Global Supply Chain Shift​ from China, While Thailand Emerges as Key Player

• 4 August 2024
• Construction Focus
• 1744 Views

Thailand has positioned itself as a prime investment destination in the ongoing supply chain reformation from China, attracting substantial investment across key industrial clusters over the next decade, according to Michael Glancy, Country Head of JLL Thailand. This shift, driven by the need for supply chain diversification, is detailed in a recent report by Jones Lang LaSalle (JLL) published by Retalkasia on 26 July 2024.

The next decade is expected to see an acceleration in the diversification of manufacturing and production locations across Thailand, Southeast Asia, and India. Glancy emphasised that Thailand is set to benefit significantly as companies implement the China+1 strategy, which involves establishing additional manufacturing bases outside of China to mitigate supply chain disruptions. The country’s competitive incentives and proactive government policies are instrumental in attracting foreign direct investment, particularly in the electrical, electronics, and electric vehicle sectors.

“In 2023, Thailand achieved its highest industrial land sales in 17 years, indicating a robust investment climate,” Glancy noted. “Thailand’s strategic geographical position, well-developed infrastructure, and skilled workforce make it an attractive location for top-tier international investors and manufacturers.”

Krit Pimhataivoot, Head of Capital Markets at JLL Thailand, echoed Glancy’s sentiments, highlighting the strong influx of inquiries from international investors. He emphasised JLL’s commitment to providing comprehensive market intelligence to facilitate site selection and land acquisition, ensuring that clients can seamlessly integrate into the value chain and maximize opportunities in Thailand’s thriving manufacturing industry.

“Diversification within supply chains is a natural step for companies involved in manufacturing,” stated Michael Ignatiadis, Head of Manufacturing Strategy for Asia Pacific at JLL. “Southeast Asia and India complement China’s production strength, but companies need to adopt a flexible mindset towards land selection and funding options to respond quickly to supply chain shifts.”

The driving force behind this trend is not only the need for supply chain diversification but also the region’s strong economic fundamentals, including a large labour pool, favourable costs, and various incentives. Rising costs in China over the past decade, including higher wages and material costs, have accelerated this shift, making industrial land prices in China up to twice as high as in some Southeast Asian countries and India.

JLL’s report estimates that while China still holds the lion’s share of manufacturing foreign direct investment in the region, the gap is narrowing. The report underscores the importance of evaluating non-cost factors such as skilled labour, infrastructure, environmental regulations, proximity to suppliers and customers, and political stability, which significantly contribute to a factory’s long-term success and sustainability.

As the supply chain landscape evolves, Thailand’s proactive measures and favourable business climate position it as a key player in the global manufacturing and supply chain ecosystem.

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