Thailand’s robotics drive

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Thai investment in robotics and automation is rising steadily, but the country is leaving nothing to chance in its efforts to modernise, recently announcing several new incentives in an attempt to speed up its industrial modernisation. Brent Balinski spoke to Ajarin Pattanapanchai from the Thailand Board of Investment about the efforts to encourage automation.

As raw as it is, one measure of an industry’s efforts to lift its productivity is in the number of factory robot units purchased.

This is seen in figures from the Industrial Federation of Robotics’ last three surveys, highlighting China’s dash to cope with rising manufacturing wages. The trend is clear, with 36,560 in 2013, followed by 57,096 in 2014, and (a forecast) 68,000 in 2015.

New robot sales are also trending sharply upwards in Thailand. A separate study from the IFR predicts imports of industrial robots will jump 133 per cent between 2015 and 2018, led – as is the case globally – by automotive and electronics industry investment.

Ajarin Pattanapanchai, Deputy Secretary General at the Thailand Board of Investment, says the country’s industry is rapidly modernising, with investment in electronic control and robotics up about 20 per cent a year for the last five years.

“Mechanical robot arms are going up about 34 per cent per year in the last five years,” she told Manufacturers Monthly.

“There’s a very, very high demand in Thailand to use more automation and robotics.”

As well as imports, the country wants to build a robotics industry of its own. Employment in the sector is predicted to double to 15,000 by 2018, and the country’s government has rolled out incentives to try and stimulate investment.

Officially, the country is on a “Thailand 4.0” drive. Like many other nations it has identified a future based on high-value production, enabled by connectivity, data and high levels of automation.

Its manufacturing sector has been described as less sophisticated than some others, but it has notable successes in two crucial areas: automotive and electronics, as well as in processed food.

According to April’s Thailand Investment Review, the country is 12th in the world for motor vehicle production. In electronics, it is the world’s second-ranked producer and exporter of hard disk drives, with the total export value of electronics growing seven per cent from 2011 to 2015.

However, the need to modernise its manufacturing sector is significant. For example, the Thai auto sector is still described by Austrade as needing to raise its skill levels to be more competitive, and possessing “limited local ability to design and produce high technology parts”.

There’s work to be done to get to Industry 4.0.

“At average, the industrial [environment] in Thailand is maybe level two to three,” explained Pattanapanchai.

“We have several of the big multinational players, and their factories in Thailand are [approaching] 4.0. Very automated, very connected to the supply chain – we have some there, but on average they are about two to three… The very small ones are maybe at the level of two.”

Part of how the Board of Investment plans to join the so-called fourth industrial revolution involves a set of tax breaks and other incentives to encourage investment.

Under the Super Cluster policy, announced earlier this year, investment in targeted industries – including automation and robotics – attracts an eight-year corporate income tax holiday followed by a five-year 50 per cent corporate income tax relief after that. There is also import duty exemption on machinery and raw materials.

It applies to sectors identified as “advance technology and future industry”- oriented, including automotive and parts, electrical and electronics, eco-friendly chemicals, digital, food, and medical (see here for details).

Conditions include those wanting to claim the tax breaks having to collaborate with educational institutes. This is to “support or enhance or build a human resource in Thailand to match that demand,” explained Pattanapanchai.

According to this year’s edition of the triennial Deloitte Global Manufacturing Competitiveness Index, the nation is ranked 14th (Australia placed 20th) in the world.

The nation’s competitiveness, if this is to be strengthened, will depend on higher levels of automation, said Pattanapanchai.

(Thailand is also attempting to recover its levels of investment following its military coup, with applications for foreign investment slipping from 3,469 in 2014 to 1,038 in 2015.)

As the Deloitte report points out, the world is moving towards an advanced manufacturing future, driven by a convergence of physical and digital worlds. It’s predicted to be good news for established industrial nations like the United States and Germany, whose relatively high wages mean less than they used to.

Policymakers in countries like Thailand know that if they are to encourage investment and subsequent economic returns, they will have to encourage the use of advanced technologies.

In terms of Super Cluster tax breaks, Pattanapanchai’s organisation hopes they will be bear fruit as soon as possible.

“The [incentives] provide that for the project you set up your business in Thailand within this year and the production or the service – if it’s software or it’s system integration – the production and the service should start by the end of next year,” she said.

“This is the condition of our timeframe.”