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The electronics sector accounts for 20% to 50% of the total value of exports of most countries in Asia. High quantities of the world’s consumer electronics like televisions, radios, computers, and cellular phones come from the ASEAN region. More than 80% of the world’s hard drives are made in ASEAN.
Thailand is one of the largest electronics assembly bases in Southeast Asia with over 2,300 companies powered by 400,000 employees. A world leader in production of hard drives, integrated circuits, and semiconductors, Thailand is also ASEAN’s largest production base in the electrical appliances sector, the world’s second largest producer of air-conditioning units, and is the fourth largest for refrigerators.
Top manufacturers in Thailand include European companies such as Philips, Electrolux, Schneider; and American companies like Western Digital, Seagate, Honeywell, and Carrier. Other major companies are Japanese brands Sony, Nikon, Pioneer, Panasonic, Sharp, Hitachi, Mitsubishi, and Toshiba; South Korean companies LG, and Samsung; and Taiwan’s Acer.
Several multinational companies also have bases in the Philippines. These include seven out of the world’s top twenty chipmakers: Texas Instruments, Philips, Fairchild, Analog, Sanyo, On Semi, and Rohm; as well as four of the largest producers of hard drives: Hitachi, Toshiba, Fujitsu, and NEC. The Philippines’ key products are hard drives and semiconductors. It supplies the world with 2.5 million hard drives per month and captures 10% of the semiconductor manufacturing services global supply.
Meanwhile, Malaysia has grown to become a major global manufacturing hub with several electronic manufacturing services (EMS) companies. From a mere four companies in 1970, Malaysia’s electronic and electric industry today has expanded to more than 1,695 companies with total investment of around US$ 35.5 billion and a workforce of more than 600,000 people.
Over the years, Malaysia’s electronics industry has invested in research and development and explored outsourcing of non-core activities domestically as part of efforts to move up the value chain. This focus on capital-intensive operations led the shift of labor-intensive industries to Indonesia and Thailand. Analysts predict that once Thailand also moves up the value chain, Viet Nam will take its place in the lower end, light goods manufacturing sector. Eventually, Myanmar is set to take advantage of its low employee costs to compete in labor-intensive industries as other ASEAN countries continue to mature.
Harmonious production networks in Asia
The electronics industry has greatly benefitted from ASEAN’s integrated production networks which foster improved trade with larger Asian economies like China and Japan.
The Asian Development Bank says China plays a crucial role in ASEAN electronics industry not as a competitor but as a market. China is an assembly base and imports several parts and components from several Asian countries such as ASEAN Member States and exports to markets outside the region.
Credit Suisse studies show that as downstream producers for Japan, ASEAN economies are likely to benefit from Japan’s reflation due to cheaper intermediate goods imports. Indonesia is expected to benefit the most since Japan is both its supplier and consumer. Malaysia is also poised to gain as its end-user product exports to Japan increase with stronger domestic demand.
Thailand’s strength in many products such as radios, televisions, and printers will continue to support the country’s exports this 2013. While the Philippines is set to underperform, long-term predictions for the Philippines is bullish. Credit-Suisse calls the Philippines “the best structural growth story in ASEAN,” which will, in the long run, increase Foreign Direct Investments (FDIs) and improve its electronic exports.
Major shifts in ASEAN economic policies and improvements in technologies allowed the vertical integration of production networks among ASEAN countries and created a unified supply chain for electronic products.