From sugars to semiconductors

Yet throughout this period, Hewlett Packard (HP), a pioneering MNC in the tech manufactur­ing space, has been happy to stay despite the cost, and operate a large presence out of Singapore.

As Ng Tian Chong, HP Inc’s managing direc­tor for Greater Asia, explains, running a manu­facturing business is about more than just the cost: it is the “ecosystem” that Singapore has cre­ated, pulling together critical elements such as the education system, a business-friendly gov­ernment, and a stable geopolitical environment.

“It is about human capital, it is about govern­ment. It is about the predictability of government policy that doesn’t change with every change of government,” says Ng in an interview with The Edge Singapore.

Time compression

Singapore’s focus on manufacturing stemmed from a dire economic need after independence. The entrepot trade and other shipping-related activities had served the country well, but new economic sectors had to be created.

Back then, UN advisor Albert Winsemius suggested industrialisation — including manu­facturing — which could help soak up the grow­ing ranks of the young and the unemployed. And within the broader range of manufacturing activ­ities, special attention was paid to attract those in electronics because of its growth potential. The transition from refining sugar to manufacturing semiconductors was soon underway.

Manufacturing, as an economic activity, is also favoured by the economic planners for its high multiplier effects: manufacturers help gen­erate economic demand in adjacent sectors such as transport and logistics, and financial services.

Evidently, this strategy has worked well. In 2020, electronics manufacturing drew about 37% of foreign direct investment in Singapore. It was also the largest sub-sector within the broader man­ufacturing sector, with 70,500 workers. Within the broader manufacturing sector, which contribut­ed 21% or $80 billion to Singapore’s 2020 GDP, electronics manufacturing accounted for 39%.

However, underneath these headline numbers, the make-up and the structure of Singapore’s manufacturing sector have changed drastically, amid a rapid pace of change seen in the last two decades with both technology and business con­ditions zipping forward, compelling companies to move faster just to stay on the spot.

Paul Chan, HP’s former managing director for Asia Pacific, told The Edge Singapore in a 2003 in­terview: “There is time compression. You no longer have the luxury of too much time to do things.”

HP started from a flatted factory in 1970 man­ufacturing core memories for the HP 211X com­puters and assembled the first Singapore-made calculator, the HP-35, at its Depot Road factory.

Since then, the company has grown here over the past 52 years to become the regional HQ for the Asia Pacific-Japan region, and has transitioned from assembling those calculators to “high-val­ue” products such as 3D printer heads that can print all sorts of items, ranging from something as straightforward as a mask holder, to products as complex and precise as a dental mould, where the shape of each tooth is different.

Thanks to a combination of factors ranging from competent local managers and engineers to a favourable operating environment, HP in Singapore made a noticeable contribution to the sprawling global operations of the company.

According to Chan in his 2003 interview, be­sides product assembly, product development was done here as well. “Every time we did that, we were able to bring about cost reductions,” Chan recalls. According to him, Singapore be­came well-known within the HP world for re-en­gineering processes and delivering world-class products at much lower costs.

HP, as a company, has seen multiple changes. It acquired competitor Compaq in 2002, for ex­ample. However, with changing market dynam­ics, the company in 2015 split itself into two: HP Inc to run the PC and printer divisions, which Ng is part of; and HP Enterprise, which operates the software and enterprise-centric business.

Throughout the changes, be it HP Inc or HP Enterprise, significant presence has been main­tained in Singapore with a series of new invest­ments and projects. For example, HP Inc’s glob­al printer division runs the global printer supply chain here and manufactures components like print heads and inks used in industrial, commer­cial and even 3D printers worldwide.

HP also opened its $100 million new Asia Pa­cific-Japan headquarters here in 2017, with the campus also home to HP’s first Smart Manufac­turing Applications and Research Centre (Smarc) in the world, where engineers aim to find ways to boost manufacturing productivity by 20%.

Unlike a traditional manufacturing plant where many operators sit in lines and assemble parts, HP’s manufacturing lines use a staggering amount of technology. Its Falcon line, which manufac­tures print heads for industrial and commercial printers, has fewer than 10 human operators.

