants and R&D campuses in Singapore to improve their supply chain resilience. He also notes that Singapore’s stability in the midst of ongoing geopolitical tensions in other parts of the world makes it a global hub for semiconductor production and chips.
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This expansion in the semiconductor industry comes after a downturn in 2023 due to lower demand and higher supply. However, the sector has bounced back, recording a 26% year-on-year increase in revenue for the first three quarters of 2024, reversing the 9% decline in 2023. This has also had a positive impact on Singapore’s manufacturing sector, which saw 11% year-on-year growth in 3Q2024, led by the electronics cluster.
While industrial rents continued to increase in the first three quarters of 2024, the rate of growth has gradually slowed compared to the previous year. This is due to a more cautious sentiment among occupiers amidst an uncertain macroeconomic environment. This can also be seen in the fluctuations in rental transaction volumes throughout the year. According to Catherine He, Colliers’ head of research for Singapore, occupiers are valuing flexibility in their leasing decisions to adapt to changing market dynamics.
Tricia Song, head of research for Singapore and Southeast Asia at CBRE, adds that consolidation in the third-party logistics and e-commerce industries has also contributed to growing occupier resistance. However, different industrial segments have been affected differently, with multiple-user factories and warehouses remaining relatively resilient and registering rental growth throughout the year. On the other hand, the single-user factory and business park segments saw a decline in rents in 3Q2024.
Despite this, the industrial sales market saw more activity with several large transactions taking place in 2Q2024, followed by a further boost in the third quarter. This includes the sale of a portfolio of seven industrial assets from Soilbuild Business Space REIT to a joint venture between Warburg Pincus and Lendlease Group for $1.6 billion. However, Alan Cheong, executive director of research and consultancy at Savills Singapore, believes that these big-ticket deals are likely a one-off and the market may see one or two large transactions in 2025, but significantly below $1 billion.
Looking ahead, JTC estimates 0.2 million sqm of new industrial space to be completed in 4Q2024 and a further 1.6 million sqm in 2025, almost double the average annual new supply in the past three years. This, coupled with weaker demand, may result in a supply-demand imbalance and slower rental and price growth in the near future. However, demand for multiple-user factory space, centrally located food factories, and logistics space is expected to remain healthy, with the electronics and advanced manufacturing sectors also attracting investments. On the other hand, business park rents may continue to face pressure as companies downsize in response to flexible working arrangements.