Singapore’s manufacturing sector is expected to remain supported by resilient demand from the global artificial intelligence (AI) infrastructure buildout, economists said, even as the pace of electronics output growth shows signs of moderating.
Despite cooling electronics output growth in Singapore, Maybank Investments Bank said in a note on Wednesday that it is unlikely that the artificial intelligence (AI) boom is coming to an imminent end.
The research house said Singapore’s electronics industry still has durable tailwinds from the global AI infrastructure buildout, underpinning a resilient outlook in the coming months.
Demand for semiconductor equipment remains robust amid a global expansion in chip fabrication capacity.
It is noted that Singapore accounts for a sizeable market share of about 20 percent of global semiconductor equipment production.
For Maybank, the July Purchasing Manager Index (PMI) is signaling strong demand ahead, with the headline electronics PMI rising to 52.4 (Jun: 52.2) and new electronic export orders (52.6 versus 52.3 in Jun) rising at the fastest pace since April 2018.
Production is inching up at a more gradual pace (52.2 vs. 52.1 in Jun), which suggest a temporary lag in meeting burgeoning demand amid supply chain pressures, it added.
The electronic supplier deliveries index fell to 47.6 in July (vs. 48.1 in Jun). Nominal non-oil domestic exports also grew 24.2 percent year on year in July, with electronics shipments surging 112 percent.
“Even if hyperscalers temper future spending plans amid mounting scrutiny over cash flows, the global AI hardware boom is unlikely to stall abruptly,
“Given the long lead times and sizeable sunk costs associated with data center projects, many facilities already in the pipeline will continue to drive demand for chips, storage and networking equipment,” said the research house.
Singapore’s manufacturing growth eased to a four-month low of 6.8 percent year-on-year in July, but output climbed 2.3 percent on a seasonally adjusted month-on-month basis (versus -7 percent in June).
The primary reason behind cooler growth was electronics, which offset a pickup in precision engineering, transport engineering and general manufacturing.
Growth in the electronics cluster cooled to an 11-month low of 11.2 percent year on year in July (June: +21.1 percent), partly on a high base.
Electronics output rose 7.8 percent on a month-on-month basis from June. Within electronics, infocomms & consumer electronics (reflecting servers and related hardware) surged 51.7 percent (versus +32.1 percent in June).
Semiconductor output expanded by a slower 8 percent year on year (versus +20.8 percent in June), despite output rising 14.2 percent from the preceding month.
Meanwhile, RHB Investment Bank Research keeps Singapore full-year industrial production forecast unchanged at 9 percent for 2026.
“We expect the electronics and precision engineering sector to continue to benefit from the global technology upcycle and strong AI-driven demand, reinforcing manufacturing growth for the remainder of the year,” the research house said in a note on Wednesday.
However, it noted the durability of this robust performance remains contingent on the persistence of AI-driven demand and the broader external trade environment.
“Against this backdrop, we retain our full-year industrial production growth projection at 9 percent on the back of robust year to date manufacturing growth of 9.8 percent,
“We also have recently revised our full-year NODX to 15.5 percent reflecting sustained momentum in electronics exports, which we expect to remain the key driver of export performance through the remainder of the year,” said RHB.
Looking ahead, it expects industrial production to expand to around 7.8 percent in the second half, supporting its full-year gross domestic product (GDP) growth at 4.5 percent in 2026.
RHB also remains positive on the electronics and precision engineering clusters, with strong exports, an expansionary manufacturing PMI and Singapore Economic Development Board (EDB)’s forward-looking indicators pointing to firm industrial momentum through the second half of 2026.
“Despite the year on year moderation in electronics growth to 11.4 percent year on year in July from 21.1 percent in June, we expect the semiconductor upcycle to remain intact, supported by structural demand from digitalization and AI adoption,” said RHB.
According to the research house, global semiconductor sales rose strongly to $403.3 billion in the second quarter of 2026, reflecting robust demand for chips and electronic components, particularly from AI-related data-center investment.
Moreover, the surge in global demand for semiconductors and electronic components to support AI workloads at data centers has boosted exports across Asia in 2026, helping economies such as Singapore cushion the impact of the Middle East tensions and US trade tariffs.
Notably, the AI-driven boom has also translated into stronger manufacturing output alongside robust year-to-date NODX performance.
“With limited signs of disruption thus far, we concur with Ministry of Trade and Industry (MTI)’s view that the economic impact of the Middle East conflict has been less severe than initially feared,
“Hence, looking ahead, continued AI-related investment should sustain demand for semiconductors and server-related products, supporting electronics and precision engineering output and Singapore’s position in the regional technology supply chain,” said RHB.
Global Economics & Markets Research, however, said there are early signs that AI-related tailwinds may be moderating, although it requires more data to confirm this assessment.
Notably, the electronics segment recorded a second consecutive month of sequential contraction (July: -3.0 percent m/m ; June: -16.2 percent), driven by semiconductors (July: – 5.3% m/m; June: -19.7 percent).
“This is consistent with the sequential declines in integrated circuit exports observed in the Jun-Jul NODX data,” the research house said in a note on Wednesday.
It sees domestic firms may be facing some capacity constraints, as the new orders sub-index of the electronics PMI continues to outpace the output sub-index.
Meanwhile, the decline in the stocks of finished goods sub-index (July: 49.3; June: 49.6) suggests that firms are drawing down existing inventories to meet demand.
This could support electronics industrial output in the months ahead, given the eventual need for inventory replenishment, said UOB.
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