Thailand - Sanyo shuts down Thai shop

Sanyo Semiconductor has decided to abandon its main production facilities in Thailand because of the recent flooding, which badly damaged its machinery and operations. The company is the first few foreign manufacturer since the disaster to announce an end to most production in the Kingdom.

The company says it will lay off about 1,600 workers and close its plant in Rojana Industrial Park permanently, said Somboon Hotrakul, director of the Electrical and Electronics Institute. However, he noted, there is currently a labour shortage in this industry.

Sanyo Semiconductor (Thailand), which has operated since 1990 producing semiconductors, transistors and large-scale integrated circuits, will close the flood-ravaged factory on December 25.

The company decided that since it would have to spend a lot of money repairing or replacing the damaged machinery, it would shut down the Rojana plant, though it "plans to maintain limited production at its Bang Pa-in site", according to its website.

Impact on supply chain

Sanyo Semiconductor (Thailand) is a business unit of US-based ON Semiconductor Corporation. The disruption at Ayutthaya's Rojana Industrial Park had an impact on the supply chain of ON Semiconductor worldwide.

The Rojana operations are estimated to have produced about 5-10 per cent of ON Semiconductor's worldwide output as measured by revenue of US$905.8 million for the second quarter of this year.

"It has been determined that given the severity of the flood damage to the production facilities ON Semiconductor operates in Thailand, and the excessive cost required to recover and reconstruct these facilities, it is not financially viable for us to fully restart our probe, assembly and test operations in Thailand for an indefinite period, if at all," the company said.

"The bulk of the company's Thailand operations will be permanently transferred to other existing ON Semiconductor facilities that have available production equipment capacity and excess floor space, and to some external subcontractors as appropriate," it said.

Somboon said the Sanyo Semiconductor case had confirmed the institute's concern that some electronics companies would leave Thailand because of the damage they sustained from flooding.

The Electrical and Electronics Institute is keeping an eye on whether other electronics plants decide to close and flee Thailand because of the disaster.

The shutdown of the Sanyo factory will not affect the supply chain in the Thai electronics industry as most of its products are exported, he said.

The Sanyo decision follows that of Maxon Systems, a South Korean electronics firm, which recently decided to move one of its operations to Cambodia to avoid the planned rise in the Thai minimum wage to Bt300 per day in April, as well as uncertainty over future floods.

Somboon noted that Japanese electronics firms had faced two major problems this year, the tsunami in their own country in March and then the inundation in Thailand. These problems affected their operational results, so it is possible some of them will close their enterprises.

He said it was not clear whether other electronics companies would close their operations, as some of them were still evaluating the damage from the floods.

"It is expected to be a month or two before we see the clear picture. I believe that electronics companies are evaluating the damage, so the result [of that assessment] should come soon," he said.

Somboon added that the Thai electronics industry employed 500,000-600,000 workers. Because of its labour-intensive nature, it faces a shortage of 50,000-60,000 workers.

The institute will follow whether the shutdown of some plants affects the labour shortfall for the industry as a whole.

The company said on its website: "We have begun the process of communicating this difficult news to approximately 1,600 of our Thailand manufacturing employees."

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