Steve Connor, HP Inc’s head of IPS Supplies Operations, tells The Edge Singapore that if the line is in its original form and configuration, there are 40 operators. But in a place like Singapore, this was not possible due to the high labour cost.

So HP digitised large parts of the process, us­ing innovations like machine learning (ML) to allow machines to not only communicate with each other, but to learn from each other as well.

For example, if a machine detects a fault in a part, it will learn to reject it, and the other ma­chines will also learn this is a fault and will aim to not have that outcome.

The manufacturing processes are so highly automated that HP’s factories in Singapore were the only ones among all its factories around the world that could operate throughout the pan­demic without shutting down.

HP’s efforts have not gone unnoticed. Its man­ufacturing facilities in Singapore have been rec­ognised by the World Economic Forum (WEF) as a global lighthouse for applying “Fourth In­dustrial Revolution” technologies to achieve prof­itable growth without increasing their environ­mental footprint.

In its recognition of HP, WEF notes: “Facing an increase in product complexity and labour shortages leading to quality and cost challeng­es, along with a move at the country level to focus on higher-value manufacturing, HP Sin­gapore embarked on its Fourth Industrial Revo­lution journey to transform its factory from being manual, labour intensive and reactive to being highly digitised, automated and driven by AI.” This has improved HP’s manufacturing costs by 20%, and its productivity and quality by 70%.

An effective package

HP is not the only big-name global electronics manufacturer wooed to set up shop here. Tex­as Instruments was a pioneer within the sem­iconductor industry to open a facility back in 1969. Singapore’s love affair with semiconduc­tors has continued till today: just three months ago in June, GlobalFoundries announced it is investing another US$4 billion ($5.4 billion) to upgrade and expand its facilities here. Micron Technology, which specialises in making flash memory, is the single largest source of foreign direct investment in Singapore, with more than US$10 billion chipped in and counting.

Understandably, as Singapore transitions to manufacturing high-value products and costs rise, companies will start eyeing lower-cost coun­tries, as seen by businesses shuttering one part or another of their manufacturing operations here: Seagate in 2009, Western Digital in 2013 and more recently IBM in 2019.

From HP’s perspective, cost, indeed, is a key factor — but it has to be weighed against other considerations. For example, Ng likes the good intellectual property protection framework here. “So, for things like R&D, working on higher val­ue-add and so on, Singapore has a good reputa­tion among other countries in the world,” he says.

Connor singles out the proactive role played by economic officials here. “What impressed me the most about Singapore was before we were even thinking about what we did here, they [the government] were saying, ‘We know you’re go­ing to have to change. So here are some things that are going to help you. If you bring in new capabilities, or if you take your current work­force and you change them to have additional capabilities, we’ll help you get there,’” he says.

He adds that this was not common global­ly: “I’ve operated all over the world in different manufacturing roles from the US, Europe and Asia. I’ve never had anyone come to me and say, ‘We want to help you.’”

The company has established a close relation­ship with Singapore, most notably, having set up a lab in Nanyang Technological University with a focus on areas including 3D printing, cyber­security and projects that explore intelligent de­sign, processors and robotics for additive manu­facturing. “The amount of technical knowledge that comes out of that lab and infuses into our manufacturing — that doesn’t happen anywhere else,” Connor says.

He believes these factors have taken on great­er importance as the manufacturing landscape pivots to what is known as the Fourth Indus­trial Revolution, using things like ML, AI, Big Data, and robotics to create “smart factories”. These factors not only benefit HP in isolation, they are also synergistic with its upstream and downstream companies, such as its suppliers for its raw materials, and logistics partners to deliv­er its products.

In a sense, it is a mutually beneficial rela­tionship. It is because of HP that these compa­nies are here and vice versa, creating an ecosys­tem that other companies can use and be easily plugged into Singapore.

Ng sums it up: “We’ve got the academia mix here, who are willing to participate. We’ve got a government who’s willing to invest in and co-fund some of these things to make it work. And they have accompanying policies that’s consist­ent over time and predictable.”

To top it off, Singapore’s location, as well as its connectivity is a major advantage in itself, Ng highlights. “When you put all that together, it’s a very effective package,” he concludes.