Singapore's industrial output growth slowed sharply in September as a sharp decline in the pharmaceutical sector failed to be offset by continued demand for electronics and equipment related to AI development.
Factory output rose 3.4% year-on-year in September, data from the Singapore Economic Development Board (EDB) showed on Oct. 26. A month earlier, the increase was significantly stronger - 15.4%. The result also fell short of the expectations of economists surveyed by Bloomberg, who had forecast growth of 7.1%.
Excluding biomedical manufacturing, Singapore's industry is showing a much better picture - production increased by 9% year-on-year. The data shows that one of the most volatile industries is once again having a serious impact on the overall industrial index.
The pharmaceutical sector shrank by nearly 66%
The most serious decline was recorded in biomedical production, which shrank by 32.8% compared to September last year.
The main reason is the pharmaceutical industry, where production decreased by 65.9%. According to EDB data, the decline is due to the different product mix of active pharmaceutical ingredients.
The production of medical equipment also decreased – by 1.7%, due to weaker export demand.
AI continues to support electronics
At the other extreme is the electronics industry. Production in the sector grew by 5.7%, supported by sustainable demand related to the development of artificial intelligence infrastructure.
However, the pace is also slowing down significantly - in August, electronics reported growth of 28.3%.
The strongest increase in September was registered in information and communication technologies and consumer electronics - 29%, while the production of computer peripherals and data storage systems increased by 21.3%.
The picture is more moderate in semiconductors. Production rose just 1.9%, after a 25.9% increase in August.
Chip-making machinery drives industry up
The strongest performing major industrial sector in September was precision engineering, where production jumped 31%.
The main driver was the machinery and systems segment, which grew 34.8% thanks to higher production of equipment for the semiconductor industry.
This is another indicator of the effect of global investment in data centers and artificial intelligence infrastructure on the Singapore economy.
Transportation engineering also reported a strong result - growth of 10.6%. Production in the aviation segment increased by 16.3% thanks to higher production of aircraft components and sustained demand for aircraft maintenance, repair and overhaul services.
At the same time, marine and offshore engineering contracted by 6.3% due to lower activity in shipyards and weaker production of oil and gas field equipment.
Chemical industry also shrinks
Production in the chemical sector decreased by 4.6%. In petrochemicals, the decline reached 24.3%, with production remaining constrained by weaker demand and problems with raw material supplies.
In contrast, total industrial production recorded an increase of 4%, and in food, beverages and tobacco products, the growth reached 11%.
Despite the sharp slowdown in September, analysts remain relatively optimistic about the sectors related to artificial intelligence. Data for the third quarter show an increase in industrial production by about 8.5% on an annual basis, which is above the 7.5% pace previously set in government estimates.
However, risks are increasing. Among them are higher production and energy costs, disruptions in supply chains and the possible weakening of the investment boom in AI infrastructure. This means that strong demand for high-tech equipment may continue to support Singapore's industry, but growth is likely to remain uneven across sectors.