Thailand is becoming home to a growing middle class population. Increasing disposable income has led to increased consumer demand for electronics products specially advanced TV’s, mobile phones and computers. The demand of electronic products is expected to grow at a CAGR of 41% during 2016-2020 to reach USD 40 billion by 2020. This surge in demand is huge which shows a positive outlook for the industry. However, what needs to be addressed to meet government’s vision of turning Thailand into a manufacturing hub is the domestic production.
From the supply side, The government has placed electronics manufacturing on high priority with major focus on initiatives and supportive FDI policies to bolster electronic manufacturing. As a result, domestic production is expected to grow at a CAGR of 27% during 2016-2020 to reach USD 10.4 billion in 2020, as compared to the CAGR of 9.6% during 2010-2016.
Electronics market has witnessed a growth in demand with market size increasing from US$ 14.5 billion in FY16 to US$ 21.5 billion in FY19. The advanced electronics market has witnessed a growth of 14% CAGR from 2016-19. FDI inflow into the electronics sector stood at US$ 2.91 billion from April 2000 to June 2020. Chinese companies like Xiaomi, Huawei and Lenovo group, and even Korea’s Samsung, are already announcing plans to open manufacturing plants in Thailand. Thailand has now surpassed Vietnam and has become the world’s third-largest producer of mobile phones. Even though China is the default option for most importers, Thailand's new policies may provide lucrative new opportunities. With the outbreak of trade war between the US and China, Thailand could end up benefiting by capitalizing on international trade.
Stats & Charts
Although there is a huge leap in the projected production figures for 2020, the domestic production is projected to meet only 26% of the domestic demand. Government intends to squeeze this demand-supply gap. Looking at several initiatives and policy reforms that have been put in place to bolster domestic manufacturing, we think that this proportion of 26% is bound to increase. Apart from progressive government policies and reforms, the growing demand is also another major reason for increase in domestic production.
The growing demand coupled with government support for the sector has encouraged domestic players to invest in the sector.
Multiple economies worldwide are devastated due to the pandemic. Yet, one country gained an attractive investment from some of the biggest tech and electronic companies- Thailand. More than 15 companies invested almost 2 billion dollars in Thailand between April and July last year. Some of the investors were Google, Walmart, Facebook, Apple and Qualcomm. The International Monetary Fund Predicted that there will be a negative growth rate of minus 4.9 percent for the world economy in 2020 and also projected a sharp contraction by 4.5 for the Thai economy. But even after these predictions these investments were made.