Market InsightsThailand

Sourcing & Manufacturing in Thаilаnd: An Introduction

By 15 April, 2022June 30th, 2023No Comments

Busy street in Bangkok

In this article, we review Thailand as a manufacturing destination and why it’s considered one of Asia’s most important export markets.

First, we cover the benefits and disadvantages of choosing Thailand for manufacturing. This will give you an understanding of why companies keep or relocate production to neighboring countries.

The article also gives you an overview of Thailand’s major manufacturing industries, the most active economic regions, and its free trade agreements.

Thailand Overview:

  • Population: Around 70 million
  • Capital: Bangkok
  • Bordering countries: Myanmar, Laos, and Cambodia
  • Major cities: Bangkok, Nonthaburi, Nakhon Ratchasima, Chiang Mai

Benefits of Manufacturing in Thailand

Setting up manufacturing in an emerging market can be rewarding but is oftentimes challenging. It’s crucial to find a balance between the potential cost savings and future growth prospects, along with the existing infrastructure and business environment.

Let’s review some of the major benefits of choosing Thailand as a manufacturing destination.

Established manufacturing sector

Thailand has an established manufacturing sector, particularly in the electronics, automotive, and petrochemical industries. The sector has been active since the 1980s and with foreign multinationals present, giving the country a head-start over many Asian countries.

Over the years, Thailand has managed to build up a robust manufacturing infrastructure by Southeast Asian standards. The high reliance on local suppliers, networks, and its business ecosystem makes relocations to nearby countries a non-priority to some companies.

This is something we touched on in our article about manufacturing in China, and the importance of its business ecosystem. It’s comparatively easy to move a factory, but it’s difficult to relocate a business ecosystem in a short time.

Low labor costs

Thailand is not the most competitive country in Southeast Asia in terms of labor costs. Vietnam, the Philippines, and particularly Indonesia have lower labor costs, being 30% to 50% lower than Thailand on average.

With that said, Thailand is still considered a low-cost country for manufacturing and with labor costs that are almost a third of China’s.

Ease of doing business

Thailand is a business-friendly nation that scored high in the World Bank’s Ease of Doing Business (EODB) ranking. In 2020, it was listed in the 21st spot among 190 countries globally, only behind Malaysia in 12th place, and Singapore in 2nd place.

By comparison, Vietnam was ranked 70th, Indonesia 73rd, and the Philippines 95th.

Contributing factors include Thailand’s active approach to simplifying the process of starting businesses and paying taxes. It has also introduced electronic submission of customs declarations, to give another example.

What are the disadvantages?

Thailand might have advantages thanks to its developed infrastructure and business-friendly environment. At the same time, it struggles with issues that make other Southeast Asian countries more preferable for investors. Let’s review the most prevalent ones.

Political instability

In the last century, Thailand has experienced the most military coups worldwide, including 13 successful ones and 9 failed. The latest coup took place in 2014 when the Thai military abruptly suspended the constitution and started to control the government.

Even if the economy has remained relatively stable due to the coup, the events affect companies’ decisions to invest in the country. According to the IMF, the military coups and following instability have a clear impact on the slow economic development.

The 2014 coup has also put negotiations and introductions of free trade agreements on halt.

Slow economic growth

Thailand saw great growth in the 80s and 90s and was the fastest-growing economy in the world from 1985 to 1994. That abruptly ended in 1997 with the Asian financial crisis, which was triggered in Bangkok when the Thai baht was unpegged from the US dollar.

In recent years, Thailand’s economy has grown at a timid pace, recording a growth of 2.27% in 2019, right before the pandemic. Vietnam and the Philippines, on the other hand, grew by 6% to 7%, remarkably higher figures.

It’s fair to say that Thailand had its booming days in the 80s and 90s, but will face difficulties in competing with neighboring countries in terms of economic growth in the coming years.

Aging population

Thailand’s population growths by a slow pace and will stagnate around 2028. The population growth rate has declined since the 1970s, which is partly related to its economic development.

Birth rates and median ages both tend to decline as countries become more developed.

Looking at median ages, Thailand has a median age of 40.1 years as of 2022. This is well above that of Vietnam (32.5 years), Indonesia (29.7 years), and the Philippines (25.7 years).

What products are manufactured in Thailand?

When choosing a manufacturing destination, it’s crucial to understand what products the country specializes in. The underlying infrastructure and development of supply chains have a close correlation to the primary industries.

While Thailand has a broad manufacturing sector, there are a few industries that account for a majority of the exports.


Thailand is a major exporter of electrical and electronic equipment (E&E) that accounts for 24% of exports. The sector contributes 10.4% of GDP and employs 800,000 employees nationally, with 2,500 companies present.

Products manufactured include washing machines, air conditioners, computers, semiconductors, and display panels.

In recent years, we’ve also seen local brands popping up, including Casper, which targets international markets. It plans to become a leading provider of electronics, refrigeration products, and appliances.

Automotive parts

Thailand is a manufacturing hub for automotive parts and vehicles, being the largest exporter in ASEAN. It’s the 12th biggest exporter of vehicles globally and the industry accounts for around 10% of the total GDP.

