AN UNEMOTIONAL READING OF U.S. INVESTIGATION OF SINGAPORE'S MANUFACTURING OVERCAPACITY

The U.S. initiated a probe against more than 16 major economies, including Singapore, focused on alleged excess manufacturing capacity. This triggered the usual backlash of Trump-hate rhetorics with no one interested in seeking a proper understanding.

Trump imposed blanket-wide tariffs on many countries under the International Emergency Economic Powers Act (IEEPA). In the Learning Resources Inc Vs Trump case, the Supreme Court of U.S. struck down these tariffs on grounds the president has no authority to impose blanket tariffs on imported goods for economic reasons. It did not rule the Executive cannot impose tariff, just that the IEEPA framing is illegal. Chief Justice John Roberts actually alluded to the fact the president has other workaround means to reframe the tariffs legally.

And here's to those who call Trump a fascist -- how do you call a fascist who's hands are bounded by the judiciary? Not a very good one, huh?

The Office of the U.S. Trade Representative and its head who is a cabinet member, Trump appointee Jamieson Greer, are namesakes. Both are referred to as USTR. The USTR is now investigating 16 countries under Section 301 of the Trade Act 1974. This is one of the work-around pathways for Trump to reframe his tariffs. We can expect in the coming months other actions, possibly S201 of the same Act and S232 Trade Expansion Act.

IEEPA is blanket-wide and on economic grounds whilst 301 is more restrictive and are acts against unfair trade practices. The U.S. applies 301 against friends and foes alike. It has used this against Japan in the past (on steel and vehicles), and in recent years against China, South Korea and Australia. In the case of Singapore, it is about excess manufacturing capacity in certain sectors.

Excess manufacturing capacity means a country is producing more than its domestic needs. This leads to export pressure and consequently to the practice of "dumping" where a country sells overseas well below market to the disadvantage of other countries including U.S.. Production in excess of domestic consumption alone is not the issue. If that were so, every exporting country in the world stand accused. The issue is the over-capacity is state-driven with hidden subsidies, direct involvement by government in funding and ownership. Such is the case that U.S. has levied against China for decades in industries like steel, solar panels, shipbuilding and electric vehicles.

So what does USTR look out for and how does Singapore attract U.S. attention?

Two elements are present:
- The excess is state-driven or artificially supported -- state subsidies, cheap state financing, guaranteed inputs (land, energy, credit etc).
- It leads to market distortion -- exports at suppressed prices, displacement of foreign competitors, global price depression.

The U.S. only really cares about overcapacity when it is state-driven and excess production distorts global markets and destroys American production. They are asking is this market-driven (acceptable), is it state-distorted (problematic)?

Singapore triggers the appearance of over-capacity because of state involvement in industrial planning and cluster development. The export-oriented structure produces far more domestic consumption that mechanically resembles over-capacity.

Singapore's industrial land use model is controlled by the government through the . Singapore plans decades ahead thus the industrial supply cycles are long. Facilities are built long before the full ecosystem arrives. For example the , Seletar Aerospace Park, . Furthermore, many of these industries take years for equipment installation, cleanroom construction, regulatory approvals, etc which means whilst space is occupied, they remain "vacant" as production has not commenced.

A statistical quirk happens. Industrial space growth comes in spurts. When an industrial park is ready, vacancy rates hit the roof. As JTC planning model has a long term cycle, vacancy rates tend to remain high for a while. USTR's "high vacancy" data was from 2024. , Second Minister of Trade, once said the occupancy rate is actually 90% based on latest data. The statistical quirk is due to the planning model.

To those not familiar, Singapore's industrial land planning model seems similar to China's central collective model. However, Singapore's economic logic is different from China. The Chinese model - government pushes production volume, domestic firms expand output, exports used to absorb surplus. Singapore is a paradox economists call "state capitalism with market discipline". It is heavy state planning, but has a reputation as one of the world's most market-friendly economies. The reason it works is because the government plans the platform (infrastructure, industrial parks), while the market (global companies) decides the activities (what to produce) on the platforms. There is thus no evidence of state-sponsored export drive of specific products.

