A report last week by Reuters says that Thailand’s tech sector is losing out to cheaper neighbours such as Vietnam, as it struggles to compete against rivals.
Tech industry struggling in Thailand
Companies such as LG are even moving production of electronics goods like televisions to other regions, as part of a downwards trend for Thailand’s electronics industry. In January this year, the country’s manufacturing index fell for the 22nd month, with production of goods such as televisions down 38% year on year.
This decline has raised concerns that Thailand’s economic slowdown is not a temporary problem, but one caused by the manufacturing industry’s failure to adapt and the increasing attractiveness of its neighbours like Vietnam.
Electronics is one of the largest export sectors in Thailand (about 15% of the total), and the country remains the world’s second biggest maker of hard disk drives after China, with Seagate and Western Digital among the big producers. Hard disks, used mainly in personal computers, are however being displaced by the much faster solid state drives (SSDs) which use solid-state memory chips and are used in products such as tablets and ultra-thin laptops.
Thai exports of hard drives/disks rose 5.8% in January year-on-year, even though those to China slipped by 21 %.
Samsung has just sites two smartphone factories in Vietnam and made $11 billion worth of investment commitments to the Vietnamese economy in 2015, according to local newspaper Dau Tu.
Back in 2009, Vietnam’s exports of electronics were worth just $2.8 billion, a tenth the size of Thailand’s, but last year had reached $37.3 billion compared to Thailand’s $33 billion. Part of the reason is the lower minimum wage in Vietnam at just $6.35 per day, in contrast with $9.2 in Thailand. Microsoft, Canon and Intel have all set up facilities there in the last few years.
Economists say that Thailand is not as nimble as other low-cost economies to adapt to newer types of technology, and its innovation ranking in the World Economic Forum’s Global Competitiveness Index fell to 67 in 2014 from 33 in 2007.
“When you look at the context of the continuous decline, you see there is a structural competitiveness problem that has been eroding Thailand”, said Santitarn Sathirathai, senior economist of Credit Suisse in Singapore.