February 19, 2025
BANGKOK – Thailand’s manufacturing sector is facing a growing crisis, with factory closures accelerating across the country.
For the past two years, an average of at least 100 businesses have shuttered their doors each month, according to data from the Kasikorn Research Center (KResearch).
This worrying trend shows no sign of abating, with forecasts suggesting closures will continue throughout 2025, impacting businesses of all sizes.
While overall factory openings in 2024 slightly outnumbered closures, the persistent rate of closures – exceeding 100 per month – paints a concerning picture.
The net reduction in operational factories, calculated by subtracting closures from new openings, has plummeted. Over the past two years (2023-2024), this figure has averaged just 52 per month, a stark contrast to the 127 monthly average seen between 2021 and 2022.
Government Optimism Tempered by Industry Concerns
Despite the mounting challenges, the government remains cautiously optimistic. Industry Minister Akanat Promphan acknowledged the closures, particularly within the automotive sector, but urged against undue alarm.
He emphasised the dynamic nature of the business landscape, highlighting that while some businesses close, new ventures emerge.
Akanat pointed to significant investments from international automotive giants such as Mazda (5 billion baht) and Toyota (55 billion baht) as evidence of continued confidence in the Thai market.
He also cited positive trends in other sectors, including electronics, semiconductors, and artificial intelligence (AI), which have attracted record levels of investment promotion.
Akanat stressed the government’s commitment to industrial reform, focusing on transparency and inclusivity for businesses of all sizes. He outlined plans to promote environmentally and socially responsible practices, leveraging foreign direct investment (FDI) to introduce new technologies and facilitate knowledge transfer to smaller operators.
Experts Highlight Key Challenges Facing SMEs
Kiatipong Ariyapruchya, a senior economist at the World Bank in Thailand, echoed the Akanat’s view on the importance of FDI in driving technological advancement for small and medium-sized enterprises (SMEs).
However, he also highlighted the significant hurdles facing Thai businesses, particularly in accessing funding, developing essential infrastructure, and addressing skills shortages. He further pointed to regulatory obstacles, particularly concerning fair competition, trade and investment, as critical issues needing attention.
Saengchai Teerakulvanich, chairman of the SME Confederation of Thailand, confirmed the scale of the problem, noting that closures extend beyond factories and impact a wide range of businesses.
He identified two main categories of closures: registered businesses that formally cease operations, and unregistered businesses that simply slow down or become inactive. Saengchai outlined seven key factors contributing to the rising tide of closures:
- Weak Consumer Spending: A sluggish economy, coupled with high unemployment, rising debt, and low consumer confidence, has significantly dampened purchasing power.
- Intense Competition: The influx of foreign capital and cheap imports has created a fiercely competitive environment, making it difficult for many SMEs to survive.
- Liquidity Crisis: Limited access to finance and tight lending conditions have left many businesses struggling with cash flow.
- Rising Operating Costs: Increased energy prices and reliance on imported materials have pushed up operating costs for many businesses.
- Shifting Consumer Behaviour: The rapid growth of e-commerce and social-media marketing has forced businesses to adapt their strategies to survive.
- Product Inadequacy: Businesses failing to innovate, build strong brands, and cater to evolving consumer needs are struggling to compete.
- Labour Market Challenges: Mismatch between labour productivity and wages, skills shortages, and the increasing use of automation are creating further pressures.
Automation and Global Competition Threaten Jobs
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations (FETCO), expressed concerns about the potential for further job losses due to automation and the challenges faced by SMEs in global supply chains.
He cited the recent decisions by Subaru and Suzuki to halt production in Thailand as examples of the pressures facing the automotive industry.
Kobsak warned that businesses clinging to outdated models and failing to adapt to changing market demands are unlikely to survive. He stressed the need for businesses to innovate and upgrade their products to remain competitive.
Specific Sectors Under Strain
The KResearch highlighted the garment, textile, furniture, metal, and steel industries as particularly vulnerable sectors.
These industries have faced mounting competitive pressures, exacerbated by rising costs and weak domestic demand.
Bantoon Juicharern, chairman of the FTI’s Iron and Steel Industry Group, noted the dire situation in the steel industry, where utilisation rates have plummeted to just 25-26%.
He warned that further expansion of steel production capacity could lead to even more closures.
He also highlighted the impact of cheap Chinese steel exports flooding the global market, creating unfair competition for Thai producers.
Statistical Overview and Future Outlook
Data from the Department of Industrial Works reveals the extent of the challenge:
- 2022: 2,240 new factory openings, 1,140 closures
- 2023: 2,190 new factory openings, 1,811 closures
- 2024: 2,112 new factory openings, 1,234 closures
Despite these challenges, January 2025 data suggest a potential glimmer of hope, with 147 new factory openings representing 18 billion baht in investment and the creation of 6,257 jobs.
However, it remains to be seen whether this positive trend will continue and if it will be enough to offset the ongoing pressures facing Thailand’s manufacturing sector. The coming months will be crucial in determining the long-term health and resilience of Thai industry.