The USTR could have interpreted Singapore's land policy as a veiled subsidising of industries. Real estate valuation for residential sector is open-market competition, but industrial land valuation is controlled by JTC. Due to land scarce Singapore, industrial land pricing has to be controlled for Singapore to remain competitive. It is by all accounts, state-subsidy. However, it is not a targeted subsidy for certain domestic business for them to gain unfair advantage and distort global prices. It is an open policy that benefits both domestic and foreign corporations.

The USTR has pointed out Singapore's massive export in certain sectors (oil refinery, electronics, pharmaceuticals, etc) but economic policies are not state-driven to benefic domestic businesses. These export sectors are MNCs. Ultimately, it benefits U.S. corporations domiciled in Singapore.

The tension is -- to USTR unfamiliar with Singapore's planning model. this can look like state-directed industrial expansion, similar to how China plans industry. But Singapore's intention is investment attraction, not export dumping.

How will Singapore defend the USTR claims?

Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong headed the task force that went to U.S. to negotiate the earlier round of tariff. He earned sneers from netizens for his inability to extract any concessions despite the . Singapore does not respond with political hyper-venting but on technical argumentation. 301 allows for a resolution process with a few outcomes -- tariffs, quotas or a quiet nothingburger. Gan will again lead another task force to convince USTR their interpretation is wrong. As Mr Gan goes to Washington, we hope he has more documents in his briefcase than just data on the 90% occupancy rate.

The industrial land policy and the statistical quirk mentioned above will no doubt be fully explained by Gan. The U.S. perception -- Singapore state involvement means likely distortion, investigate. The Singapore reality -- state planning enable markets, attract capital.

The test is - does Singapore model distort global markets? There is no clear evidence of this. Production is done by MNCs, pricing is determined globally, there is no sign of dumping, no global price depression.

Three other elements that favour Singapore.

The first is the industrial sectors pointed out by USTR actually favours American companies. For example in the semiconductor sector, companies like and use Singapore as manufacturing base, supply chain hub and regional HQ. Singapore does not need to fight the U.S. -- the American companies will fight on Singapore's behalf, indirectly.

The core principle of U.S. trade policy is not purely 'national interest' in abstract. It is heavily shaped by which American groups win or lose and how loudly they complain. The competing forces inside the U.S. that White House has to contend with is protection pressure from domestic manufacturers vs supply chain pressure of U.S. MNCs operating abroad who want open and stable flows. These firms have structured influence within the U.S. that have direct engagements with USTR. They act collectively through groups like industry associations. The Semiconductor industry Association, for example, carry more weights than individual firms.

The second element is Singapore has a good reputation as one of the most open economies in the world, has consistently aligned with U.S. economically, politically and militarily. Singapore is also unusual because it is not competing against U.S. companies, it is hosting them. It has a long history of being a well-trusted and useful hub for U.S. companies. That adds a political layer to U.S. consideration.

The third element is the US-Singapore FTA. In the earlier round of tariffs, Trump-haters maligned him for wanton disregard for laws and agreements signed with other countries, and PAP-haters laughed at Gan for his inability to secure concessions despite our FTA with U.S.

This is where cool heads separate from the hyper-ventilators. It involves a crucial legal distinction most commentary misses. The earlier tariffs were acts under IEEPA and current investigation is under 301. The two are completely different legal universes:
IEEPA is power-based system; 301 is rules-based system
The IEEPA is used for national security or emergency threats where there is broad presidential powers that sit above normal trade rules. The president declares a national emergency. Actions are justified on security grounds, not trade fairness. FTAs are not binding. National security exceptions exist in international law where countries reserve the right to act unilaterally.

Section 301 is used for enforcing trade rules. This sits within trade systems. Authority is constrained by trade agreements and WTO norms. It is a trade remedy tool. Actions must be justified as responses to unfair trade. Thus FTAs become relevant legal frameworks. The U.S. must consider obligations, justify deviations and manage diplomatic and legal fallout.

