Thailand E&E Still Growing With Major New Investments
New investment projects continue to crop up across Thailand’s electrical appliances and electronics (E&E) landscape, adding strength to strength in an already expansive industry. The E&E industry alone accounts for nearly 30% of the country’s total exports. Manufacturers of electrical products and electronics are not only the main driver of the export sector but also provide combustion to national economic growth. Manufacturing is especially robust in lines such as air conditioners, refrigerators, digital cameras, hard disk drives (HDDS), integrated circuits (ICS), computer monitors, keyboards and printers. Thailand is a leading production hub for such products, and is recognized as a vital part of the global supply chain.
Meanwhile, the local industry is still growing. Virtually month after month, new E&E investment projects keep coming. In October 2010, the Japan-based Minebea group confirmed plans to pour 120 billion baht into two electronic parts plants in Thailand. The company will invest 54 billion baht in a rolling bearing parts factory in Ayutthaya Province. With a capacity of 40 million precision units per month, the plant will generate 850 new jobs. Minebea is also spending 65 billion baht to build an additional electronic parts factory in Lop Buri Province. The facility is to have a monthly production capacity of 15 million units while creating 1,700 jobs. Construction on both plants will begin in 2011. Just before that, Japan’s Hitachi Global Storage Technologies in August unveiled intentions to invest an extra 15.5 billion baht in its plant at Thailand’s Prachin Buri Province. The project will boost the company’s output of HDDS and components, including head gimbal assemblies.
In July, South Korea’s Samsung group said it has chosen Thailand over Vietnam as the site for an additional air-conditioner production line. The new plant will start production in 2011, lifting Thai Samsung Electronic’s capacity to 3 million units per year. Samsung had initially targeted Vietnam for expansion but strong demand growth in the Thai market prompted the change. According to Somporn Jangreenapawong, a business manager at Samsung’s Thai subsidiary, air-conditioner sales in Thailand during the first half of 2010 soared 130% yo-y. Growth drivers are said to be the hot weather, the government’s elimination of the excise tax on air conditioners in 2009 that led to a 10% reduction in prices locally, and the trend for greater health consciousness among people in Thailand. In June, the Sony group obtained approval from the Thailand Board of Investment (BOI) to invest 2.6 billion baht in a production expansion project at the company’s Ayutthaya Province factory for digital cameras, parts and lenses. The project will boost Sony’s annual capacity at the Ban Wa Industrial Estate to 2.1 million digital cameras, 2.73 million lenses and 2.2 million parts. Designed to incorporate local content worth more than 2.41 billion baht per year, the expansion will create 1,029 jobs. Minnesota-based Hutchinson Technology is also breaking ground in Ayutthaya Province for a 4 billion baht production facility, its first outside the United States. The 13,000sqm factory will produce suspension assemblies for the read-write heads of HDDS. BOI Secretary General Atchaka Sibunruang said the projects show that foreign investors’ confidence in Thailand remains strong. She elaborated that investors are confident in the country’s long-term investment potential, reasonable production costs, skilled labor, healthy economic fundamentals, government support and market growth. Lively Industry, Strong Support Thailand’s E&E exports in 2009 hit US$42.48 billion. Outbound shipments in 2010 are estimated at US$49.13 billion, representing solid 15% annual growth. The country is also a substantial importer of E&E products, with the value of inbound shipments for 2010 projected at a hefty US$36.10 billion, according to the Customs Dept and the Electronics and Electric Institute. Support of E&E is one of the Thai government’s industrial development priorities. Top developmental objectives are to enhance the industry’s overall competitiveness, encourage skills advancement and continuous technological innovation, and attract high value long-term investments. The BOI extends vigorous support to E&E investment, granting special incentives such as tax and duty exemptions. In 2009, the Board approved incentive applications by 219 electronics and electrical appliance projects, representing US$3 billion in new investment value. Enthusiasm in the industry only heightened in 2010 as the number of submitted projects from January to July was 30% greater than during the same seven-month period a year earlier.
