The precision engineering industry here has been warned that it faces the "urgent challenge" of raising productivity levels.

Studies show output rates here are only half those of the same industry in countries such as the United States, Germany and Japan, said Senior Minister of State for Trade and Industry and National Development Lee Yi Shyan.

He was speaking yesterday at the opening of MTA2013, a biennial precision engineering trade event held at Singapore Expo. Its 19th edition this year showcases manufacturing technology from about 500 exhibitors from 31 countries and regions.

Precision engineering is seen as a crucial pillar in high-value industries such as aerospace engineering and medical technology.

Mr Lee said "a key challenge" has been trying to convince small and medium-sized enterprises to adopt and integrate commercially available advanced technology.

Singapore is "well-positioned" to further develop its precision engineering industry "through productivity-led growth", he said. But "the bulk of SMEs have to adopt more advanced technology in place of manpower", he added.

The Government aims to help firms by "working closely with trade associations and educational institutes, and investing very heavily in research institutes".

It also implements schemes such as the recently enhanced Productivity Innovation Credit bonus to provide incentives for productivity improvement.

Singapore Precision Engineering and Tooling Association (Speta) chairman Ricky Souw said: "It is especially tough for small companies in the industry bringing in sales of about $2 million to $5 million to adopt advanced technology as equipment is not cheap."

Mr Lee said locally produced machinery and technology solutions are not as advanced, and generate lower output than those of some other countries.

This technological limitation forces local firms to turn to foreign technology, which "comes at a premium and is harder for small companies like us to procure and support," said Fischer Tech chief financial officer Gordon Tan.

Mr Lee said the Republic has to "move up the value chain" and focus on "higher-end products" that are difficult to replicate.

Dr Souw said schemes like the precision engineering master craftsman programme at Nanyang Poly can help Singapore catch up.

The four-day MTA2013 ends on Friday.