Asia is a global hub for the production and exports of technical consumer goods (TCG) among which various consumer electronics such as cellular phones, laptops and computers, radio sets and sound systems, televisions and television sets among others as well as other essential electronic parts, small and big domestic appliances.

Southeast Asia, in particular, is home to some of the biggest and most well-known consumer electronics manufacturers. According to a GfK Global study from 2019, Japan, Taiwan, Malaysia and Thailand reported a growth of sales of TCGs of around 3% y/y in 2019. The largest increase of around 13% was registered in the sub-category of small domestic appliances, which includes various air treatment products and air conditioners, kitchen gadgets, robotic vacuum cleaners and hair dryers.

Japan is famous for being the home of many of the big names in the global consumer electronics market such as Mitsubishi, Toshiba, Panasonic, Sony, Nikon and Hitachi. Taiwan, on the other hand, is home to brands like HTC, Acer, Asus and Foxconn, one of the largest manufacturers of consumer electronics in the world. Since the 1970s, Malaysia’s consumer electronics sector has been growing steadily and the country is now among the largest global players on this market, housing companies like Acson, Joven, Koolman, Fujiaire and Everbright. Malaysia has also become the Asian hub for medical electronic devices, being the home of large players such as Engineered Medical System, Ascatec, Integer, KMWE, Paramit, Plexus, SteriPack Contract Manufacturing, CCB Medical Devices, Straits Orthopaedics and many others. Thailand is among the top destinations for setting up consumer electronics assembly factories, currently home to over 2,300 such companies, among which Delta Electronics Thailand, Summit Electronic Components, Hana Microelectronics, Forth Corporation and many others.

Prior to the current COVID-19 global crisis, the trade outlook of the Southeast Asian consumer electronics sector was looking very positive. However, the coronavirus-induced restrictions and lockdowns around the globe have had a strong negative impact on both the supply chain and production capacity. This prolonged crisis puts the ability of consumer electronics manufacturers to fully recover at a serious test. The supply chain disruptions in the consumer electronics sector in the region combined with the impaired demand due to the expected shift in consumer priorities has dragged down the consumer electronics trade outlook.

Even so, according to September Markit data on manufacturing PMI, there has been significant positive growth since the peak of the crisis between March and April 2020, which might indicate the beginning of a recovery in the region. Still, taking into consideration the dynamically changing epidemiological situation and the lack of a vaccine, the current positive trend might not be very stable.

Trade in Consumer Electronics

The Southeast Asia region is home to some of the strongest economies in the world. They have been leading the technological change worldwide for the last more than two decades, promoting and developing novel technological ideas and benefitting from a large share of young consumers open to buying and using new technologies. In most Southeast Asian countries consumer electronics account for a significant share of the manufacturing sector. For instance, Thailand currently produces very large quantities of consumer electronics, semiconductors and integrated circuits. In 2019, the country’s semiconductors, transistors and diodes exports stood at USD 2bn or an average of between USD 150mn and USD 230mn per month. Along with that, currently, the Southeast Asia region produces the largest quantity of hard drives in the world, supplying more than 80% of the global demand for digital storage and more specifically - hard disk drives. In 2019, Thailand alone exported hard disk drives worth more than USD 10bn. The Philippines, for instance, hosts seven of the top 20 manufacturers of electronic chips on the global market, which account for around 10% of the global semiconductor production and supply.

Countries like Japan and Taiwan are among the biggest hubs for the development and production of technical goods, consumer electronics and parts. Over the past decade, the ongoing trend of smart devices, smart homes and smart offices has boosted the consumer electronics market significantly, increasing the demand for household electronics, smart systems and their accompanying parts. According to a Goldstein Market Intelligence report from September 2020, the consumer electronics market in Japan currently represents a 48.6% share of the total electronics market in the country, with demand driven mainly by the middle and high-income segment of the population who are getting increasingly open to the prospects of incorporating technology in their everyday lives. In the past decade though, Japan has faced some serious competition on the consumer electronics market from countries such as China and South Korea, which have been building their global presence as producers and buyers of consumer electronics as well as large investors in the development of new technologies. Even so, the report estimates the GACR of the consumer electronics industry in Japan at 4.6% for the period 2017-2030.

While the current health crisis has not hit Japan, Taiwan, Thailand and Malaysia as hard as many other countries in the world, the overall global supply chain disruptions have already shown a significant impact on the consumer electronics trade worldwide.

Foreign Direct Investment in Consumer Electronics

Considering the importance of technological progress for Southeast Asia's consumer electronics sector, attracting direct investment becomes a critical element of the individual and joint government strategies to promote technology transfer in the countries in the region. That said, over the years, the government efforts of the countries in ASEAN, and even more so of the ones with significant production and exports of technological goods, have proven successful in attracting some of the biggest names in the sector from around the world. According to the latest ASEAN Investment Report from 2019, between 2018 and 2019, the region managed to attract many of the global leaders in the manufacturing of technological goods and consumer electronics to open new or move their current production and research facilities there. Apple, for instance, has moved its main production facilities to China, Taiwan, Thailand, Malaysia, South Korea, Singapore, and the Philippines, robotics and industrial automation leader Nidec-Shimpo Corporation opened a manufacturing plant in the Philippines in 2019, Micron Technology opened a flash memory fabrication plant in Singapore in 2018, HP also opened a digital lab in Singapore in the beginning of 2020 bringing in over USD 80mn in investment to the country. Other names include PerkinElmer, Plexus, Germany semiconductor manufacturer Infineon Technologies and many other well-known technology and electronics manufacturers that have been either creating additional R&D centres or moving entire production factories and business facilities to Southeast Asia.

The investments come not only from countries outside of Asia but also from within the region. For instance, the Japanese communication equipment giant NEC opened a manufacturing plant in Thailand in 2019. Other companies that have been expanding their businesses and stimulating the investment flow in the region include Japanese electric and electronic equipment companies Furukawa Electric and Murata and Chinese consumer electronics manufacturer Cal-Comp Technology, the three of which opened production facilities in the Philippines in 2019. There are also Chinese batteries manufacturer Longi, which is planning to open a USD 125mn solar cell plant in Malaysia, and Korean Iljin Materials, which boosted their battery production with an investment worth USD 400mn there.

COVID-19 and the Outlook for the Consumer Electronics Trade in Southeast Asia

Being a global hub of technological goods, the Southeast Asian region was hit badly by the COVID-19 pandemic and its accompanying restrictions and lockdowns. Due to that, manufacturing facilities all around the region were forced to either continue working at a limited capacity or cease their operations entirely for the duration of government-imposed restrictions. Under the imposed restrictions in Japan, Taiwan, Thailand, Malaysia and all other countries in the region, many non-essential businesses including consumer electronics retailers had to remain closed, which had an adverse impact on overall sales.

The COVID-19 crisis has also triggered a substantial shift in consumer behaviour, with buyers focusing on essential goods and putting on hold the purchases of non-essential products such as apparel and electronics. Another thing that was changed by the pandemic was the growing preference for online shopping. According to an analytical report by Bain & Company from June 2020, capturing the purchasing behaviour of over 8,600 consumers in Southeast Asia, 47% of the respondents have decreased their on-sight purchasing, while 30% of the respondents have increased their online purchasing due to the pandemic.

In the long term, the shifting consumer patterns could have a significant impact on the technological and consumer electronics sectors, as buyers globally are becoming more and more cautious with their purchases and have started prioritizing essential goods to household gadgets. Analysts expect that while there will be a more serious decline before the end of 2020, if a successful vaccine is mass released sometime in 2021, this should also mark the beginning of a more stable recovery of the sector.

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