The TPCA Seminar on Southbound Market Development & Investment was convened on June 22 at TPCA’s headquarters, attracting around one hundred participants. The event was conducted over 5 sessions: Overview of Southeast Asia, Thailand, Vietnam, India and Indonesia respectively. Mr. Ming-Zhong Dong, senior analyst at IEK, kick started the event with an overview on Southeast Asia and India, followed by a session on Thailand addressed by Mr. Shuh-De Kang, President of JFCCT, who touched upon business opportunities amidst transitions as a result of Thailand 4.0. The session on Vietnam featured Mr. Hong Jung Bong from BHflex who discussed Samsung’s FPC facility in Vietnam, panel suppliers for Apple, and Korea’s deployment strategies in Vietnam. Mr. Suresh, director of Qdos Flexcircuit, then shared his insights on the outlook of investments and the market in India. The final session was hosted by Ms. Wendy Hwang, President Director of PT. Sintra Sinarindo Elektrik, who discussed all miscellaneous affairs potentially facing investments in the country.
Equipped with High Market Potential & Low Cost and Poised to Model on China’s Experience
Mr. Dong reminded the crowd that 3% of the total production value is generated in Thailand, despite the fact that over a half, 57%, of the total production output of Taiwan still depends on China. With increasing wages, stricter environmental rules, limitations on utility supplies, and shifting clients downstream, China has lost its advantage as a factory country. Many neighboring countries of Taiwan such as Korea and Japan have long been reaching for the new Southeast Asian continent, while Taiwan initiated its Southbound policy in 2016, focusing on trade, exchange of human resources, resources sharing, and regional links to locations such as India, Indonesia and Thailand. An office dedicated to this policy has been established.
In 2016, most Southeast Asian countries demonstrated a growth rate of more than 2.4% compared to the global growth rate. Mr. Dong further added that the ASEAN market prides itself on its 600-million-people market and its rapidly depreciating currencies, providing great incentives for the local population to spend extravagantly. It is estimated that ASEAN will become the 6th largest auto market in 2018, with Indonesia enjoying the largest share. Thailand, Indonesia and Malaysia are major automobile producers with an annual output of 1 million cars. The Philippines and Vietnam are major suppliers of automobile parts and components and have zero-tariff incentives. In terms of cell phones, ASEAN enjoys a penetration rate of 119% with over 0.3 billion users in the Philippines, Indonesia, Vietnam. Indonesia demands that at least 30% of cell phones sold in the country must be made locally. Malaysia and Singapore have established their IoT’s. Despite low online retail sales volumes, ASEAN is well prepared for enormous growth.
ASEAN’s average wages are on the rise. Compared to China, the region stands out with a relatively low labor cost, ranked only after China and India as a labor supplier worldwide. Furthermore, ASEAN’s consumption momentum, its economic scale of 2.4 trillion US dollars, and the incrementally maturing infrastructure, the market is ready to copy and paste China’s successful model.
Thailand: Comprehensive PCB Supply Chain with Enormous Demand for Auto Electrics and Business Opportunities as a result of Thailand 4.0
According to Mr. Dong, Thailand stands out among all ASEAN countries both as a PCB exporter and importer, the revenue from which is more than US$1 billion. China is still the greatest PCB exporter, with a market share of 27%, with other countries remaining at the same level. China runs 42% of PCB exports, which constitutes the largest proportion overall, followed by Japan at 20%. Most of the products are car components. Currently Thailand produces 2 million cars, ranked first in ASEAN. The country is expected to export approximately 1.2 million cars in 2017, about 60% of the total production. 57 of the greatest producers of auto parts and components are located in Thailand. 28 Japanese PCB suppliers for auto parts and components are also Thailand, showing the in-depth engagement of Japan’s PCB industry in the country.
Mr. Shuh-De Kang, President of JFCCT, said that Thailand has a fairly comprehensive infrastructure and is the hub of ASEAN. The East Economic Corridor (EEC) policy implemented by the Thai government is designed to coincide with China’s Belt & Road (B&R) policy. The EEC is aiming at some US$44 billion-worth investment through to 2021, projected to be applied to the expansion of airports and sea ports as well as industrial modernization. Kang said that Thailand enjoys a comprehensive supply chain and is proud of its position as the production center for many renowned western brand names, making it the top choice for investment in Southeast Asia. Now that the Thai authorities are going through an industrial transition, the Thailand 4.0 policy has been created to boost intelligent factories, intelligent cities, and intelligent human resources. Kang further added that investment in Thailand used to be associated with opportunism that sought short-term gains with a small investment. However, the country has greatly improved its investment environment through moves such as implementing transparency policy incentives like exemption/reduction of tariffs, on top of its well-furnished infrastructure. The soft power of Thailand, on the other hand, is not to be underestimated, e.g. the male-female ratio of 51:49 and its state of gender equality, with the number of female entrepreneurs ranked among the top 3 in the world. In the face of all these challenges and changes, Kang recognized the inevitability of globalization and called for greater steps from Taiwan, concluding the session by saying, “There is only a road when you step out, but there is nothing ahead if you always stay at home.”
