TLDR: A recent McKinsey report highlights Singapore’s strategic push into AI and advanced manufacturing, marked by the launch of the Sectoral AI Centre of Excellence for Manufacturing (AIMfg). This initiative, part of the National AI Strategy 2.0, aims to drive significant economic growth and create high-value jobs by leveraging AI and robotics. While Singaporean CEOs are heavily investing in AI, many face challenges in achieving expected returns and scaling initiatives across their organizations.
Singapore is making a concerted effort to solidify its position as a leader in artificial intelligence (AI) and advanced manufacturing, a strategy underscored by a recent McKinsey & Company report. This strategic focus is designed to propel future economic growth, generate substantial annual revenue by 2040, and address evolving demographic shifts within the nation.
A pivotal moment in this endeavor was the launch of the Sectoral AI Centre of Excellence for Manufacturing (AIMfg) on September 27, 2024. Deputy Prime Minister and Minister for Trade and Industry, Mr. Gan Kim Yong, inaugurated the center at the Advanced Remanufacturing and Technology Centre (ARTC). McKinsey & Company is a strategic partner in this initiative, which is a cornerstone of Singapore’s broader National AI Strategy 2.0.
The primary objective of AIMfg is to cultivate a robust industrial ecosystem that harnesses AI to create significant value and enhance capabilities across the entire AI technology stack. Oliver Tonby, a McKinsey senior partner, expressed enthusiasm for the initiative, stating, “Industrial AI with robotics is going to transform manufacturing and we’re only at the starting line. I get super excited when I see the forward leaning equipment, use cases, capabilities, the ecosystem of partners at AIMfg. This is the future coming towards us in practical steps.” Azam Mohammad, another McKinsey senior partner and co-leader for the firm’s operations practice in Asia, emphasized the collaborative nature of the summit, noting it “brought a sector-based approach to embedding AI in manufacturing in Singapore.”
Deputy Prime Minister Gan Kim Yong articulated the vision for this intensified focus, remarking that Singapore “can build a strong, innovative and vibrant manufacturing sector, that will enable us to … continue to provide good jobs for Singaporeans.” The discussions at the AIMfg summit centered on how AI can optimize processes, boost productivity, and revolutionize value chains across various sectors, including procurement, supply chain management, production, and maintenance. McKinsey’s AI Quotient (AIQ) asset, which has been utilized by over 750 companies, and their AI-driven analytics transformation (ARIM) tool, are expected to play a crucial role in assessing and guiding these transformations.
Despite this ambitious push, a July 2025 report from the IBM Institute for Business Value, which surveyed 210 CEOs from Singapore and ASEAN, reveals a “Gen AI paradox.” While 80% of Singaporean CEOs prioritize AI use cases based on expected return on investment (significantly higher than the global average of 65%), only 23% have realized their anticipated returns. Furthermore, a mere 14% of businesses have successfully scaled AI initiatives across their entire organization in the past three years.
The report indicates that 52% of Singaporean CEOs are actively expanding their AI investments, with plans to implement AI agents at scale. However, this rapid investment has inadvertently led to fragmented and piecemeal technology environments for over half (52%) of the respondents. Key challenges include the need for integrated, enterprise-wide data architecture, which 58% of Singaporean CEOs deem essential for cross-functional collaboration. Additionally, 68% consider proprietary data a critical asset for unlocking the full potential of generative AI, yet difficulties with data integration continue to impede AI’s effectiveness.
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McKinsey’s research also corroborates the “Gen AI paradox,” noting that nearly eight in ten companies using generative AI have reported “no significant bottom-line impact.” Despite these hurdles, investments in generative AI by businesses are projected to surge by 94% in 2025, reaching an estimated US$61.9 billion (S$79.5 billion). However, the percentage of companies abandoning most of their AI pilot projects has also risen sharply to 42% by the end of 2024, up from 17% in the previous year, according to a survey by S&P Global. This highlights the ongoing challenge of translating AI investments into tangible, widespread business value.
