Opportunities Abound in Thailand’s Machinery Industry

Boasting 50,000 enterprises and 400,000 workers, Thailand’s machinery and metalworking
industry resounds with activity. Demand for more sophisticated machinery is growing,
especially among domestic downstream industries, creating attractive opportunities for
investors. This is because even with its extensive size, the local industry offers a limited
supply of high-end machinery and parts, leaving many companies looking for imports. In fact,
machinery and parts rank among Thailand’s top 5 most imported goods, with their inbound
shipments totaling US$12.57 billion in 2009. Japan is the primary source, responsible for
24.6% of imports in 2009, followed by China at 21.3% and the United States at 9.4%.
Electrical machines and apparatus with individual functions are the leading product category,
with US$9.78 million in imports that year.

Thailand’s status as a regional export hub also allows local machinery and parts suppliers to
benefit from the economic growth of its neighbors. The country’s exports of these products
have grown by 90% since 2004 to nearly US$8 billion. Favorable trade relations with the
signing of the ASEAN Free Trade Agreement (AFTA) is adding fuel to Thai machinery and
parts exports. Growth looks likely to continue as demand from developing nations such as
Vietnam, Malaysia and Indonesia strengthens.

Top 5 Machinery & Parts Imports 2009

US$
Code Description
Million
Electrical machines and apparatus having individual
8543 978
functions
Air or vacuum pumps, air or other gas compressors, and
8414 932
fans
8411 Turbo-jets, turbo-propellers and other gas turbines 918
Printing machinery used for printing by means of
8443 748
printing type, blocks
Refrigerators, freezers and other refrigerating or
8418 721
freezing equipment

Agricultural Machinery
Thailand is flush with agricultural resources, and the machinery to make efficient use of these
resources in the fields and on the processing floors is in high demand. As major suppliers of
agricultural machinery in Thailand currently fall short of meeting demand, the domestic
market must turn to imports, which increased by more than 80% over six years to reach
US$548 million in 2009.

While importing more modern equipment for use in its fields, Thailand has also increased its
exports of agricultural machinery. The 2004-2009 period saw exports soar by 77%, with the
top categories being tractors and equipment for cleaning, sorting and grading seed and grain.

Machine Tools
Growth in Thailand’s automotive and E&E (electrical appliances and electronics) industries
is boosting demand for modern machine tools. Automotive and auto parts companies are the
biggest buyers of machine tools, accounting for 35% of the domestic market. The E&E
 industry purchases 14%. The machine tools sector is heavily dependent on imports, which
totaled US$1.2 billion in 2009.

CNC Machine Tools

Reflecting growing demand, Thailand’s market for computer numerical controlled (CNC)
machine tools also relies strongly on imports, half of which come from Japan. In 2009, total
imports of CNC machine tools reached US$87.45 million. Exports that year were worth
US$10.55 million, the top categories being lathes and other turning centers for removing
metal.

Industrial Machinery
Thailand’s world-class downstream manufacturing industries continue to have a keen hunger
for imports of industrial machinery and parts, which in 2009 totaled US$10.82 billion, a 16%
jump over six years. Printing machinery showed the biggest increase at 108% to US$3.6
billion.

At the same time, however, the country’s industrial machinery sector is developing rapidly as
an exporter. In the past six years, industrial machinery exports more than doubled, reaching
US$7.7 billion in 2009.

Industrial Machinery & Parts Imports, Exports

2004 – 2010 (Feb)

14
12
10
8
6
4
2
0
2004 2005 2006 2007 2008 2009 2010 (Feb)
Imports 9.36 10.66 10.35 10.43 11.98 10.82 1.94
Exports 3.88 4.88 5.49 7.99 8.38 7.72 1.60

Unit: US$ Billion

Source: Ministry of Commerce

Food Processing & Packaging Machinery

More than 10,000 food processing companies are operating in Thailand, creating healthy
demand for processing and packaging equipment, with the domestic market for such growing
20% annually. Imports comprise a large portion of this market at a value of nearly US$263
million in 2009, and most come from Japan (33%), Germany (30%), the United States (22%)
and Italy (15%).
The leading import category by value comprises machinery for filling, closing, sealing,
capsiling and labeling bottles, with shipments exceeding US$100 million in 2009. This is also
the biggest growth sector at 32% over the past three years.

Moulds & Dies

Moulds and dies are essential inputs for downstream manufacturing. With Thailand’s
automotive and E&E industries expected to continue growing robustly, the prospects for the
mould and die sector are bright. The government’s Mould and Die Industry Development
Project 2010-2014 aims to reduce dependence on imports by more than 3% and increase the
value of exports by 5% through the creation of added value for the sector.

