THAILAND INVESTMENT REVIEW January 2009
INDUSTRY FOCUS
Electrical Appliance and Electronics Industry (E&E) 6
Thailand’s electrical appliance and electronics industry has been experiencing strong and steady growth for more than 25 years, playing a significant role in the country’s economy as an important export earner. The government’s designation of E&E as a priority industry and Thailand’s proactive national investment policies have played a pivotal role in creating an enabling environment for the industry’s successful development. Thailand is now ASEAN’s leading producer of electrical appliances, ranking as the world’s fourth largest producer of air conditioning units as well as a major producer of refrigerators and televisions. The Kingdom is also a major electronics producer, ranking as the world’s top manufacturer of hard disk drives (HDD) and components. Thailand holds a similarly prominent place in the integrated circuits (IC) and semiconductor industries, and boasts one of the largest assembly bases for these products in Southeast Asia. Much of Thailand’s success is attributable to the government’s export-oriented development strategy for the E&E industry. The Board of Investment (BOI) provides attractive investment incentives and support systems for foreign investors, making Thailand an ideal location for the export-oriented production activities of transnational corporations (TNCs). Furthermore, another aspect of Thailand that makes it so attractive to investors is that the country is extremely competitive within the global E&E labor market. The country not only offers relatively low labor costs, but also boasts an exceptionally well-educated workforce. Currently, 61 public and private engineering institutes in Thailand are accredited by the Council of Engineers and over 18,000 students graduate with an engineering degree each year. Thus, E&E companies who choose to locate in Thailand have no trouble finding capable skilled workers.
The government’s policies have sent Thailand to the forefront of the E&E industry, as leading international companies from all over the world including Japan, Korea, Europe, and the United States have established facilities for production, testing, assembly, and research and development within the country. The result is that E&E now accounts for about one-third of the country’s annual export revenue, generating over US$45 billion in 2008. Electrical appliances accounted for approximately US$17 billion of the total revenue, growing nearly 6% from the 2007 figure, while electronics accounted for the remaining US$28 billion, a year-on-year growth of over 8%. The majority of Thailand’s E&E products are exported to other countries within Asia, as China, Japan, and other ASEAN countries account for approximately 15%, 12%, and 16% of total E&E exports, respectively. The United States (15%) and Europe (16%) are the other two major export destinations. Thailand’s E&E industry is expected to continue on this path of growth in the upcoming years. By focusing on human resource development and capacity building, Thailand has positioned itself perfectly to take advantage of the expected continued growth of the market for high-tech consumer electronics like wireless devices, flat panel displays, MP3 players, gaming consoles, and computers. Such growing demand, coupled with strong government support and good industrial policy decisions, promises a bright future for the electronics sector. One such policy is an industry wide commitment to improving efficiency. In order to foster greater productivity and efficiency amongst E&E companies, the government has encouraged the development of electronics clusters. The proximity between firms and their input suppliers that these
THAILAND INVESTMENT REVIEW January 2009
clusters allow for enhances communication and improves the flow of goods. Additionally, electronics clusters help reduce the logistics costs of E&E companies located within Thailand by fostering improved supply chain management. They also allow manufacturers to benefit from shared core technologies and human resource development programs. Investment opportunities abound within Thailand’s E&E industry. The country’s preeminent position as the world’s largest production base for HDDs and components offers suppliers within the HDD value chain the opportunity to develop global manufacturing capacity within a dynamic and highly concentrated cluster. Almost all of the world’s key HDD manufacturing players are located within a 250 kilometer radius of Bangkok, offering unparalleled opportunities for manufacturers within the HDD industry. Thailand has established itself as a competitive location for the assembly and testing of HDDs, ICs, and electronic subcomponents such as printed circuit boards. However, many key components of the upstream electronics value chain such as semiconductor material; discrete components, such as diodes and transistors; as well as ICs, are still imported from abroad. Manufacturers looking to expand their market in Thailand can find excellent opportunities in manufacturing these components locally. Yet another opportunity exists in the field of automotive electronics. With consumers demanding ever more sophisticated gadgets and consumer electronic applications in their automobiles, automotive electronics offers a burgeoning field of opportunity in an industry valued at over US$110 billion. The manufacture of automotive electronics and parts is a natural fit to Thailand’s goal of becoming one of the world’s top ten auto manufacturers. Lastly, Thailand is positioning itself at the vanguard of such cutting-edge technologies as radio-frequency identification (RFID), another area which offers great potential for supply chain management and a host of other applications. In addition to the BOI and Ministry of Industry, government support is provided to the E&E industry through several independent institutions. The first is the Electrical and Electronics Institutes (EEI). The EEI is an autonomous institute under the Ministry of Industry’s Industrial Development Foundation. It contributes as an operation and standards center, industrial clustering service center, and information and technical service center.
There is also the National Electronics and Computer Technology Center (NECTEC). Its main responsibilities are to support and promote the development of electronics and computer technology through research and development activities. NECTEC also provides linkage between the research community and industry though the electronics clusters. Finally, Thailand supports the flagship of its E&E sector through the Hard Disk Drive Institute (HDDI). The HDDI’s key aim is to enhance the HDD sector and strengthen the industry in Thailand through the development of human resources, new technologies, the supply chain of supporting industries, and policy and investment incentives. With such strong government support and a business-friendly environment, it is no wonder why Thailand’s E&E industry has been so successful. As Thailand succeeds in becoming a leading innovator in the field, electronics should continue to play an important role in the national economy.
E&E Export Destinations, 2008
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