I was baffled to hear about the mega tech company Micron committing $24 billion to its factory expansion in Singapore. Then I heard about Vanguard and NXP, a semiconductor manufacturer, pouring a combined amount of $10.5 billion into a wafer fabrication plant in Singapore. A major semiconductor foundry, UMC, is investing $5 billion in Singapore, too.

Singapore, a tiny island state, is smaller in size when compared to cities like London, Beijing, or Taipei. There is no land for agriculture and no other natural resources. And yet, all the mega producers are bringing in billions to set up their plants or expand their existing ones in the tiny island, which shouldn’t be able to manufacture anything big at all.

The information I covered was more than fascinating. Turns out, one in every ten chips produced in the world comes from Singapore. In fact, the country accounts for 20% of all semiconductors being produced around the world.

The growth has been mind-boggling. When economists predicted the Southeast nation’s GDP growth at 1.7%, the manufacturing sector surged 29% in 2025 and pushed the country’s GDP to an increase of almost 5%.

The question is, how on earth has Singapore transformed into a manufacturing powerhouse?

How Was Singapore Able to Build?

To get a grasp of what’s happening right now, it’s important to get a whiff of what was happening back then.

This goes back to 1965, when Singapore gained its independence. Back then, it was simply a trading port. Most of the revenue came from the traders purchasing and selling goods that passed through their harbor.

It had been separated from the Federation of Malaysia. Then the foundation prime minister, Lee Kuan Yew, realized the brutal truth of the small island and declared a vision. Singapore would soon turn from a country that trades to a country that makes.

The Economic Development Board was set up in 1961 for the sole purpose of attracting international businesses. Industrial parks were set up. Labor laws were reformed. Investments were made in educating the population.

Lee Kuan Yew didn’t just want a simply educated class; he was hoping to make engineers, scientists, and technicians.

Factories were already present in the country. But they were producing low-margin products such as matches, mosquito coils, and fish hooks. The government wanted to change that.

The main plan was to create quality labor instead of cheap ones. Singapore was making its workforce reliable, fast, and highly skilled.

And then the boom finally happened during the 1970s. First, manufacturing was 14% of the GDP, and then it jumped to 22%. American company Texas Instruments first started producing semiconductors in Singapore. Other giant firms followed. Hewlett-Packard, NEC, Philips, Fairchild, and many more.

It took a decade for Singapore to entirely transform itself into a key manufacturing hub in the region. And it never stopped there.

By the 1980s, Singapore had factories where hard disk drives were being prepared. In the 2000s, the shift was turned to attract the pharmaceutical and semiconductor industries to set up their plants.

Tax benefits were provided. From 2021 to 2025, Singapore invested $18 billion into research and infrastructure. If companies put money into R&D, they will be rewarded with refundable credits by the authority.

The strategy paid off. The semiconductor sector alone generated $101 billion in 2023. 35,000 professionals are linked to this sector alone. Despite its small size, Singapore is the fifth-largest producer of high-tech products in the world. Four out of 10 drugs are Singapore-made, and the world’s top ball bearings are produced there. All this on a piece of land with very limited space.

Even in 2026, foreign investment is at an all-time high. Amazon struck a deal with a Singapore-based system integrator, CSE Global, to power its AI data centers. Firms like UMC, GlobalFoundries, and STMicroelectronics are all increasing their foothold.

With Great Power Comes Great Vulnerability

In this boom and bust, there lies a risk, a big one.

When a large chunk of GDP is generated by one particular sector, the strength becomes dependent. That’s why there lies a special advantage in diversification.

What happens if the AI bubble cools down or the tariffs tighten? In a world where geopolitical tensions and global supply chains are at their most volatile, it puts Singapore in a risky spot.

While US tariffs haven’t been brutal on Singapore, that doesn’t mean it will stay this way.

2026 and the years will define whether the manufacturing sector can hold up against the torrents.

The country has already been successful in punching far above its weight, which is remarkable. The question is, for how long are they able to keep up with this?