Analyst maintains negative outlook on Thai electronics market amid Western EV sector challenges
Maybank Investment Bank recently shared some insights that might make the tech sector in Thailand seem a bit rocky moving forward. Despite some positive signs from the trade war front, their forecast for Thai electronics in the fiscal year 2025 is looking bearish. The main concerns stem from issues in the Western electric vehicle (EV) sector and potential impacts from the Global Minimum Tax.
In a note released last Friday, Maybank mentioned that many investors are feeling cautious about the sector due to a combination of weak demand outlook and geopolitical uncertainties. Delta Electronics and Hana Microelectronics, two key players in the industry, also seem to share this negative outlook for the Western EV sector in the upcoming fiscal year.
One of the reasons behind this caution is that electric vehicle adoption in the United States is not moving as fast as expected. The lack of affordable options that suit American consumer preferences, like larger cars with higher ranges, and a shortage of EV charging stations are contributing to the slow uptake. On the other side of the pond, the European auto industry, encompassing both EVs and internal combustion engines, is facing fierce competition from Chinese original electronic manufacturers. The situation is causing some major brands to scale down production or even close down factories.
Despite these challenges, there are some rays of hope on the horizon. SVI has a more optimistic view on the trade war, believing that many OEMs will shift manufacturing bases away from China, a trend already seen back in 2018 during the trade war escalation. Conversely, Hana’s concern is focused on the unstable geopolitical landscape, worsened by the prospect of a second term for President Trump, which could lead to lower inventory levels from customers.
Maybank also highlighted comments from key representatives of the Thai Board of Investment (BOI). They highlighted that Thai electronics companies qualifying under the Global Minimum Tax Pillar II scheme might see their effective tax rates increase from January 1, 2025. However, to offset this impact, BOI has plans to return 50-70% of the additional tax paid as cash grants, with the remaining going to the Revenue Department.
Although there are some challenges ahead, Maybank points out that they see potential growth drivers in the Thailand tech services sector, particularly in virtual banking and cybersecurity spending. So, while the road ahead may have its bumps, there are also opportunities for growth and innovation in the tech industry.