Minebea in particular said its latest investment is a response to the BOI’s new policy allowing industries to hire more unskilled foreign workers to expand the labor pool. The policy applies to large companies that have operated in Thailand for at least 20 years. The number of alien workers cannot exceed 15% of a company’s total workforce. Other bodies that contribute to E&E growth include the Science and Technology Ministry, Federation of Thai Industries, Electronics and Electric Institute, National Electronics and Computer Technology Center, Thai Microelectronics Center, and Hard Disk Drive Institute. Launchpad to ASEAN Thailand’s E&E industry will build on its already strong foundation by continuing to tap opportunities spawned by the ASEAN Free Trade Area (AFTA) agreement and bilateral free trade pacts with various countries. The revocation of import and export tariffs on electronic components among AFTA signatories in particular opens doors to convenient materials access and greater market penetration for manufacturers. Even now ASEAN is Thailand’s top E&E destination with a 20% share of exports, followed by the European Union, the United States, China and Japan, each of which absorbs about 15% of shipments. Operating in Thailand also puts E&E manufacturers in close connection to their customers that have bases here or in nearby countries across Asia. “When we were doing our country selection process, what especially differentiated Thailand from other places was customer proximity,” said Abraham Sleiman, managing director of Hutchinson Technology (Thailand). HDDS and ICCS at Forefront The electronics sector is the big brother of the electrical appliances sector. In fact, electronic components of various types help feed development in the electrical appliances sector, and in a vast range of other industries from automation to automotives. HDD and IC production is at the heart of Thailand’s E&E industry. The two vibrant lines account for 40% and 23% of the country’s total electronics exports, respectively. In fact, Thailand is the world’s largest manufacturer of HDDS, overtaking output by Singapore several years ago. Since 2005, Thailand has supplied nearly half of the world’s HDDS. Four of the world’s top five HDD makers are located in Thailand: Seagate, Western Digital, Toshiba and Hitachi. Manufacturers are supported by the country’s busy network of companies that supply the parts and subcomponents used in HDDS, from suspensions and gaskets to motors and covers. In 2009, nearly 260 million HDD units were produced in the country. A record-high export value of 500 billion baht is projected for 2010.
Thailand is also one of Southeast Asia’s biggest centers for the assembly of ICs and semiconductors. Exports of ICs in 2009 totaled US$8.41 billion, according to statistics from the U.S. Commercial Service as released by the U.S. Embassy in Bangkok. ICS also make up the lion’s share of Thailand’s imported electronic components.
Electrical Appliances 800 Strong With 800 factories, Thailand’s electrical appliances sector is highly regarded among buyers of white goods around the world. The country is ASEAN’s largest production base in the sector, and the world’s second-biggest maker of air conditioners and fourth-largest for refrigerators. Nearly 43% of investors are Japanese manufacturers. The Office of Industrial Economics projects 18% expansion for the Thai electrical appliances sector in 2010. The sector’s leading product lines by export value are air conditioners, refrigerators, and digital cameras and video camera recorders. The main markets are ASEAN with a nearly 20% share of exports, and the European Union and Japan at about 15% each. The United States absorbs more than 10% of shipments, and the Middle East and China take in about 6% each. Most of the Thai E&E industry’s major players are foreign or joint-venture companies. Japanese manufacturers in Thailand include JVC, Sony, Orion, Nikon, Pioneer,
Panasonic, Canon, Sharp, Hitachi, Mitsubishi, Toshiba, TDK, NEC, Stanley, Epson, Alpine, Minebea, Seiko and Sanyo, among many others. Other prominent investors are Taiwan’s Tatung and Acer; South Korea’s LG and Samsung; Seagate, Western Digital, Hutchinson and Honeywell of the United States; and Europe’s ETA, Stiebel Eltron, Schneider, BHS, ABB and Fasco. Even with the substantial development achieved by the highly competitive Thai E&E industry, lucrative investment opportunities still exist – the so-called missing links for an absolutely comprehensive top-to-bottom local supply chain. These areas ripe for further investment include IC design, automotive electronics, radio-frequency identification, wafer components, telecom products and network equipment.