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29 Nov 2006

Industry

Electronics,’07: Global Slowdown, Thai Exports up15%, Risk in rising Baht(Current Issue No. 1924)

Growth in the electronics industry globally over the past 3-4 years has greatly contributed to the Thai economy as a major manufacturing base for several leading electronics companies, especially for hard disk drives and integrated circuits. As a result, Thailand's exports of electronics have expanded steadily. Looking ahead, the local electronics industry is expected to grow continuously into next year, continuing their focus on exports. KASIKORN RESEARCH CENTER (KResearch) views the outlook for Thailand's electronics industry in 2007 as:

- Exports are expected to grow 15 percent in the coming year to total some USD30 billion, an increase of 15 percent, over-year.

- Computers and parts plus integrated circuits will remain the key export items.

- Exports of electronics will play a greater role for Thailand's economic growth. Next year, they are expected to account for 15.05 percent of the GDP, up from 14 percent in 2006.

Thailand's exports of electronics next year will likely to post positive growth, albeit at a slower pace than this year due to certain unfavorable factors at home and abroad. These would include:

A Slowdown in the Global Electronics Industry – In 2007, demand for electronics in the world market will likely soften. However, KResearch takes the view that the effect on demand of this will only be moderate and short-term thanks to proliferation of electronics into nearly all industries.

A Sluggish Global Economy – In 2007, it is expected that the global economy will grow by 4.9 percent, which would mean that it will have slowed slightly from 2006.

The Stronger Baht – KResearch projects that the Baht trend in 2007 will continue in the current upturn and may reach approximately THB35/USD. In 2007, it is expected that the Baht will be around THB35-36/USD.

Competitors – Vietnam has given considerable priority to its electronics industry, wherein they are showing their potential in low-cost labor, good quality and warm relations with trade partners such as the USA, which is their main market. In recent years, many manufacturers have expanded their production bases there and invested more in Vietnam. This is forcing Thailand to boost our potential in order to attract investment, and to develop the workforce to support greater competition.

Non-Tariff Trade Barriers (NTBs) – NTBs appear in the form of preferential trade agreements between only certain nations and import regulations promulgated by trade partners. Trade liberalization will assist Thailand in some export categories, but cause Thailand to be at a disadvantage in others.

The electronic parts industry of Thailand will continue growth in 2007, despite the fact that the global electronic market is slowing with a decelerating industrial cycle and a slowing world economy. Moreover, the electronics industry of Thailand still faces other risks, such as exchange rate volatility, advances in production technology, the need for domestic entrepreneurs to adapt to a rapidly changing environment, and competition from foreign countries. These factors will induce Thailand to adjust considerably to prepare for such risks because the electronics industry plays an important role in driving the economy of our country, particularly as a major employer.

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