Thailand Becoming a Growing PCB and Electronic Component Manufacturer
Thailand is not the first country that comes to mind when you think of rising high-tech players but the reality is that increasingly Thailand is becoming a big player in high tech. In Hard Disk Drive manufacturer, Thailand is number two globally with four of the five biggest players all with factories in Thailand. The same is happening in the printed wiring board (PWB) or printed circuit board (PCB) sector where Thailand is becoming a bigger and bigger player. In 2003, Thai output of PWB or PCB components exceeded $700 million, making it the fifth largest in the Asia Pacific after Japan, Taiwan and South Korea and the largest in Southeast Asia for this product having just tipped out Singapore. Further, new factories in this sector are increasingly choosing Thailand, plus factories established over the last two years are just now coming on line and Thailand will soon pass the one billion mark in sales and could soon move into the number three spot in Asia for this item.
Why is Thailand becoming such a large player in this field, in the manufacture of Hard Disk Drives, ICs and other components? The answers are many. First, Thailand has had a longer time to put its infrastructure in place than many of the other Asian Nations with which it competes. Its government is stable and very pro-business. The government and in particular the Government Board of Investment (BOI) and Ministry of Commerce have been very proactive not only about identifying incentives to attract these companies but also the follow-on policies to encourage the companies to expand and bring in satellite industries. Also, there is a range of supporting industries that is often not found even in China and certainly nowhere else in Southeast Asia that support successful operation. Finally, the economics of the country make sense for investment. Thailand’s wage level for general workers is about $150 per month, including fringes, which is about the same as that in China. Although China often looks cheaper at first-glance, the reality is different as many manufacturers have learned by experiencing increased VAT and other charges. (for a cost analysis of Thailand/China for start-up manufacturing costs please see http://www.biz-in-thailand.com/moving_factory.html and http://www.business-in-asia.com/th_guidelines.html#costs ). In addition to these more obvious factors, Thailand also has a few things not so easily observed without considerable study. For example, a further benefit for PCB and other component industries considering Thailand has been Thailand’s growing role as the “Detroit of Asia”. As components for consumer electronics have become a more and more competitive field, Thailand’s surging automotive production has allowed Thai electronic plants to branch into automotive electronics such as PCBs for ABS, dashboard, car stereo, etc. and now such auto products often are between 30-40% of production.
(Left): Toei Denshi's Thailand Factory in Chonburi.
This is not to say that Thailand has yet solved all the problems. First, Thailand’s PCB market is small compared to the market in China. However, since most large Thai PCB makers were founded to take advantage of export sales, the small market doesn’t deter them from expanding. Second, the infrastructure to support manufacturing equipment for the PCB or component industry is still weak in Thailand with a few exceptions. Most supplies and materials must be imported although this could be changing as two of the country’s largest board makers, KCE and Elec and Eltek Thailand (EETH) make their own laminates. Further, if final products are sold and used in Thailand, it is required to pay duty on imported equipment and materials. This however is again mostly a minor issues as most PCB makers have sought and been granted Board of Investment (BOI) support incentives such as those exempting them from paying duties on imported items and that require them to export all products. Further, if PCBs or other components are sold to local electronics companies, it is considered an export sale as long as the final products are exported. This rule is similar to the one followed in China.
Components for the PCB industry used to be in short supply. Japan played the early role in leading the component industry to self sufficiency. Prior to the Millennium, Thailand did not produce enough laminates and other key items to meet demand. For example, in 1993 Namhing Copper Foil, a Hong Kong subsidiary, established the country’s only copper foil pant which produces about 70-80 tons per month of this basic unit for electronics production. Japan’s Matsushita Electric Works first moved to help alleviate this situation by building a paper phenolic laminate plant in the Rojana Industrial Park in Ayuthiya (www.rojana.com) which is a hub of Japanese investment in Thailand. This plant produces approximately 500,000m2 of FR-1 laminates monthly according to company officials. Some of this is supplied to other component manufacturing facilities of numerous companies in Thailand and some is exported to Singapore, Malaysia, and Indonesia. FR-1 material, also critical in PCB production, is also imported from S. Korea (Doosan Electronic Materials) and Taiwan (Chang Chung Chemical) and. The biggest change, was yet to come however when Elec & Eltek of Hong Kong built a laminate plant called Pacific Insulating Material (Thailand) Limited in Rojana, Ayuthiya right across from the Matsushita plant. This plant specializes in thin core FR-4 laminates and manufactures about 80,000m2 of thin core laminates and about 500,000m2 of pre-pregs each month. The majority of this production is consumed by Elec & Eltek Thailand although some is exported. Additionally, KCE Electronic Public Company Ltd., Thailand’s largest rigid board maker, created a subsidiary called Thai Laminate Manufacturers Co. Ltd. in 1998. This company has two treators in operation and is producing a similar quantity to Elec & Eltek of thin core FR-4 laminates and prepregs as Elec & Eltek’s subsidiary but will soon be expanded by installing another treater. This will increase KCE’s capacity by nearly half to the 120,000-130,000m2 per month range. According to sources, all of these laminates are consumed internally by the KCE Group although currently production is still insufficient and about thirty percent of internal need is still imported
Rigid Board
There are currently over twenty rigid board makers in Thailand and this number is growing as primarily US and European companies look to Thailand as a place to spread their China technology bets and also as a way to take advantage of Thailand’s location and status in the Asia Free Trade Area (AFTA) and other Free Trade Agreements (FTAs). As can be seen from the above chart KCE, Elec & Etek, Toei Denshi, PCB Center and PCB Center are the top five largest producers. Of these, the KCE Group which includes KCE International, KCE Electronics and KCE Technology produce nearly double its nearest Thai competitor. The KCE Group is one of the largest state-of-the art mass production facilities in Southeast Asia and soon will have this title clearly sown up as they are currently in the process of expanding to add an additional major building at their current facilities.
