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5 Feb 2009

Industry

Thailand’s Electrical Appliance & Electronics Industry: Subsiding Exports, Massive Layoffs (Business Brief No.2424)

In the first half of 2009 (1H09), KASIKORN RESEARCH CENTER (KResearch) forecasts that exports of electronic goods will show negative growth. The market value may be around 15-20 percent less than the same period of last year due to ebbing demand for electrical appliances and IT products, being plagued by the global recession, coupled with the high base effect of 1H08.
KResearch projects that the Thai exports of electronic products throughout 2009 will contract 5-15 percent to total USD26,437-29,547 million. Looking at each segment, exports of computers and parts (mostly hard disk drives) are likely to show no growth, or perhaps a 5 percent contraction. For integrated circuits, their export growth may drop to 10-20 percent. This poor export performance will hurt electronic industry employment and investment later on. Cutbacks on overseas orders have led to permanent closures of several sub-contracting factories and serious job losses. Over the short to medium terms, new investment will inevitably slow due to the downturn and excess production capacity.
Despite the market slowdown due to our trade partners' economic recessions, there are still opportunities in markets largely insulated from the global crisis. Focus should be on China, India, Vietnam, the Middle East and some Eastern European countries that are themselves production bases for electrical appliances and IT equipment where consumption of electrical products is expanding rapidly. Emphasis should be placed on innovation and the latest technology to ensure greater value in the products we offer, thus enhancing sales turnover.
Exporters should brace themselves for plummeting purchase orders, particularly in 1H09. Worse, amid the credit crunch, they may be confronted with insufficient capital and liquidity constraints. They should thus pursue prudent business operations to ensure that they have adequate cash and proper inventory levels. Amid this economic downturn, flexible production and cost-saving measures should be emphasized. Manufacturers should also place significance on product quality and safety to avoid the imposition of non-tariff barriers by importing nations.
Opportunities seem to still exist for companies with ample liquidity and/or those that have undergone mergers and acquisitions, especially amid the rising Yen. This may lead to the relocation of production plants to countries with lower labor and operating costs. However, the investment policies of multinational subsidiary units mainly come from their parent companies. The future of Thailand's electronics industry lies in our ability to draw and maintain investment into our country.

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