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15 Oct 2008

Industry

US Financial Crisis: Impact on Electronics and Electrical Appliance Industry (Business Brief No.2319)

The financial meltdown that began with the US real estate bubble and sub-prime mortgage crisis has led to a deepening credit crunch in the US and spread to financial markets and economies around the globe. Thailand's electronics and electrical appliance industry has begun to feel this through slowing exports.
The US financial fiasco and the global economic slowdown may continue to hurt Thailand's exports of electrical appliances and electronics into next year. This is particularly true of electronic components. Furthermore, investments into the electrical appliance and electronics industry may be affected by the credit squeeze and economic downturn worldwide. KASIKORN RESEARCH CENTER (KResearch) expects that exports of electrical appliances in 2009 may grow only around 3-5 percent, down from the projected growth of 8-12 percent for 2008, while electronics may record slowing exports or only marginal growth below 1 percent, against the projected growth of 0-5 percent this year. Amid the global economic slowdown, this industry has been confronted with intense competition, thus leading to price wars, rampant mergers and acquisitions, plus more business alliances and outsourcing activity.
KResearch has reached some conclusions and recommendations for Thai manufacturers to brace for the fallout of the US and global financial turbulence:
- For electronics, exports should focus on less affected markets, especially China, ASEAN, South America, the Middle East and Eastern Europe. Solid demand in these marketplaces and the outsourcing trend recently seen globally may ease the impact of the economic slowdown in established markets/
- Manufacturers and exporters of electronic components that have been hit hard by economic volatility may adjust through greater flexibility in their production to better match purchase orders; upgrades in product quality and innovations can bolster their competitiveness and help them become an integral part of global supply chains.
- Likewise, exporters of electrical appliances should place greater emphasis on regional markets and elsewhere, including ASEAN, China and India that still show promising growth rather than relying mainly on the US, Japan and European countries that are facing economic downturns.
- Exporters should be more careful about forex volatility and be prepared for severe downside risks to global economies.

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