Here is a short synopsis of many of the major players in this industry in Thailand.
KCE Group
KCE Electronics is engaged in the manufacture of MLB, while KCE International specializes in DSB. KCE Electronics is the oldest among KCE Group companies and currently the only member of KCE Group engaged in the manufacture of build-up microvia boards. KCE is considering reorganizing this division of the KCE Group.
KCE Technology is the newest member of KCE Group and is one of the largest mass production facilities in South East Asia. It doubled its production capacity and is planning to expand again soon by constructing another building in the vacant lot of the existing plant. The equipment used at KCE Technology is all brand new and “world class.” The combined floor space of the three KCE companies is 57,000m2 and employs 3,200 workers. KCE’s products are used in many different products including telecommunication equipment, electronics, networking, industrial controls, PC and peripherals, consumer electronics, automotive and many others. The KCE Group reported $128 million in sales in 2003 and plans to increase sales to $200 million shortly
Elec & Eltek Thailand (EETH)
Eight years ago, EETH was hemorrhaging money and the management in Hong Kong was considering closing the plant. Today, it contributes the most profit among Elec & Eltek’s companies. The company is planning to expand its manufacturing capacity by 50% to 75,000m2 per month. Currently, it has approximately 1,500 employees. At the same time, Elec & Eltek is going through a massive expansion plan in China.
Toei Denshi
Toei Denshi is a Japanese-owned fabricator of SSB, DSB, silver-through-hole board (STH) and MLB manufacturer located in Chonburi. MLB is made from mass lam purchased from outside vendors. FR-1 and CEM-3 laminates are imported from Malaysia and China, respectively, with FR-4 from South Korea and China. Toei Denshi has about 750 employees, of which 12 are Japanese staff members. As is often the case with Japanese companies in Thailand, almost all of its customers are other Japanese companies. Despite the fact that all materials are imported, only two weeks worth of laminates are stocked in the warehouse, according to recent reports, indicating efficient “just-on-time” material management. Toei Denshi is part of Kyoden, another Japanese electronics company which has several plants and subsidiaries. The company’s 2003 fiscal year revenue was expected to be about $350 million.
PCB Center
The PCB Center was founded by James Loh, a Hong Kong PCB pioneering entrepreneur who helped build PWB Corporation in Taiwan and OPC (Oriental Printed Circuit) in Hong Kong. Today, it is owned by several companies with the largest shareholder being Aspocomp of Finland (56.7% share). PCB Center concentrates on “specialty products” such as rigid-flex boards. Its parent, Aspocomp, was in deep financial trouble a few years back but is now firmly in the black. According to the company’s financial report, about 40% of its revenue comes from its two Asian subsidiaries, PCB Center in Thailand and ACP Electronics in Suzhou, China (51% owned by Aspocomp and 49% by Taiwan’s Chin Poon). Aspocomp’s 2003 revenue is expected to be approximately about $177 million.
Draco PCB Public Company Limited
Draco was founded as 50-50 joint venture between a Thai investor and a Taiwan investor (Chin Poon - Taiwan). The Thai partner is a purely financial investor while the Chin Poon supplied the technology. Since the company went public several years ago, the ownership of both investors is now about 25% each. Draco has a production capacity of 180,000m2 per month, of which 150,000m2 is SSB and 30,000m2 are STH boards. The total number of employees is about 500.
Flexible Printed Circuit (FPC)
Thailand’s Flexible Printed Circuit (FPC) output according to recent reports was estimated by government sources at $350 million and slightly less ($330~$340 million) in 2003 by private sources. Thailand has three substantial FPC makers. These are Innovex of the U.S and Mektec and PCTT of Japan. Innovex is engaged in back-end process and assembly. Mektec which is a subsidiary of Nippon Mektron is also engaged in back-end process and assembly. PCTT, a subsidiary of Fujikura Corporation, makes FPC from the very beginning of the process and is also engaged in assembly.
