Thailand smart factory growth and factors driving it

Thailand is an emerging economy that is driven by its manufacturing segment, but recent data has shown that not everything is going well in the sector. In June 2019, the IHS Markit Thailand Manufacturing PMI fell to a three-month low of 50.6 from 50.7 in May. Employment fell, although remained at steady levels compared to other countries in the region, but input holdings dropped for the first time in four months.

However, output in June was the highest in 2019 as new orders rose at a steep pace and overseas sales increased at the second-fastest rate ever recorded. On the price front, input cost inflation ticked higher, boosted by cost of input materials, such as metal and food items, as well as greater fuel prices and delivery fees and output prices increased at the sharpest extent since February 2018.

Business sentiments were also found to be higher than before, linked to production growth, higher sales forecasts, planned business expansions, marketing initiatives and a favorable political climate following the elections.

What this means is that while there is an increase in demand for products to be manufactured in Thailand, the industry requires a push in terms of technology. This is where the role of smart factories and industry 4.0 becomes relevant.

Chotivate Pheanphobsuk, IIoT Sales Manager at Advantech noted that there has been a tremendous increase in demand since 2016.

“Over 50 percent of the Advantech’s customers are seeking IoT devices, IoT Gateway and IoT infrastructure to upgrade their factory,” Pheanphobsuk said. “We cannot deny IoT is a hot topic for the smart factory in Thailand and we can say that over 70 percent of [customers] need smart factory.”

Societal changes and government initiatives

An aging society and a low unemployment rate of around 1 percent scale up the need for automation to contribute to sustaining the competitiveness of Thailand. The Thai government is committed to the Thailand 4.0 vision to become a high-tech manufacturing hub.

“For smart industry, the focus is on the opportunities presented by 10 targeted industries within the special economic zone called the Eastern Economic Corridor or EEC where our own plants are located,” said Joseph Ngo Hong, Managing Director at Bosch Thailand. “There is an increasingly robust automation ecosystem developing between the private sector, academic institutions and the government supported by a wide range of government support programs and policies.”

The Thai government has authorized over $6 billion for robotics and logistics upgrades to stimulate further investment in industry, aiming for the digital industry to contribute 20 percent of GDP, according to the country’s Board of Investment.

To stimulate the use of automation and robotics systems, the government has also offered incentives under the Measures for Improvement of Production Efficiency, for enterprises to encourage firms to upgrade their technology and machinery.

Industrial robots and IIoT

A growing list of companies in Thailand are waking up to the idea of using robots and Industrial Internet of Things (IIoT) to ramp up production, save costs and make their factories safer for employees, according to Chaiyot Piyawannarat, Country Managing Director at ABB.

“In Thailand’s F&B industry alone, there are more than 6,000 factories that have either fully integrated smart technology at their facilities or exploring the uses of it,” Piyawannarat said. “With capital available more readily, large factories and companies are at a more advanced stage of adopting smart technology compared to smaller players.”

Vuttipong Vongsankakorn, Industry Marketing Manager at OMRON Thailand echoed similar thoughts as he said that in recent years, robotics technology has been growing rapidly with factories starting to embrace IoT last year.

Growth prospects

Citing a study by Study by Cisco and A.T.Kearney, Vongsankakorn said that Thailand’s manufacturing sector could see incremental growth of $50 billion in productivity gains over the next decade by embracing industry 4.0 technologies.

“Thailand is one of the three leading ASEAN countries with readiness to adopt Industry 4.0 as the country has complex, large and export-oriented industries, with government policy support and technology infrastructure,” Vongsankakorn added. “The recent US-China trade war and rise of labor costs and automation in China are opportunities for Thailand to digitize manufacturing, attracting overseas factories to migrate here for a connected supply chain.”

Piyawannarat also pointed out that Thailand’s burgeoning export industry contributes to more than 65 percent of the country’s GDP. This means companies are forever chasing productivity to gain an edge in a highly competitive market – a key driver of the growth of the industry.

“Of course, initiatives like the Thailand 4.0 are significantly helping many industries like automotive and F&B, but we now need the government to focus its efforts on strategic industries and provide support them on a continuous basis,” Piyawannarat said.