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."
Business Desk
The Nation
Business & Investment Opportunities
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