Floods: Will electronics factories remain in Thailand?

Floods on top of minimum wage increases make factory relocation to other countries increasingly attractive.

Photo above of Hard Disk Drive (HDD). Floods have disrupted production of this important computer component causing a global supply shortage.

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Foreign electronics makers weigh leaving, Flight would worsen export decline by Nareerat Wiriyapong

Electronics exports will drop by at least US$3 billion this quarter with a further decline possible next year as flood-affected foreign companies consider moving out of Thailand, says the Electrical and Electronics Institute of Thailand.

The EEI said its estimate is a conservative forecast, as hard-disk drive (HDD) shipments alone will fall by at least $2 billion in the quarter.

Electronics exports grew by only 5.7% year-on-year in the first nine months to $25.9 billion, with HDD shipments falling by 1.6% to $8.89 billion.

The EEI predicts shipments abroad of electronic goods will decrease by 5% this year from $33.5 billion last year.

Exports in this category grew by only 2-3% year-on-year in the first nine months.

"Several companies are starting to think about relocating due to the daily minimum wage increase [to 300 baht] and the floods," said an EEI official.

The Board of Investment has agreed to waive taxes on replacement machinery imports, but the criteria remain unclear.

South Korea-based Maxon Systems earlier this week said it had decided to shift one of its three plants in Rojana Industrial Park to Sisophon, Cambodia.

Japan's Minebea Group also has an inundated plant in Rojana, while its factory in Nava Nakorn Industrial Estate is partially submerged.

Its other three plants remain dry.

"We have temporarily relocated some work to subcontractors in Thailand and abroad," said a Minebea executive, adding that the group had not yet decided on relocating away from Thailand.

I cannot comment at the moment about our future investment, but it's very important for industrial estates here as well as the government to introduce measures to ensure safety from such severe flooding.

Gritsada Suptuaychone, secretary of the Federation of Thai Industries' electrical, electronics and allied industries club, said the coming sharp wage increase is a major concern of producers.

Given the floods, the cabinet this week postponed the minimum wage increase from January to April.

"The wage will suddenly increase sharply without any support measures from the government, while our margin is very thin," said Mr Gritsada.

With such widespread flooding, companies cannot ship their products even if their factories are not submerged, causing a global supply shortage.

In light of the crisis, Kasikorn Research Center (KResearch) has cut this year's forecast for electronics export value to $30.15 to 31 billion, a contraction of 6% to 8.5% against growth of 21.9% last year.

The floods have ravaged seven industrial estates - five in Ayutthaya and two in Pathum Thani - that are major manufacturing bases for electronics and electrical goods, some 44.5% of the industries' local production facilities.

KResearch forecasts electrical appliance exports may grow by only 7-9% this year for a value of $22 billion to $22.4 billion, down from 32.3% growth last year. 

Most affected will be refrigerators, TVs, video/DVD players, TV parts and air-conditioners. 

The electrical component industry will be less affected given that some of these production facilities are located well east of Bangkok. 

(Source: Bangkok Post, Foreign electronics makers weigh leaving, Flight would worsen export decline, 25/11/2011, Nareerat Wiriyapong, link) 

Economic Impact of Floods Vocabulary

Hard Disk Drive (HDD) - the part in a computer that keeps all your files and data (See Wikipedia)

hard-disk drive (HDD) shipments
shipment - goods sent from one place to another place (example: from factory to store)

alone - only this, considered by itself (not included with other things)
hard-disk drive (HDD) shipments alone - only hard drive shipments (by themselves, not combined with other things) 

hard-disk drive (HDD) shipments alone will fall by at least $2 billion in the quarter

disrupt - cause difficulties that prevent some process from operating in the normal way, interrupt ทำให้ยุ่งเหยิง,  ทำให้ยุ่งยาก, ทำให้แตกแยก, ทำให้เสียกระบวน, ทำให้เสียระบบ
disrupted production

component - a part which combines with other parts to form something bigger ส่วนประกอบ,ส่วนเสริม
computer component

global - throughout the world ทั่วโลก
shortage - when there is not enough of something การขาดแคลน
global supply shortage

weigh - think about making a certain decision (thinking about good points and bad points, evaluating, assessing, judging before making decision)
X weighs Y - X thinks about making decision Y

weigh leaving - think about leaving
foreign electronics makers weigh leaving

flight - leaving quickly
flight would worsen export decline

quarter - three months of the year (on the business or government calendar)
electronics exports will drop by at least US$3 billion this quarter

