Thailand is facing an issue not often found in developing economies. Due to the previous success in controlling population growth, which significantly lowered poverty rates in the country, it is now stuck with an aging society and a skilled-labour shortage.
Based on a recent nationwide survey, a quarter of businesses are reporting shortfalls of hires and another report suggests for every 100 openings, companies could only find 77 recruits. This is an undesired outcome of Thailand’s very low rate of unemployment which has averaged around 1% for the past ten years. The problem is even more pronounced in the industrial sector where around 600,000 vacancies remain unfilled. This issue leaves industrial expansion plans stuck at square one.
Thai businesses have always recruited from neighbouring countries, but as living standards and wages improve in migrant workers’ own countries, businesses are now scrambling for a more sustainable solution.
The fourth industrial revolution, often referred to as Industry 4.0, is currently one of the Thai government’s most recent intitiatives to address the labour shortage, and increase the nation’s output. Backed by Thailand’s Board of Investment (BOI) a number of manufacturers have shifted to smart factories where cyber-physical systems make decentralised production decisions as the machines monitor actual physical processes by themselves.
Thailand is the world’s second largest producer of computer hard drives after China accounting for about 40% of global HDD production, exporting more than U.S.$12 billion worth annually. One of the leading players in this industry, Seagate Technology was amongst the first multinational firms in Thailand to have invested in a fully automated smart factory, where their robots assemble hard drives 24 hours a day, while providing humans with real time updates via internet of things.
Industry 4.0 is not limited to changes at the factory, Thai soft drink maker Ichitan employs a fully automated warehouse, which determines the number of packages to be sent to the bay for shipping based on the sales data it automatically acquired through the cloud, via point of sales devices at retail outlets in the city.
There is still some debate about what Industry 4.0 will mean to the global manufacturer and the trend to relocate to increasingly risky lower wage countries. Certainly many in the West hope to see Industry 4.0 spark a trend of ‘onshoring’, where their manufacturers bring their factories home, but the competition for this direct investment is far from over as relatively low cost markets with established industrial bases like Thailand also race towards the fourth industrial revolution.