In the 1960s, Japanese vehicle manufacturers entered the market with brands like Mitsubishi and Toyota. American and German companies soon followed. With decades of development in the automotive industry, Thailand is sometimes even referred to as “The Detroit of Asia”.

During the pandemic, the automotive industry saw strong growth at the same time as other industries suffered. Vehicle production is expected to exceed 2 million per year by 2024, while 50% of locally produced vehicles will be electric (EV) by 2030.

Agricultural products

The agriculture industry accounts for around 6% of Thailand’s exports but employs around one-third of the population. Thailand is currently the world’s biggest exporter of rubber, tapioca products, frozen shrimp, canned pineapple, and canned tuna, to give some examples.

Rice is the most important crop and around 60% of the country’s 13 million farmers grow the product. Agricultural production accounts for almost 10% of the GDP, on par with the automotive industry.

Industrial Regions & Cities

Most of Thailand’s manufacturing can be found in Bangkok and its surrounding areas, as well as in the North. Let’s review the cities and provinces that account for most of the economic output nationally.


Foreign companies first targeted Bangkok when they started to set up manufacturing in Thailand.

The city is the most densely populated with developed infrastructure by local standards. It also has a strategic location along the Southern maritime border with superior shipping capabilities.

Much of Thailand’s electronics manufacturing can be found in the surrounding areas of Bangkok. Other major industries include textiles and garment production, food processing, and petrochemical products.

Automotive manufacturers are also active in the surrounding areas of Bangkok, including Nissan, Ford, and General Motors.

Eastern Seaboard

The eastern seaboard is a major region comprising Chonburi Province, Rayong Province, and Chachoengsao Province. It’s the home of many car and automotive parts manufacturers, including companies like Ford and Denso.

Rayong is particularly dense with manufacturers of rubber and petrochemical products, but also electronics and automotive parts. Emerson, Daikin, and Bosch are just examples of companies with factories in Rayong.

Chonburi is famous for its vast electronics and automotive parts manufacturing. Sony, Toyota, Mazda, and Triumph are located here while the province is also home to the country’s biggest sea port, Laem Chabang.

What speaks for the region as a more promising manufacturing hub is the lower labor costs and the development of its infrastructure. Much investment will be allocated to the region in the coming years.

Samut Prakan

Samut Prakan is a province located to the South of Bangkok, covering almost the whole Southern sea border. Being part of the Bangkok Metropolitan Region, it has received many investments in the past decades, thanks to its proximity to Bangkok and developed supply chains.

The province is considered the most important transportation hub and where Suvarnabhumi Airport, the biggest international airport, is located. Various electronics and automotive parts manufacturers can be found here, including Denso, Toyota, Isuzu, Nissan, and Panasonic.

It also has a strategic location as it’s considered a gateway to the Eastern Economic Corridor (EEC).

Thailand’s Free Trade Agreements

Thailand has country-specific trade agreements with Australia, Chile, China, Laos, New Zealand, Japan, Peru, and India.

It’s also a member of the Association of Southeast Asian Nations (ASEAN), including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, and Vietnam as additional member countries.

ASEAN currently has free trade agreements with the following countries:

  • ASEAN-Australia and New Zealand
  • ASEAN-China
  • ASEAN-India
  • ASEAN-Japan
  • ASEAN-Korea

The Regional Comprehensive Economic Partnership (RCEP) is another trade agreement signed between 10 ASEAN countries and:

  • Australia
  • China
  • India
  • Korea
  • Japan
  • New Zealand

Thailand also negotiates potential future trade agreements with the US, Turkey and Pakistan, for example.


Thailand has a developed manufacturing industry by Southeast Asian standards and foreign companies have been present for decades. Major industries include vehicle and automotive parts manufacturing, agricultural production and food processing, electronics manufacturing, and petrochemical production.

Even if Thailand has problems with an aging and stagnating population, slower economic growth, and political instability, it remains a major manufacturing destination in Southeast Asia. It’s still considered a low-cost market with developed infrastructure and supply chains.

Many manufacturers rely on local sub-suppliers and the overall business ecosystem, which makes it difficult to relocate production, at least in the short term. With that said, upcoming markets like Indonesia and Vietnam will increasingly impact companies’ manufacturing strategies.

Read more about our market entry services or other consulting capabilities.

    Ready to talk to our experts?

    The insights provided in this article are for general informational purposes only and do not constitute financial advice. We do not warrant the reliability, suitability, or correctness of the content. Readers are advised to conduct independent research and consult with a qualified financial advisor before making any investment decisions. Investing in financial markets carries risks, including the risk of loss of principal. Past performance does not guarantee future results.

    The views expressed herein are those of the author(s) and do not necessarily reflect the company's official policy. We disclaim any liability for any loss or damage arising from the use of or reliance on this article or its content. ARC Group relies on reliable sources, data, and individuals for its analysis, but accuracy cannot be guaranteed. Forward-looking information is based on subjective judgments about the future and should be used cautiously. We cannot guarantee the fulfillment of forecasts and forward-looking estimates. Any investment decisions based on our information should be independently made by the investor.

    Readers are encouraged to assess their financial situation, risk tolerance, and investment objectives before making any financial decisions, seeking professional advice as needed.