estimate - guesses an amount (not exact); to say what you think an amount or value is or will be, either by using available information or by guessing คาดคะเน โดยประมาณ
conservative - cautious, doesn't want to experiment, not willing to try new ideas

forecast - a statement about what will happen in the future based on information available now พยากรณ
its estimate is a conservative forecast

category - a group of  things that have similar qualities หมวดหมู่ ประเภท
year-on-year - a time period this year compared to the same period last year (example: the first nine months of the year) 

exports in this category grew by only 2-3% year-on-year in the first nine months 

wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wage - the smallest amount of money that a worker can legally be paid for their work
daily minimum wage - the smallest amount of money that a worker can legally be paid for one day of work

relocating - moving to a new location (example: relocating production operations to a different country takes a long time)

several companies are starting to think about relocating due to the daily minimum wage increase [to 300 baht] and the floods an EEI official.

waive - give permission not follow rules and regulations; give permission not to do something
waive taxes

replacement - someone or something that takes the place of another ผู้การทำหน้าที่แทน, การทำหน้าที่แทน
replacement machinery imports

criteria - the rules and standards for evaluating (assessing, judging) something and making a decision บรรทัดฐาน (See glossary)
the criteria remain unclear

the Board of Investment has agreed to waive taxes on replacement machinery imports, but the criteria remain unclear

shift - to transfer; to move from one place to another เคลื่อนย้าย
plants - factories
decided to shift one of its three plants in Rojana Industrial Park to Sisophon, Cambodia.

partially - partly; not completely
submerged - under water จมน้ำ อยู่ใต้น้ำ
partially submerged - part of it is under water (not all of it) 

its factory in Nava Nakorn Industrial Estate is partially submerged. Its other three plants remain dry.

inundated - flooded ถูกน้ำท่วม, จมลงใต้น้ำ
inundated plant - a factory that has been flooded (with floodwaters that prevent the factory from being used)

temporarily - for a limited period of time; not permanent ชั่วคราว
relocated - moved to a new place
temporarily relocated - moved to a different location temporarily (for a period of time, not permanent)

subcontractors - other companies that have agreed to do some work for the company (agreement = contract) 
we have temporarily relocated some work to subcontractors in Thailand and abroad

executive - the highest level managers in a company
a Minebea executive

comment - to express an opinion แสดงความคิดเห็น remark, telling what you think or what your opinion is about an issue หมายเหตุ
moment - a very short period of time; a particular time or occasionชั่วขณะ, โอกาสสำคัญ
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)

I cannot comment at the moment about our future investment

measures - actions taken to solve a problem มาตรการ
ensure - to make certain that something happens or is done รับรอง ให้ความมั่นใจ ให้การยืนยัน 
severe - very serious and worrying ที่รุนแรง ที่น่าเป็นห่วง

introduce measures to ensure safety from such severe flooding

sharp - strong ที่รุนแรง (here: very large, very fast)
concern - a worry ความกังวล
major concern - very big worry (one of the biggest things they worry and think about)

the coming sharp wage increase is a major concern of producers

postponed - delayed; decided that something will be done at a later time เลื่อนออกไป

the cabinet this week postponed the minimum wage increase from January to April.

support - help, by giving money, for example สนับสนุน
support measures from the government

margin - profit margin, profit (expressed as a percentage of revenue or sales)
our margin is very thin - profit is low (the percentage of profit they are making is very small)

the wage will suddenly increase sharply without any support measures from the government, while our margin is very thin

widespread - happening or existing in many places, or affecting many people อย่างแพร่หลาย
widespread flooding

crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
In light of the crisis, ...- considering the crisis ..., because of the crisis ... .

forecasts - what experts say will happen in the future คาดการณ์
forecasts electrical appliance exports may grow by only 7-9% this year  ... down from 32.3% growth last year
cut this year's forecast for electronics export value to $30.15 to 31 billion,

contraction - decreasing in size, shrinking, growing smaller, get smaller
a contraction of 6% to 8.5% against growth of 21.9% last year

ravage - destroy
floods have ravaged seven industrial estates

local - in this country (here: Thailand)
facilities - the buildings and equipment for an activity (for example, athletics facilities) สถานที่และสิ่งอำนวยความสะดวก สิ่งอำนวยความสะดวก
local production facilities

players - participants in an industry; companies and individuals who compete in a market; an important company, person, or country in an industry ผู้ค้าคนสำคัญ หรือผู้ค้ารายใหญ่