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On the Ground in Thailand: Tracking the Tech Industry

Late last year, Thailand suffered devastating floods, which wreaked havoc on the high-tech manufacturing sector. Semiconductor, EMS, and hard disk drive companies were among the hardest hit.

This week, I am on the ground in Thailand. I’m here to understand what the impact was, see for myself how the recovery efforts are going, and talk to people about what's happening now. I'll be talking with officials from the Thailand Investment Board and the local American Chamber of Commerce, meeting with senior-level manufacturing and operations executives, and visiting plants damaged by the floods.

Over the next few days, you'll find some daily dispatches posted here, and in the next couple weeks, EBN and our sister site, Velocity, will be featuring more in-depth analysis on doing business in emerging markets and how developing countries like Thailand deal with natural disasters and supply chain disruptions. We'll use the trip to focus on some significant things happening in the hard disk drive segment.

To provide a bit of perspective on how severe the floods were, I pinged an economist who has spoken about the Thai floods for major news outlets like the BBC. Citing Thai government and World Bank statistics, Ramya Suryanarayanan, an economist at DBS Bank in Singapore, told EBN that the flooding caused a loss in output of about 2.5 percent of GDP (or approximately $9 billion in US dollars).

“This doesn’t include loss of capital stock and wealth — buildings, roads, fixtures, machineries, household fixtures/assets, etc.,” she said in an email. “Manufacturing and agriculture suffered the most. Manufacturing output dropped by 22 percent quarter-over-quarter, seasonally adjusted. Within manufacturing, the auto industry and hard disk drives were especially [hard-]hit, followed by machinery and equipment (air conditioners), domestic appliances (refrigerators), and semiconductors.”

Anecdotally, there's not much to see in terms of flood damage while walking around Bangkok. The worst-hit areas were away from the commercial center in the Lumpini neighborhood I'm in. But I've heard some stories and have a long list of questions to ask.

For instance, a few “common folk” — not company or government officials, but locals and ex-pats living here — told me informally that the government hasn't significantly progressed in taking measures that would prevent wide-scale flooding from reoccurring in the future. So what has been done, and what needs doing?

And as a Seagate executive mentioned in a recent blog, companies were forced to rethink their supply chain practices and beef up their emergency management strategies. (See: Opportunities Beckon as Risks Rise.) But what practices need to be reevaluated? And would preventative steps taken in one situation work well if the region goes under water again?

Thailand may be a small space on the overall high-tech supply chain map, but valuable lessons can be learned as a result of last year's natural disaster. Let's find out what some of them are.

For full disclosure, the trip is sponsored by the Thailand Investment Board and is part of an international press tour. All stories, however, reflect independent reporting, writing, and analysis.

11 comments on “On the Ground in Thailand: Tracking the Tech Industry

  1. garyk
    August 7, 2012

    What comes to mined is Business 101, DON'T put all our eggs in one basket!!!!!!!!!!!!

  2. Ariella
    August 7, 2012

    @garyk absolutely, because if anything happens to that basket then…, oh, I'm so tempted to mix metaphors here and say your goose is cooked. Well, to put it another way, you need a plan B and sometimes even a plan C.

  3. garyk
    August 7, 2012

    Ariella, that is a beautiful name, you are a smart lady!!

  4. Ariella
    August 7, 2012

    @garyk Very sweet of you to say, and I do appreciate any bit of sweetness I get today as it's been a very difficult day. Nice of you to brighten it now.

  5. SunitaT
    August 8, 2012

    the government hasn't significantly progressed in taking measures that would prevent wide-scale flooding from reoccurring in the future.

    @Jennifer, thanks for the post. Its really surprising to know that inspite of such huge devastation last year, government hasn't significantly progressed in taking measures that would prevent wide-scale flooding from reoccurring. Do you think slow response from the government will force the companies to move out of Thailand ?

  6. t.alex
    August 8, 2012

    Rumour has it that during the flooding period the government was slow to respond. And there has been no improvement so far for the next flooding should it happen.

  7. garyk
    August 9, 2012

    Forget the govenment, why should the govenment of any country get envoled?

    The company purchasing the product (the EGG) shouldn't put all there products in one basket!!! (one manufacturer, or manufactures in one country).

  8. Susan Fourtané
    August 12, 2012

    Hello, Jennifer

    I started reading your last article, and when I saw it part of a series I decided to start from the first one. Very interesting! 

    I particularly like that you have brought us a view from Thailand's manufacturing world after the floods. Normally, we hear a lot about the big manufacturing hubs, and too little about the small ones, like Thailand. 

    “the government hasn't significantly progressed in taking measures that would prevent wide-scale flooding from reoccurring in the future. So what has been done, and what needs doing?”

    That is a surprise. One would think that the logical thing to do would be to take immediate action looking into the future, right? 

    -Susan 

  9. Susan Fourtané
    August 12, 2012

    Gary, 

    “Forget the govenment, why should the govenment of any country get envoled?” 

    Well, to start with, any government of a country that experiences natural disasters should have the issue on the agenda. It's not only for the manufacturing companies, or any other company for that matter; it's for the whole nation's safety, protecting their jobs and homes, and the population, you see. 

    If the manufacturing companies decide to move their business elsewhere a lot of people get unemployed. Shouldn't the government think of this, too, and try to act fast in preventing the same last year´s results for next time? 

    -Susan 

  10. garyk
    August 13, 2012

    Susan,

    I'm sorry my message wasn't clear. I agree the government has to plan for the natual disasters. My message was for company's putting all there eggs in one basket, meaning suppliers of materials and products should not be one company or several companys in one county that would be unable to supply products if a Natual Disaster occures. You are absolutely correct. If the Thilands government isn't addressing the disaster in there country that there problem, there probably waiting for the USA to re-build there country.

  11. bolaji ojo
    August 13, 2012

    @Garyk, One of the more puzzling aspects of the global supply chain today is how complex things have become. Even companies that think they've diversified operations often found themselves held captive by the absence of a small but critical component.

    Diversification can mean having more than one source for a particular set of components but sometimes companies may find that their suppliers are located in the same region. Yes, they should verify location but imagine if you have to do that for all of the components that go into a single equipment? Risks can be mitigated, it cannot be eliminated completely from the supply chain.

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