Thai E&E Industry

August 2012

Expertise, New Investment Keep Thai E&E Industry at the Top With strong fundamentals and plenty of new investment, Thailand’s electrical appliances and electronics (E&E) industry is forging ahead in 2012. As capability expands to even greater heights, the country augments its status as a top global production hub.

Thailand’s E&E industry stands very tall among the competition. The country is the world’s largest manufacturer of hard disk drives (HDDs), the second-biggest producer of air conditioners and the fourth-largest for refrigerators. The most voluminous electrical appliances base in the Association of Southeast Asian Nations (ASEAN), Thailand also ranks high at 13th in the world for E&E export value.

E&E contributes between 25 and 30% of Thailand’s annual export revenue for all industries. After recovering from last year’s massive flooding, the country’s resilient E&E industry is projected to pass US$54 billion in exports for 2012, according to the Electrical and Electronics Institute. It sees 7% growth in electrical appliances and 12% for the electronics sector this year.

Major export markets include ASEAN (which currently absorbs 17%), mainland China (17%), the EU (14%), the United States (13%), Hong Kong (12%) and Japan (8%).

The electronics sector accounts for 60% of the local E&E industry’s outbound shipments. The leading export products are HDDs, integrated circuits (ICs), semiconductors, compressors and equipment for mobile phones. Electrical appliances are led by air conditioners, refrigerators, TVs and washing machines. Thailand’s airconditioner output reached 17 million units in 2011.

In fact, the vibrant electronics sector feeds the prosperity of many other manufacturing industries in Thailand. From communication devices to automotive to even electrical appliances themselves, companies depend on electronic component suppliers’ R&D breakthroughs for achieving added value in new models.

Besides its robust export and manufacturing capability, Thailand also offers entrepreneurs a lucrative domestic market. The country’s rising middle class with families of two income earners spells hefty sales for producers of electronic and electrical consumer products.

World-Class Production With more than 2,300 companies, Thailand’s E&E industry contributes heavily to the country’s economic vigor. Fortified by expertise and innovation, the industry is composed 77% of part and component makers and 23% of end-product assemblers.

While the majority of part suppliers are Thai companies, most of the major assemblers are foreign or joint-venture firms.

Among the many Japanese manufacturers in the country are household names such as JVC, Sony, Orion, Nikon, Pioneer, Panasonic, Canon, Sharp, Hitachi, Mitsubishi, Toshiba, TDK, NEC, Stanley, Rohm, Alps Electric, Epson, Alpine, Minebea, NHK, Seiko, Sanyo and Fujitsu. Prominent investors from South Korea include LG and Samsung, with Tatung and Acer from Taiwan. Other top manufacturers are Europe’s ETA, Philips, Electrolux, Stiebel Eltron, Schneider, BHS, ABB and Fasco; and Western Digital, Seagate, Hutchinson, Honeywell, Carrier, Emerson and Spansion of the United States. Delta Electronics (Thailand) Plc is one of the industry’s biggest firms with 11,000 employees.

This year is seeing more investment as enterprises demonstrate confidence in Thailand as a leading hub. Samsung has announced plans for spending 3 billion baht to double its local refrigerator output to 3 million units. LG is also expanding its air- conditioner manufacturing facility with a 1 billion baht investment.

Toshiba Carrier Corp. said it is building a second air-conditioner plant in Thailand that will be the company’s largest worldwide. With a capacity of 2 million units a year, the plant is scheduled to start production next February. Electrolux will set up its first ASEAN refrigerator factory in Rayong Province, with production starting by early 2013.

Sony has earmarked 700 million baht for marketing and promotions to boost sales of its digital cameras, and Haier will increase annual capacity at its washing machines plant to as much as 300,000 units.

During the first half of 2012, the Board of Investment (BOI) received applications for 134 E&E projects valued at nearly 59.7 billion baht in new investment by foreign companies.

Helping to ensure sustainable growth for the industry, the BOI grants a wide range of incentives to E&E investors. Tax-based benefits include exemption or reduction of import duties on machinery and raw materials, and corporate income tax exemption for up to eight years. The non-tax incentives are permission to bring in foreign workers, own land and remit foreign currency abroad. There is also a special package for investors that apply prior to the end of 2012. Investors have praised the BOI’s incentives as the most attractive in Asia.

Prime Location for Investment Dubbed the Silicon Valley of the Far East, Thailand is the global frontrunner in production of HDDs, the country’s largest electronics export. The world’s largest HDD manufacturers, Western Digital and Seagate, operate production facilities here.

With a highly efficient cluster network of supporting industries, Thailand produces more than 260 million HDDs a year, or 40% of world output. The country’s exports in the line reach US$12 billion annually. As digital data now rules nearly every aspect of life, demand for hard drives will soar in coming years, heightening Thailand’s vital importance as a production center.

The IC segment of the industry will also continue prospering, as demand for electrical apparatuses and electronics of all types is rising. Investment possibilities are therefore going to widen as well. As Thailand’s imports of ICs currently exceed its exports, the segment represents a golden opportunity for new investors that establish IC plants here.

Virtually all of the major international manufacturers of electrical appliances have already located in Thailand to benefit from its many advantages. Thai-made white goods are praised by buyers around the world for their quality and affordable prices.

Boasting very favorable investment circumstances, Thailand is an excellent location for E&E operations. The country gives manufacturers a great infrastructure, including state-of-the-art industrial estates and a vigorous network of parts suppliers. Efficient transportation provides easy access to fast-growing markets, with Thailand located at the heart of Southeast Asia. The steady government support also perpetuates the industry’s competitiveness.

E&E businesses will see Thailand become an even more attractive investment location with the launch of the ASEAN Economic Community (AEC) in 2015.

The 10 member countries of ASEAN are to drop trade tariffs among them to zero and liberalize investment sectors, enabling the free flow of goods, services, capital and people across the regional bloc. Collectively, this massive single market comprising

Thailand, Singapore, Malaysia, Indonesia, Vietnam, Cambodia, Laos, Myanmar, Brunei and the Philippines offers 600 million consumers.

Investors in Thailand also enjoy efficient regional market access through the country’s free trade agreements with Japan, China, India, Australia and New Zealand.

Dynamic Clusters, Hard Workers Developed with encouragement from the government, Thailand’s various electronics clusters are the envy of competing countries. By putting assemblers and their input suppliers in proximity, the cluster program enables companies to benefit from efficient flow of goods, cost-savings, collected expertise and technological innovations.

This dynamic concept gives operators in Thailand a considerable advantage. As a prime example, nearly all of the world’s major HDD players operate production facilities within a 250-kilometer radius of Bangkok, representing a preeminent supply chain.

The bustling E&E industry in Thailand employs more than 480,000 workers. Diligent, reliable and well-educated, the Thai workforce is another reason that investors continue flocking to the country. The government endeavors constantly to advance Thailand’s technical capability, and certified engineers already make up one-third of the total E&E labor pool.