Vietnam: A Hub for International Smartphone Production
Impact of Samsung on Local FPC Suppliers
According to Mr. Dong, the export of PCB in Vietnam totals only US$0.5 billion, with import values approaching 2 billion in contrast. Vietnam delivers most of its products to Korea, 28%, followed by Japan at 22%. In terms of import, Korea takes the lead by selling 53% to Vietnam, followed by China, 24%. Korea has deep roots in Vietnam, spreading most of its production in the north. Driven primarily by Samsung, Korea invests mostly in Tinh Thai Nguyen, Tinh Bac Nin and Ho Chi Min City, while Foxconn inserts its influence in smartphones from Tinh Bac Nin. Compal initiated its Vietnam project in 2015, focusing on cell phones. Looking comprehensively at the investment preparedness of Vietnam, Dong said that most of Taiwanese PCB investors did not end up with proper returns on investment some 10 years ago due to the lack of decent infrastructure, human resources and guiding policies. However, this situation has changed, attracting enormous international investment from Samsung and Foxconn and driving the local PCB demand upward.
BHflex is the 7th largest PCB supplier which focuses on HDI, FPC, and mixed boards. It has facilities in Korea, Vietnam and China. The President of BHflex, Mr. Hong, serving also as the President of KPCA, opened the session with an overview of the politico-economic outlook in Vietnam. Hong said that exports have been steadily rising in recent years in Vietnam, with its peak at 9% in 201, turning the country into an export-oriented country. The economic growth rate is around 5-6 %, with the majority of investment flow coming from Korea. It is expected that Vietnam could see a growth of 6.2 to 6.8% by 2017. Samsung is the greatest foreign organization, which produces over 200 million phones a year; over 50% of the corporate’s global production. Evidently Korea has a comprehensive supply chain in the country. Hong further stated that all Vietnamese facilities are now in full swing to tailor to the demand for Apple devices.
FPC will be more frequently applied to batteries to prevent overflow and overheat. The assembly line of FPCs is very labor-intensive, therefore most of FPC near-end assembly lines are concentrated in China and Vietnam. BHflex is one of the few PCB enterprises that has devoted its entire process exclusively to Vietnam. Mr. Hong wrapped up with a remark on fingerprint identification modules, an area which deserves our attention due to its great potential.
India—A Key Origin of International Cellphones
PCB Supply Chain in Shape but at Risk
Dong said that the export and import of PCB is not significant. As an exporter, Austria has the greatest market proportion at 31%, primarily because AT&S is based in India. As an importer, China is dominant, taking 55%. Most of India’s PCB suppliers are concentrated along its western coast. There are hundreds of mid- to small-sized suppliers with non-significant output. However, thanks to local brands such as Micromax, Karbonn, Lave, and Intex, which began to move along with the country’s manufacturing industry policy, there is potential growth of the PCB industry. Samsung, for example, began its deployment of smartphones in 2006. Lenovo and Motorola also established bases in Madras as large as 40,000 square feet. Other Chinese players such as Mi, Huawei, Foxconn, Wistron have also expressed their interest in investing in India. Dong said that India has a relatively longer history of PCB development compared to other ASEAN countries and has a more comprehensive and cohesive supply chain.
Mr. Suresh, Director of Qdos Flexcircuit, envisions an enormous growth in semiconductors, high-tech manufacturing, IT systems and hardware, export and telecommunications within the next three and half years, with particular focus on semiconductors and related equipment, which is predicted to total US$153 in 2020. Qdos statistics show that India’s PCB demand will reach US$6.1 billion by 2020, with the most rapid growth in the car and smartphone industries. Mr. Suresh said that 60% of PCB suppliers are small/medium enterprises. Although human resources are adequate, the PCB supply chain is underdeveloped, hence the dependence on imports from Taiwan and China. This is an excellent opportunity, but it is up to the Taiwanese businesses to conduct thorough risk assessments before embarking on this path.
Indonesia: Home to Japanese Home Electronics Production
Local Production of Smartphones Trigger PCB Development
Dong said that Indonesia mainly exports and imports to and from Singapore, at 80% and 26% respectively. In addition to the Japanese PCB supplier, Mektec, others are focused on single/double or low-level multi-layer boards, which are tailored to local Japanese electronics and their circuit boards. In terms of the imported cellphones in Indonesia, the volume decreased year on year from 2013 to 2016, which demonstrates the increase in ratio of domestic production and the consequential increased demand for PCB. With such trends and the country’s policy calling for more local manufacturing, the PCB industry will be led primarily by these electronics corporations.
President Director Ms. Hwang, PT. Sintra Sinarindo Elektrik, said that getting the ISO18001 (OHSAS) certification is the key to establishing your facility in Indonesia. Also important are assistance from local consulting companies and certifications issued by local labor unions (e.g. increasing the number of employees to over 100), as well as labor union membership. Ms. Hwang wrapped up by reminding the crowd that many sources of data and statistics on the Indonesian economy are not as reliable as they seem and advised Taiwanese partners to pay as many visits to Indonesia to get the most useful and practical information before local success.