High costs and weak economy deter adoption
Driven by a growing shortage of workers and increased wages, Thai businesses have eagerly embraced automation to cut costs and improve productivity, but more government incentives would help to accelerate such development, executives say.
Automation has been applied widely in upstream industries such as synthetic fibres as well as the country's large and important automotive and electronics sectors, said Chen Namchaisiri, vice-chairman of the Federation of Thai Industries (FTI).
"The use of automation has been seen increasingly in recent years as companies have managed to cope with higher wages and shortages of labour," he said.
Automotive and hard-disk drive (HDD) manufacturers are leading the way, along with some electronics producers, but in general Thailand trails its neighbour Malaysia when it comes to automation.
"Malaysia has also faced a labour shortage and that has driven the need for automation. Thailand, meanwhile, has a larger supply of labour than Malaysia but the use of automation has also been on the rise in this country," Mr Chen told Asia Focus.
Mr Chen was responding to the findings of the Grant Thornton International Business Report (IBR), which showed that the number of Thai businesses planning to automate key processes was below that of their Asean peers, notably Malaysia and Indonesia.
Andrew McBean, a partner with Grant Thornton, said automation got a boost after the 2011 floods in Thailand, when many companies had to replace damaged machinery. But since then, activity has levelled off. Indonesia, meanwhile, has been moving ahead because its economy has been growing at a faster pace than Thailand's.
"Another issue is economic optimism. It is harder to invest in anything when money is a bit tight. We can perhaps hope to see a greater appetite for evolving these plants once economic optimism returns. Optimism is relatively strong in Indonesia but not in Thailand," Mr McBean, who used to be based in Indonesia, told Asia Focus.
Mr Chen noted that the Thai Board of Investment (BoI) offered incentives for large companies to invest in automation. Commercial banks have also keen to provide loans for small and medium enterprises (SMEs) to modernise.
Suparat Sirisuwannangkura, a senior vice-president of Toyota Motor Thailand, said the Japanese automaker over the past 10 had adopted automation at factories in Thailand. Robots now handle some processes, such as painting and welding, at all three Thai factories, he said.
"It's not a matter of wages or a labour shortage. We have done this mainly because of quality control issues and in some areas, there are safety risks for our staff," said Mr Suparat, who is also chairman of the FTI's Automotive Industry Club. "Automation also gives us production flexibility while staff are still needed to operate the machines.
"The area where automation should play a bigger role is automotive parts suppliers. Only big companies like (Japan-based) Denso or Thai Summit can do that. We have been urging the government to provide support to SMEs to adopt automation."
One way to help smaller businesses, he said, would be for the government to encourage the development of robots by local universities. These could be priced within reach of small-scale businesses seeking to automate operations.
At present, Thai companies have to import costly robotic systems from Germany, Japan, China and Taiwan.
As well, Mr Suparat added, the BoI could offer incentives for foreign robotics companies to set up production facilities in Thailand, through joint ventures with local companies, to supply local and export markets.
Thavorn Chalasathien, chairman of the Human Capacity Building Institute at the FTI, said that automating production was aimed primarily at increasing productivity, as competition will rise once the Asean Economic Community (AEC) is formed.
Productivity in Thailand reportedly grows by 8-10% a year although the rate should be in double digits, he said.
"Thailand has to maintain its status as a real manufacturing centre in the region as the country has yet to upgrade to become a design or research and development hub. And in order to maintain that status, automation is the key," said Mr Thavorn, a former vice-president of the Thai Auto Parts Manufacturers' Association.
One project in the pipeline by Mr Thavorn's team is the establishment of the Manufacturing Automation and Robotics Institute to be used as a central facility for companies to learn and develop automation capabilities.
"We don't need to go for full-function automation but instead focus on a semi-low-cost automated operation," he told Asia Focus.