Thai Electronics and Electrical Industry in Crisis: Floods Hurting Exports until 2012 (Business Brief No. 3201)

Seven flood-ravaged industrial estates (five in Ayutthaya and two in Pathum Thani) are major manufacturing bases for electronics and electrical appliances, accounting for more than 44.5 percent of Thailand's total such production facilities. Most of them are owned by leading multi-national companies, e.g., from Japan, and are located in clusters to facilitate supply chains, especially through shipping components back to their parent countries for final assembly. In addition, these industrial estates, now submerged, constitute world's major electronic component production sites from which Thailand exports to the global market. Among key product shipments are hard disk drives (HDD) and components, ball bearings, integrated circuits, etc. which hold a large market share in the world market.

KResearch holds the view that the Thai electronics industry in 4Q11 would suffer a severe contraction in exports of computers, parts and accessories such as HDDs, computer parts and printers, representing around 55.0 percent of the country's total electronics shipments. Other products that may be severely hit will likely include integrated circuits, printed circuit boards (PCB), telephonic equipment, etc. We have therefore cut our forecast for 2011 of electronic export value to approximately USD30.15-31.0 billion, a contraction of (-)6.0 to (-)8.5 percent, compared to growth of 21.9 percent in 2010.

For exports of electrical appliances and parts, KResearch forecasts that they may grow only 7.0-9.0 percent (with a value of USD22.0-22.4 billion), down from the growth of 32.3 percent in 2010. The most affected products will include refrigerators, TVs, video/DVD players, TV parts and air conditioners. The electrical component industry will be less affected by the disaster given that some of these production facilities are located well east of Bangkok.

In response to the flood crisis in Thailand, some of the world's largest manufacturers have shifted their production to other provinces, and some have temporarily moved certain production lines to other countries. However, IT products, especially HDDs, will remain in short supply due to the disruption caused by the severe flooding. The natural catastrophe may not only bring about losses to local producers, but also affect global supply for certain types of electronic products over the next one to two quarters.