AI Demand Keeps Singapore Manufacturers Upbeat for Second Half of 2026

Singapore's factories are looking at the second half of 2026 with cautious optimism — and artificial intelligence is the thread running through every upbeat forecast. The Economic Development Board's latest business expectations survey, released on August 3, shows manufacturers across the precision engineering and electronics clusters betting that global AI investment will keep their order books full through December. It is a picture of an economy where AI is not just a tech story — it is a manufacturing story, driving demand for the chips, equipment, and components that sit inside every data centre rack.

The headline number: a net weighted balance of +12% of manufacturers expect improved business conditions for July through December, with 24% forecasting better conditions against 12% expecting a weaker environment. That is down from the +17% recorded in the previous survey for April to September, suggesting the optimism is tempering but still in positive territory. Precision engineering firms are the most bullish — a striking +55% net balance — as semiconductor equipment makers cite sustained AI-related capital expenditure. Electronics registered +19%, with chipmakers pointing directly to demand from AI applications and data centres as the growth driver.

Not every sector is riding the AI wave. Chemicals firms posted a net balance of -25%, weighed down by Middle East feedstock disruptions that are keeping input costs elevated and squeezing margins. General manufacturing came in at -13%, with firms flagging higher material, fuel, and freight costs. The overall output forecast for Q3 is +26%, led again by precision engineering (+55%) and electronics (+49%), while chemicals (-12%) and general manufacturing (-27%) expect contraction. The survey, which covered 401 establishments with an 85% response rate, paints a two-speed manufacturing sector — one lane accelerating on AI chip demand, the other braking on commodity headwinds.

Employment expectations are broadly stable: 74% of manufacturers expect no change in headcount from Q2, and all clusters except transport engineering anticipate maintaining or expanding their workforce. But the survey also flags a persistent concern — 24% of firms expect difficulties securing export orders, citing overseas price competition and geopolitical uncertainty including tariff developments. It is a reminder that Singapore's externally-oriented manufacturing base remains exposed to trade policy shifts even as AI demand provides a tailwind.

Why it matters for Singapore: The EDB survey confirms what GDP data has been signalling all year — Singapore's manufacturing recovery is real, and it is being led by the semiconductor cluster's integration into the global AI supply chain. With electronics and precision engineering accounting for a disproportionate share of manufacturing value-add, the AI demand story translates directly into jobs, investment, and economic growth. But the divergence between the AI-linked clusters and the rest of manufacturing also raises a policy question: how to ensure the benefits of the AI boom spread beyond the chip floor to the broader industrial base.