Under IEEPA, the U.S. acts first, justify later, FTAs are irrelevant. Under 301, U.S. builds case, FTA is part of the argument space. 301 is in Singapore's favour because legal arguments matter, data matters, and FTAs carry weight. Again, to Trump-haters, they don't understand how the law works. There's no fascist bully, just leaders trying to work out what's in their country's own interest.

Could the investigation actually be aimed at something else

Perhaps there is something else about Singapore that sits uncomfortably with the U.S., something for which there has been no commentary at all?
Might the investigation be really aimed at China's industrial overcapacity
The U.S. has been worried for years about China's industrial overcapacity, not without justification. The sectors include solar panels, batteries, EVs, steel, semiconductors.

U.S. fears the Chinese industrial overcapacity is relocating into Southeast Asia. Most of these relocated to Vietnam, Thailand and Malaysia which are amongst the 16 countries under investigation. 301 is actually a wide net of investigation and Singapore just get caught in the crossfire because of transshipment and production relocation.
Relocation of producers to distributed manufacturing hubs makes technology restriction problematic
The U.S. is worried supply chain hubs make it difficult for the monitoring of avoidance of American trade restrictions particularly related to technology restrictions on China. The goal is to prevent advanced chips and chipmaking equipment from reaching China.

To adapt, MNCs shifted parts of production into Southeast Asian countries. Their strategies include splitting manufacturing steps across multiple countries, moving assembly and testing out of China, and routing logistics through neutral hubs.

Singapore is ideal for this because it has strong intellectual property protections, advanced infrastructures, stable geopolitical positioning. Because Singapore is a high tech manufacturing hub, a re-exporter center, and a major node in semiconductor logistics, it inevitably appears in supply-chain data. In a highly complex distributed manufacturing ecosystem, parts are moved in and out of Singapore several times for some value-adding before ending up in a final product in some countries.
Advanced chips are sexy and win headlines, mature chips keep the world running
Whilst the headlines, so-called technology weaponisation, all concentrate on cutting tech chips, the whole world forgets about . Node refers to the chip size. U.S. control over chips is in the lower nodes -- 5nm, 3nm. "Mature manufacturing node" refers to producing semiconductor chips using older, well-established process technologies -- typically 28 nm and above.

These mature chips are used everywhere -- cars, home appliances, industrial machinery, power management chips, basic microcomputers, elevators, escalators, etc. The reality is most chips in the world are still mature-node. Cutting edge chips power the high-tech world, matured chips power the rest of the real world.

The importance from security and resilience point of view of matured node manufacturing has been overlooked for years. Mature-nodes control the foundation layer of the global economy. They are the chips that quietly power everything physical. Mature nodes present a paradox - they are low-tech and widely used, but they are also system-critical and geopolitically sensitive.

What only few Singaporeans realise is the tiny country is a major player in mature-node manufacturing. Some of the world's largest semiconductor firms run major production facilities in Singapore -- Micron Technology, GlobalFoundries, Infineon Technologies and STMicroelectronics. The chips that make all sorts of physical devices work in the world, they pass through Singapore during production.

You can lose the race in advanced chips and still function. But if you loose control of mature-node supply, your economy can literally stop.

"Overcapacity" fears are now beginning to focus here because mature-node chips are easier to mass-produce, vulnerable to price competition and capable of flooding global markets. The fear comes not from cutting-edge dominance, but market saturation and dependency. The lockdown has also raised awareness resilience matters.
Might the investigation be about Singapore's unseen role in the cutting edge chip industry
Singapore may not compete with Taiwan, U.S., China, South Korea and Japan in chip manufacturing, but what most people do not realise is Singapore is a major manufacturer of tools used to make chips, including equipment from companies like Applied Materials and Lam Research. These tools are essential for building advanced fabrication plants worldwide.

