When I was a kid in Asia back in the early 1980s, places like Singapore and Taiwan, where I grew up, were nothing like they are today. Suffice it to say a “Made in Singapore” or a “Made in Taiwan” label on the back of any product wasn’t exactly a guarantee of quality. Cheap labor and cheap consumer goods were the forces that made these countries two of the founding members of what were then just four “Asian Tigers.”
Bear with me, because this will come back to aviation. This morning at the Raffles Hotel (which back in the 1980s was a careworn colonial relic, not the gleaming $700-a-night luxury hotel it is now) Lufthansa Technik Chairman August Wilhelm Henningsen said something astonishing to me. The company is not expanding its MRO facilities in Singapore because the high cost of labor here makes any kind of labor-intensive maintenance too expensive. Instead, the company is expanding in the Philippines and China. “The labor difference is meaningful to us,” he said. “Other places have lower costs especially for labor-intensive work." The company opened an Airbus A380-capable hangar in Manila, its third hangar there.
Instead, Lufthansa Technik will expand its marketing department in Singapore and has opened a new warehouse here to speed high-value parts to airlines in the region. “We are taking advantage of Singapore’s network,” Henningsen said. The company also is beefing up its technical education facilities both here and in Taiwan.
This is a problem that hasn’t been lost on the Singapore government. Earlier this week at the Singapore Airshow, Lim Kok Kiang, Singapore Economic Development Board (EDB) executive director for transport engineering, said the country is investing heavily in aerospace engineering education the university and post-graduate levels. Recognizing that much of the low-wage, labor-intensive work is migrating elsewhere in Asia, Lim said the country is focusing on “moving up the aerospace value chain.”
Henningsen’s announcement at the Raffles illustrates that arc; the company is moving out the labor-intensive work and focusing on higher-value service skills, like marketing.
This isn’t a new story. Many readers will remember when "Made in Japan" meant "low quality and cheap." Singapore’s aerospace industry is just the latest example of this economic trajectory.