Foreign direct investment (FDI) into the Chinese electronic industry has experienced a steady decline, most notably in smartphone production due to constant rising wages. Some investors have relocated production facilities to Vietnam, which is ready to offer foreign businesses a better deal. This includes more attractive production costs, geographical convenience toward the import of component parts and tax privileges. These advantages have successfully attracted foreign investors to shift their bases from China, and at the same time have sparked interest among smartphone part manufacturers who now see Vietnam as a highly viable base for production. Vietnam has recently become the world's 7th largest smartphone and part exporter, with the highest expansion rate.
Imports of electronic components into Vietnam have risen rapidly in categories of machinery, parts and industrial electrical equipment, along with integrated circuits and micro-assemblies, and printed circuits. In contrast, a downward trend is apparent in the imports of smartphone parts, since many manufacturers of such products are now producing them in Vietnam. As such, opportunities seem obvious for Thai operators to expand there within the smartphone supply-chain.
KResearch sees exciting prospects for Thai operators that have strengths in manufacturing where high technology is needed, operating non-labor-intensive facilities. Products that we are good at include printed circuits, machinery parts and industrial electrical equipment, as well as integrated circuits and micro-assemblies, etc. In the future, however, if production in Vietnam extends to midstream supply chain work, particularly integrated circuits and micro-assemblies that can be used in electronic devices other than smartphones, this might put our electronics industry into jeopardy. It follows that in order to remain competitive, it will be crucial for us to maintain our viability in midstream work, wherein high technology is essential. To this end, we need to acquire microelectronic and embedded system design facilities as used in upstream work. Synchronized development of both midstream and upstream production facilities would reinforce the Thai electronics industry in the future.
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