Trying to determine an accurate “value” of bareboards produced in Thailand is very difficult since companies in Asia and elsewhere often use their Thai facility as one stop in their production chain. For example, Mektec circuitized flexible boards are sent to Thailand from its divisions in Japan and Taiwan where the Thai operation deoxidizes film circuit, laminates overlay and prints solder masks, and cuts circuit into its final shape by punching which is a labor intensive “back-end” process suitable for Thailand. According to knowledgeable experts, depending on the complexity of FPC, the back-end process may account for 60% of production costs. All FPC makers report “final sales” in their respective native countries. How much is value-added in overseas operations is hard to calculate precisely. Mektec and other industry sources estimate that its back-end process adds about 60% of the value of FPC. Using this measure, Thailand activities may add between $90 million to $100 million.Mektec
Mektec’s main business is flip-chip “assembly” for disk drives. It attaches semiconductor dies using the flip-chip method to FPC for the disk drive industry which as noted earlier Thailand is the number 2 spot in the World. Mektec’s main customers are Seagate, Western Digital, Hitachi, Fujitsu, etc., and the total revenue from the entire business seems to be about $300 million. It is expanding its capacity by constructing two more buildings in High-Tech Industrial Park where KCE Technology is located and is also close to the Rojana Industrial park where Matushita and Elek & Etek are located.
Fujikura performs all production processes from research and development to manufacturing. Fujikura has many plants in Thailand includidng Precision Circuit Technology Thailand (PCTT) in Navanakorn and Prachin Buri (left), and in Ayutthaya (right)
Fujikura
Fujikura’s PCTT has four FPC manufacturing plants in Thailand, of which two are engaged in front-end as well as back-end processes. Its output is also more than $300 million, of which $200 million to $220 million is said to be “bare boards.” When all the above is added together, the total value of FPCs made in Thailand including “value added” may be estimated to be about $330 million to $340 million.
Hana Microelectronics
Other major players in both the PCB field and in related electronic components and assembly in Thailand include Hana Microelectronics which is involved in integrated circuit (IC) and printed circuit board (PCB) products. Hana’s earnings were over 508 million baht in the last quarter of 2003. This represented a 79% increase from the previous quarter while its total sales of US$60.7 million rose 23% on a year-on-year basis with IC sales growing 56% and PCBA (printed circuit board assembly) showing a slight rise of just less than 2%.
Delta Electronics
An even stronger player is Delta Electronics which is the largest Thai electronics company with a market capitalization of about 31.5 billion baht (just under US$1 billion) which has been ramping up its Swiss unit DES Power, formerly known as Ascom Energy System. Delta has changed its focus more to the telecommunication sector and which is expected to announce profits of 2.8 billion baht in 2003, up from 1.8 billion baht. recently that it received new orders for printed circuit boards (PCBs) from HDD maker Western Digital that would add $15 million in revenue for Cal-Comp’s fourth-quarter results in 2003. The first shipments were delivered in early November and were to continue into the first quarter of 2004 at 1.5 million PCB’s per quarter.
Innovex
Innovex which has two plants, one near Bangkok engaged in the backend process, and the other one near Chiang Mai in the North engaged in assembly. Innovex is also involved is back-end processes which are thought to add about $30-40 million in value. Other companies in this sector to note are Semiconductor Ventures and especially U.S. based Benchmark Electronics which announced it was expanding its Asian manufacturing by adding a 125,000 sq. ft. manufacturing space with an additional 55,000 sq. ft. available for expansion in a new facility in Nakorn Rachasima (Korat) in Thailand’s Northeast which will become fully operational in the third quarter of 2003.
Other component and IC players in the field include U.S. companies Agere Systems, Maxim, AMD, AT& T Microelectronic (Thailand) Ltd and National Semiconductor that has been in Thailand since the 1970s. From Japan, Sanyo, Matushita Electric which recently started production in Khon Kaen where they are soon expected to have over 3,000 employees, Mineba (which has nearly US$2 billion invested in Thailand’s electronics industry) and Rohm (Japan) which recently established Rohm Integrated Semiconductor (Thailand) Co., Ltd, an LSI manufacturer and expanded their Rohm Apollo Electronics (Thailand) Co., Ltd subsidiary making components. Alphatec Electronics Public Co., Ltd in Chachoengsao, PCTT Co Ltd (Printed Circuit Technology Thailand Limited) in Pathumthani, Goham, NS Electronics Co, Ltd in Bangkok, Cenplas Co., Ltd and Circuit Electronic Industries Public Co., Ltd.
As can be seen by the above, Thailand’s components and assembly industry is big and getting bigger. Also, as you may note, not all investment or even most investment is in or near Bangkok and increasingly as demonstrated in the case of Benchmark in Nakhorn Rachisima, Matushita in Khon Kaen, Innovex in Chiang Mai, the electronics component, PCB and PCBA industries are decentralizing to the more rural provinces. Even with the undervalued Chinese currency making China at first appear low-cost and more attractive, Thailand has remained attractive with direct investment in the sector jumping 90% in the first 10 months of 2003 over the same period in 2002 to exceed 54 billion baht. The Board of Investment (BOI) noted that the final figure was even higher at 64.6 Billion for the electronics & electrical sector and further noted that 11 additional projects were approved in January-February with a value of investment of 1,875 million Baht. From these figures, Thailand seems to be justifiably proud in its growing prowess in this sector and looks destined to be the clear electronic and ICT powerhouse for Southeast Asia and one of the top tier producers worldwide.
Reported by:
Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)
Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. Mr. Runckel is one of only two non-Ambassadors to receive this award in the 200-year history of the U.S. diplomatic service.
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