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24 Jun 2005

Industry

Thai Furniture and Parts in the US: H1/2005 ... in a Slump

คะแนนเฉลี่ย

According to reports of the Customs Department and Department of Trade Negotiations, it was found that exports of Thai furniture and parts to the US market over the first four months of this year posted the worst performance in ten years. In value, exports of furniture and parts to this market plunged as much as 12.8 percent (in Baht terms) or 11 percent (in US Dollar terms), year-on-year. Among the products in this category that saw remarkable drops from last year (in Baht terms) were furniture made from natural materials, i.e., reed, bamboo and rattan (down by 42.69 percent), metal furniture (decreasing by 26.25 percent) and wood furniture (down by 12.93 percent). Meanwhile, furniture parts fell modestly by 0.66 percent. Among products that posted growth over the year before were plastic and other types of furniture, up by 32.69 and 23.49 percent, respectively. However, exports of these two types of products accounted for only 2.57 percent of export total for Thai furniture and parts to the US market during the period. Kasikorn Research Center (KRC) forecasts that Thai furniture and parts will have remained sluggish in the US market throughout H1/2005, with a drop of 11-15 percent from the same period of last year.

Based on data from the US Department of Commerce, KRC holds the view that market penetration of Thai furniture and parts in the US market during the first half of this year (H1/2005) is still far from successful though Thai-made products are still marginally competitive. Meanwhile, Vietnam should be watched, given that its competitive potential has been on the rise. The country has an edge over Thailand in its very low labor costs, rapid development of its labor force, and technology transfer from foreign investors from Taiwan, Singapore and the US in ventures there. Furniture production in Vietnam has been developing rapidly, thus resulting in higher quality and a wider variety of products. At the same time, Thailand's other rivals, including China and Indonesia, which already have higher competitive potential than Thailand, have steadily boosted their competitiveness. Right now, the competitive gap between Thailand and these countries seems broad. KRC takes the view that the competitiveness of Thai furniture and parts may deteriorate in the future, and expanding the Thai market share in the US market may be more difficult if Thai businesspersons do not concentrate on development of designs and production-related technology. Brand creation for better market recognition is also crucial.

Over the past several years, Thailand has posted a trade surplus with the US in furniture and parts. However, Thailand is mainly reliant on the US market. Each year exports of Thai furniture and parts to the US account for around 30-35 percent of total exports of this product category. On the contrary, Thailand is not the US' sole exporter of furniture and parts. Most of the US' key supply sources are Thailand's rival countries, which have an edge over Thailand in many areas. These include China and Vietnam that have lower raw material costs and wages, as well as Italy that has expertise in design. As a result, Thai manufacturers should expedite adjusting themselves to maintain the businesses and boost their competitive potential. To this end, serious marketing strategies should be rapidly adopted while competitive potential should also be enhanced. At the same time, product development should also be conducted to penetrate the Japanese and EU markets, which are set to grow steadily. What should also be done concurrently is to seek new markets to replace the US. Among target markets could be those with which the Thai government has already clinched FTA deals, i.e., India, the Middle East, China and Australia. In so doing, not only would Thailand be able to reduce its export reliance on the US market, but Thai furniture and parts would also have a greater chance to create more income in the future.

Industry

Furniture