Here's a brief on the semiconductor power stack and where Singapore stands:

Stack control USA):
a). Chip design layer - Nvidia, Apple, AMD. Rules in chip architecture, has the highest value capture.
b). Software design layer (EDA) -- Synopsis, Cadence. Provide tools to design chips.
c). Equipment layer -- Applied Materials, Lam Research. Rules in Etching, Deposition. These determine how chips are actually made.
d). Control layer (IP) -- Sets standards, licensing, architectures and export control jurisdiction. This is the regulatory layer and where U.S. has system-level leverage.

Equipment chokepoint (Netherlands, Germany:
. Zeiss
Rules in Lithography - ASML (EUV/DUV), optics (Zeiss).
It's role is system integrator. Enables advanced nodes.

Materials chokepoint (Japan):
Rules in materials (photoresist), Precision components, Specialty chemicals.

Manufacturing chokepoint (Taiwan, South Korea, Singapore):
a) Taiwan - produces the most advanced chips -- 7mn, 5mn, 3mn. Taiwan is centre of gravity in advanced nodes.
b) South Korea - Samsung, SK Hynix produces memory and some logic.
c) Singapore - Mature-node fabs, equipment subsytems, assembly & testing for both mature and advanced chips.

China:
Numero uno in rapid scaling. It focuses on mature nodes. Trying to move up the value chain to produce cutting edge chips, but lacks key bottlenecks.

Where does Singapore sit in this advanced chip making power stack? Singapore is not involved in advanced chip manufacturing nor the most sensitive core machines themselves. Picture chipmaking tools (lithography, etching, deposition) as:
- Core technology (most sensitive part) - lithography, optics.
- High-precision subsystems (vacuum systems, chambers, RF)
- Components & modules (valves, pumps, frames, component parts)
- Assembly and integration.

Singapore is strong in:
Precision components (ultra-clean valves, pumps, mechanical structures, fluid systems)
- Subsystem manufacturing (vacuum modules, wafer handling systems, thermal and control subsystems
- Assembly and support (regional manufacturing huns, repair, calibration and servicing)

From the U.S. policy perspective, Singapore is part of the supply chain for cutting edge technology but not a technology gatekeeper.

From the strategic angle, to the U.S., Singapore is useful but not threatening. It contributes to production efficiency but cannot independently enable advanced chip breakthroughs.

Risk arises only when components are being directed into restricted chains. But even if that arises, the focus is on compliance, not punishment.

My unsolicited advice to Mr Gan

Never frame the case defensively, but strategically that aligns with U.S. priorities. Say not "Singapore has no overcapacity". Say "Singapore's capacity is part of the system the U.S. itself is trying to build." The "90%" occupancy rate Tan mentioned and JTC land model explainer can come in as footnotes, not the frontal assault.

In my past blog posts I wrote about Singapore establishment having the "elite mindset", one that processes the world procedurally and legalistically because legitimacy is the hill they will die on. While there are certainly strengths in that approach depending on situations, I fear in this case, this may lead to framing the arguments in exactly the manner they should never do. These are critical:
- Do not lay out a purely legalistic defence. Eg FTA says you can't do this, you should observe that... Under WTO this must be done .... etc. This is adversarial.
- Do not deny state role. We are accustomed to Singapore's defence in such situations --- so and so are independent, they make their own decisions etc. The government is a price-taker in residential land sales (even though it owns 90% of the land) but a price-maker in industrial land. There is a stain of subsidy you cannot wash away.
- Avoid technocratic data dump. A focus on data misses the political narrative.

In my explanation above, I have brought the issue from purely technical "overcapacity" concerns to what I think is the real game of this investigation. I have put myself behind the 3 lenses the USTR is looking through:
The Trade Lens -- making sure there is no price distortion that disadvantages the U.S..
The Industrial Policy Lens - the U.S. supply chain resilience.
The Security Lens - ensuring trusted, compliant nodes in their supply chain.

Mr Gan must understand it is not about proving a point. It is about how the U.S. categorises Singapore. Are we in the category of "Distorting / non-trade restriction compliance producer -- if so, punish". Or are we in the category of "Strategic partner -- if so, preserve". Our arguments must focus on locking Singapore firmly into the latter category.

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