Singapore is an electronics manufacturing hub, with demand for locally manufactured microchips increasingly coming from the automotive industry. Silicon microchips are used in electronic devices such as mobile phones, computers and televisions, as well as in vehicle systems as cars become more electrified and connected.

A typical internal combustion engine car uses 50 to 150 chips for onboard electronics managing lighting, fuel efficiency and torque vectoring, which controls traction and handling. EVs use more chips because many functions are powered by electricity or controlled by radio frequency signals. Some of the latest EVs use more than 3,000 chips, packaged in electronic control units (ECUs) behind the dashboard or beneath the floor.

The amount of silicon content in most cars is expected to exceed US$ 3,000, compared with about US$ 350 currently. For high-end EVs, chip costs could reach US$ 6,000 per vehicle in the coming years.

By 2030, one in three cars on the road will be an EV, according to a 2023 global study by the International Energy Agency. During the same period, the number of chips in traditional and hybrid vehicles is expected to double as manufacturers develop more efficient vehicles with additional functions. Other consumer electronics, including mobile phones, computers, televisions, air conditioners and refrigerators, will also require semiconductors.

Singapore Semiconductor Industry Association (SSIA) executive director Ang Wee Seng said the ongoing chip glut, which has reduced global sales growth, could have affected Singapore's industry more significantly without demand for automotive chips.

"While there is a drop in demand for chips in general, our foundries are still in better shape to an extent because of the ongoing demand from the automobile industry," he told The Straits Times.

Boom and bust

Mr Ang and industry experts have identified two issues affecting the semiconductor industry, which accounted for about 7% of Singapore's gross domestic product in 2023 and provided more than 33,000 jobs.

More than 80% of chips are used in consumer goods, a cyclical industry. Rising employment and wages can encourage purchases of cars, phones and televisions, while weaker economic conditions can result in these products being removed from household spending.

The industry is also fragmented because chip manufacturing involves complex processes. Fabless chipmakers design chips to meet device manufacturers' specifications but generally do not own fabrication plants, or foundries. Pure-play foundries, also known as contract manufacturers, purchase wafer discs from substrate material companies and etch or stamp chip features onto silicon wafers. The wafers then go to assembly and testing companies, which assess their viability and package them in ceramic modules for mounting on electronic-device circuit boards.

Each foundry typically manufactures chips based on a particular process node, referring to the distance between transistors. Measured in nanometres, a smaller node allows more transistors to be packed into a chip. Each new chip generation can require a new foundry, taking two or more years and tens of billions of dollars to construct.

Chips with process nodes of 28 nanometres (nm) or larger are classified as mature nodes, while those below 28 nm are advanced nodes. With 2 nm nodes likely to become commercially available soon, some experts consider all double-digit nodes mature. A human hair is approximately 100,000 nm wide.

Demand for advanced-node chips has increased with technologies such as artificial intelligence, 5G and the Internet of Things (IoT). TSMC is set to begin volume production of 2 nm chips in the US by 2026, with its N2 fab estimated to cost more than US$ 30 billion. Intel has also broken ground on a US fab for leading-edge chips costing US$ 20 billion. A 28 nm plant would cost less than a third of that amount.

Until a few years ago, relatively few companies planned mature-node fabs, despite such chips accounting for more than 60% of global sales. This changed in late 2020 when COVID-19 lockdowns and production disruptions caused shortages of mature-node semiconductors in the automotive industry.

New investment cycle

Semiconductor companies have since renewed mature-node investment commitments. Singapore's semiconductor ecosystem is largely focused on mature nodes.

In February 2022, UMC announced plans to invest SGD 6.8 billion (US$ 5.31 billion) in a Singapore wafer fab producing 22 nm and 28 nm chips for advanced speciality technologies. In September 2023, GlobalFoundries (GF) opened its SGD 5 billion Singapore wafer fab, focused on automotive, 5G mobility and secure devices.

Applied Materials, Siltronic and AMD have also invested in manufacturing and R&D facilities. In May 2023, Analog Devices launched an R&D facility at Singapore's Kallang Industrial Park.

Besides UMC and GF, Singapore has three foundries: Vanguard International Semiconductor (VIS), in which TSMC is a major shareholder; Systems on Silicon Manufacturing Company (SSMC), a joint venture between TSMC and NXP Semiconductors; and STMicroelectronics.

Micron Technology, for which Singapore is its largest manufacturing site outside the US, produces data storage and memory chips used in automotive applications including ADAS, autonomous vehicles, cloud-connected cars and infotainment displays.

The semiconductor industry has experienced a glut since 2023 after increased demand from late 2020 through most of 2022, while chipmakers have also seen increased automotive business.

Mr Tan Yew Kong, senior vice-president and general manager of GF in Singapore, said: "A bulk of our Singapore business is focused on the automotive segment, which is a growing market as we see more electrification in cars."

He said multiple GF-manufactured chips could be used in one car for battery management, sensors, safety features, lighting, infotainment and other functions.

Mature-node innovations

Chip designers are developing EV architectures requiring new mature-node chips. Mr Daryl Wan, regional business director for South Asia Pacific at Analog Devices, said the company had developed a battery management system intended to increase EV range per charge and battery lifetime, reducing ownership costs.

He said the perception that mature-node chips are less advanced than smaller-node chips was a misconception.

"There is still a lot of innovation going into larger chips which will keep them relevant and viable for years to come," he said.

Mr Brian Tan, regional president of Applied Materials South East Asia, said most of his company's business comes from foundries working on mature nodes.

"Most of the chips used in IoT, communications, automotive, power and sensor devices - or ICAPS as we call them - do not have leading-edge nodes. They are speciality chips and in terms of nodes, some of them are even larger than the 28 nm chips, we believe that there is going to be a growing market in this ICAP space," he said.

SSIA's Mr Ang believes Singapore will eventually have foundries producing smaller nodes.

"We already have a number of chip research and design companies that are working on leading-edge process technologies. So, at some point, they will start to attract foundries that produce the same wafers and chips."