Precision engineering companies continues to be a key pillar of growth for Singapore especially in the manufacturing sector and also a backbone for industries as diverse as aerospace, oil and gas, medical devices and electronics. Precision engineering companies aim to enable any custom piece or moving part to be designed and made to exact specifications, making advanced manufacturing possible (Ssg, 2018). The sector’s output has vastly increased by almost four times over the past two decades, reaching $32 billion in 2013 (Teo Ser Luck, 2014). The government aims to increase the precision engineering output from S$32 billion to S$42 billion by 2020. Today, there are some 2700 companies ranging from Small And Medium Enterprises (SMEs) to large Multinational Corporations (MNCs), in the Precision Engineering industry (Myskillsfuture, 2018).
Contribution Of These Economies in Singapore Economy
Due to increasing complexity as well as the demand for newer and more advanced technology and sophisticated products, manufacturing processes are also being complicated. However, precision engineering firms and companies are continuing to invest in these new technologies to advance the value chain, affecting the demand as well. Economic Development Board (EDB) says that Asia has grown rapidly with importance in the global economy. Thus, more companies deem this situation as a chance to build their own companies, thus creating a great deal of competitors in the market and increasing the competitiveness level between competing companies and firms. After companies have become stable, they will seek to improve and increase productivity to compete with other companies. According to the latest data from the Economic Development Board , output in the precision engineering sector increased 24.1 per cent in the first two months of 2017 as compared to the first two months of 2016, on the back of a 30.1 per cent surge in electronics production. These improvements will continue to be made if precision engineering companies are still taking up majority of the economy, leading to more competition between new and existing companies.
Since electronics and precision engineering companies stand majority of the market, it is highly unlikely or near impossible that people working in these companies or industry will go out of jobs. Hence, many new jobs are created in hopes that the industry will continue to improve. The precision engineering industry is expected to create 3,000 jobs — in areas such as robotic coordination and industrial data science — over the next three years for professionals, managers, executives and technicians (PMETs). The total number of Asia’s listed companies has increased by 57% between 2004 and 2009, from 131 to 206. (EDB, 2012). Based on latest official figures, the precision engineering industry employed about 94,000 workers and contributed S$8.8 billion to the economy in 2014 (TODAY, 2016)
Singapore’s Economic Development Board (EDB) (2012) states that profitability in Asia’s precision engineering sector has continued to grow, despite the global financial crisis. In 2005, the scale of profit has plummeted but over the years, increase at a stable and fairly consistent rate. From the data information provided, the average gross margin of large and publicly-listed firms has declined from 43.1% to 27.6% in 2004 and 2005 respectively. This figure then rose to 37.4% by 2009. Combined operating revenues regenerated increased from US$26.6 billion to US$35.1 billion by 2009. In total, assets of these listed companies rose from US$13 billion to US$63.3 billion (EDB, 2012).
Constraints Of These Companies In Singapore Economy
Due to the limitations and scarcity of resources, precision engineering companies do not possess much capabilities to improve or advance their technology. Lack of financial resources is one such example that will hinder the growth and development of smaller precision engineering companies in Singapore. An example would be recessions and the difficulty of accessing capital through debt and equity financing that are usually faced by smaller precision engineering enterprises (Lord Flight, 2018). In the long term, some companies might need to borrow or take loans from different financial sources to invest and implement business plans and related business processes. Inability to raise funds in time would mean a delay in several business processes which may affect the company in a negative way.
Constrained managerial capability is another factor that will hinder the growth of some precision engineering companies in Singapore. In every company there will be a team of staff that invents business strategies and measures to improve the company business either by reforming the organisational structure or to strengthen the foundation of the business aspects such as profitability (Renesas, 2017). In order to incorporate these invented business strategies and measures into their business would incur additional costs. Moreover, there is possibility that some reforms or reorganisation would be difficult to implement or if achievable, expectations of the planned results might be what they hoped to achieve, influencing the financial status and standing of the company internally and externally.
In addition, if a company is not able to make use of the technology, wisely, it would defeat the purpose of aiming to achieve a higher and more advanced level of technology. In the current economy, the rate of technological evolutions is growing at a rapid rate. Technological changes and standards are always being made. An example would be the Apple Series of Iphones. The well known company has made use of the constantly advancing technology to innovate and invent new series of phones for customers. This is the reason not many mobile companies are able to complete, excluding the other popular brands alongside Apple, Samsung, Oppo etcetera. Hence, if the company is not able to carry out the necessary research and development of the current focus, business performance will be adversely affected, especially the financial condition. (Renesas, 2017).
Steps To Strengthen These Companies in Singapore
However, there are methods and policies to strength the companies’ standing in Singapore economy. One such initiative is the Local Industry Upgrading Programme (LIUP). Under this programme, large or multinational local companies will work together with smaller precision engineering companies on some project to effect technology transfer. Manager in the mentoring company is fully sponsored by the programme. There have been cases whereby the small precision engineering companies will adopt or acquire the operations that were previously used in the mentoring companies, entering into a subcontracting arrangement with the mentoring companies. (Loke Chong, 2018). Often than not, development of such technologies is beyond the capabilities of the precision engineering companies.
Another step to help these companies strengthen their position in Singapore is to reform the company’s labour law and how the process is being carried out and established within the company. Leaders must identify the challenges and explain to the subordinates how their objectives will be carried out and how they should go about doing it in the beginning. When their progress is monitored and managed regularly, a benchmark or a performance minimum is being is being set to help everyone keep track of their expected target goals (Jose Luis Blanco, Mauricio Janausakas, Maria Joao Ribeirinho, 2018). Making amendments and taking extra measures and precautions would help the company to improve the situation and reduce any risk involved.
Finally, Priority Sector Lending (PSL) by the Reserve Bank of India (RBI) is an effective way to help these small precision engineering enterprises stabilize in Singapore. This PSL will provide timely credit to various priority sectors what have difficulties obtaining necessary financial support. Under this initiative, banks will disperse small value of loans to the various sectors in need of the financial support (Nair, 2012). This macro policy framework is designed to achieve the desired level of financial deepening at all levels of society in all aspects for the company and the economy (M.M Ghandi, 2015).
Conclusion: The Future Prospects Of These Companies In Singapore
The key to expanding their business globally would be to source for potential location overseas. The location where the production of the goods and services tend to have implications on various aspects of the business, such as the potential to develop the business and also the competitiveness in the different targeted countries or regions (Dieter Ernst, 1997). Since global competition is increasing worldwide, international production would be more realistic than exporting products. Thus, many companies are forced to choose overseas locations to expand and globalize their business overseas instead of just remaining in their local or current location in the countries.
In order for precision engineering companies progress stably or even succeed in the future, no parties should have any reason to question the validity and reliability of the products and also the service provided. To do so, it is important that precision engineering companies refrain and from the aforementioned happenings and try to take precautionary measures to avoid any risk. Only when the risks are mitigated and monitored can the company stabilize and secure their stand in the economy be it locally or globally.
In the future, young entrepreneurs would have to take over the previous generation of precision engineers and decision makers in the industry. David Falzani (2017) outlines the reasons engineers make good entrepreneurs and why we should train them to be because engineers tend to share common traits as a result of all the training and methodologies that they apply in the real world. These young entrepreneurs will one day take over the responsibilities of Singapore’s great precision engineering and entrepreneurs in the future.
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