Thai industries are facing challenges from Chinese competition and the rising daily minimum wage. Ongoing issues include factory closures, job losses, and structural defects.
Key Takeaways
- 1700 factories have closed their operations in the Thai market since the beginning of 2024.
- The average number of factories shutting down per month nearly doubled to 159 in the second half of 2023.
- The complex situation within the manufacturing market could be due to different factors such as the Chinese competition and technological challenges.
- The planned increase in the daily minimum wage is causing concerns about potential business closures and layoffs, highlighting a contentious issue for SMEs.
From the beginning of 2024 to the present, more than 1700 factories have closed their operations in the Thai market.
A clear example of the current complex situation towards the manufacturing industry in the country is the recent announcement made by two of the main automobile manufacturing companies in Thailand, Subaru, and Suzuki, which announced that they will close their factories in Thailand at the end of 2024.
The complex situation within the manufacturing market could be due to different factors such as sluggish economic conditions, fast-changing technology, slower-than-expected recovery of the global economy, and fierce competition from Chinese firms.
KKP Research, part of the Kiatnakin Phatra financial group, has expressed concern over the accelerating number of factory closures, particularly in the second half of last year.
The average number of factories shutting down per month rose from 57 in 2021 to 87 in 2022 and nearly doubled to 159 in the second half of 2023. Between early last year and the first quarter of this year, 1,700 factories closed down, resulting in the layoff of 42,000 workers.
The net growth of new factories has also slowed, with the number of new factories opening minus those closing dropping to 50 per month, a sharp decline from the previous average of 150 per month.
What are the main factors behind the potential crisis in the manufacturer industry in Thailand?
Thailand’s manufacturing industry, a cornerstone of its economy, is facing a dangerous situation. Several factors contribute to the potential peril of this sector, which has historically been a hub for global manufacturing and export. Some of the main factors behind the current situation in the industry are:
Technological Changes
Rapid technological advancements are reshaping industries worldwide, and Thailand’s manufacturing sector is struggling to keep pace. The adoption of new technologies requires substantial investment, and not all Thai manufacturers are equipped to make such transitions smoothly.
Competition from China
Intense competition from China, with its massive manufacturing capabilities and state support, poses a significant threat to Thai industries. Chinese manufacturers often benefit from economies of scale, making it difficult for Thai factories to compete on price and innovation.
Domestic Challenges
Domestically, the proposed hike in the daily minimum wage could increase production costs for Thai manufacturers, potentially making them less competitive in the global market.
These factors combined create a challenging environment for Thai manufacturers. To survive and thrive, the industry must adapt by diversifying supply chains, embracing technological innovation, and finding new ways to compete on the global stage.