The project supports 20 industry-related educational institutes and has invested in the
expansion of 225 mould factories. Seven mould excellence centers with public and private
funding have already been established. One of the many functions of such centers is to train
mould technicians, with 4,426 trained so far. The project is also raising production standards
to sharpen Thailand’s global competitiveness.

According to a Thai Tool and Die Industry Association survey, there are 1,061 mould and die
factories in the country. Of these, 90% produce moulds and dies for plastic and metal, while
the rest manufacture the products for rubber, glass and ceramics. Stamping, progressive and
forming are the most common types of metal moulds, while injection and blow plastic
moulds are widely used by auto and E&E makers and the packaging industry. As the
automotive industry is expanding output, investment opportunities exist in die casting for the
manufacture of engine blocks, crank shafts, front cases, oil pans, gear boxes and auto safety
parts.

Thailand’s Top Import & Export Locations

for Moulds & Dies 2009
Import Origins Export Destinations
Location US$ Million Location US$ Million
1 Japan 343.48 1 Japan 64.40
2 Mainland China 59.59 2 India 27.33
3 Taiwan 47.69 3 US 19.19
4 South Korea 36.96 4 Mainland China 11.76
5 Singapore 19.88 5 Malaysia 11.64
6 Malaysia 15.82 6 Vietnam 11.45
7 US 7.37 7 Indonesia 10.97
8 Germany 5.54 8 Singapore 3.94
9 Hong Kong 4.99 9 Germany 3.61
10 Canada 4.50 10 Canada 3.46

In 2009, Thailand imported US$568 million worth of moulds and dies. Exports totaled
US$203.5 million, going mostly to Japan, the US and China. Closing this trade gap presents
another investment opportunity in Thailand’s mould and die sector.

Why Thailand?
There are many reasons to choose Thailand as a machinery and metalworking production
base. Thailand boasts:
Strong Business Climate – In its 2010 index, the World Bank ranked Thailand 12th in the
world and 3rd in East Asia and the Pacific for ease of doing business.

Machinery and Mould & Die Clusters – To foster greater productivity and efficiency in
this sector, the government is encouraging the development of national machinery and mould
and die clusters. Proximity between manufacturers and their input suppliers allows for
enhanced communication and improved flow of goods.

Growing Domestic Demand – Thailand’s dynamic manufacturing industries are expanding,

and urban development and infrastructure projects are fueling construction. Brisk activity in
the following industries is spurring demand for machinery and metalworking support.
♦ Automotive Industry
ƒ Thailand is Southeast Asia’s largest vehicle producer and the world’s No. 2
producer and market of pickup trucks.
ƒ World’s 13th largest automobile manufacturing country.
ƒ Production of passenger cars and pickups to reach 1.6 million in 2010.
♦ Electrical Appliances & Electronics Industry
ƒ World’s largest HDD components manufacturing base, with 1.4 million units in
2010.
ƒ World’s 4th largest producer and 9th largest exporter of air conditioners.
♦ Food Processing Industry
ƒ World’s biggest exporter of rice, sugar, cassava, processed chicken, canned and
frozen seafood, and processed pineapple products.
ƒ World’s 19th highest agriculture output.
♦ Construction Industry
ƒ Industry expected to grow at an annual rate of 5.5% through at least 2012.
ƒ Public investment totaling US$14 billion planned for expanding roads and mass
transit in and around Bangkok.

Access to Markets – Thailand has successfully negotiated many free trade agreements
(FTAs). This includes FTAs with ASEAN member countries, Australia, New Zealand and
Japan. Thailand’s prime location in the heart of Southeast Asia and its membership in the
ASEAN Free Trade Area (AFTA) provide it with unparalleled access to ASEAN’s market of
550 million people. The tariff on machinery exported to ASEAN countries was eliminated at
the outset of 2010.

Great Infrastructure – There are many industrial estates that focus on the machinery and
metalworking industry, providing state-of-the-art facilities. Thailand’s extensive road
network, world-class deep sea ports such as Laem Chabang, and new international airport
make exporting easy and efficient.

Competitive Workforce – Thailand not only boasts low labor costs but also a well-educated
workforce. There were 111,314 Thai graduates in science-technology and engineering in
2009.

Investor-Friendly Environment – The Thai government imposes no export requirements,

no local content requirements, and no foreign equity restrictions on manufacturers. In
addition, the Board of Investment offers a host of fiscal and non-fiscal incentives for the
manufacture of machinery, equipment and parts, ranging from corporate tax exemption to
assistance with work permits and product sourcing. The local industry also has excellent
institutional support.