Factory-gate prices in Singapore experienced a significant increase of 47.5% year-on-year in September, with a monthly rise of 5.3%, according to Market Analyst Zavier Wong from etoro. The surge is primarily attributed to the high demand for chips, which account for about three-quarters of the increase. Electrical machinery, particularly integrated circuits, saw an 82% rise over the year, whilst oil and chemicals contributed to the remaining increase.
The shortage of chips is largely driven by AI data centres purchasing vast quantities, allowing manufacturers to charge premium prices. Interestingly, the cost of electrical parts imported by Singapore rose by only 4.5% compared to the previous year, indicating that the price surge is mainly due to buyers paying more for scarce chips.
This discrepancy explains why Singapore’s national accounts appear more subdued compared to export data. Export figures reflect the revenue received, thus inflated by higher chip prices, whereas GDP measures production volume, excluding price effects. In September, the value of Singapore-made electronics exports more than doubled, whilst manufacturing grew by 7.5% in the third quarter.
Households are unlikely to feel the impact directly, as chips are predominantly used by data centres and device manufacturers. The Consumer Price Index (CPI) remains at 2.2%, contrasting with the factory-gate increase. The elevated export values are largely price-driven and may decline if chip supply catches up. However, Wong notes that machinery and transport equipment prices have consistently risen, suggesting that supply is unlikely to meet demand before the year’s end, keeping the annual rate above 40% through December.
