Thailand has outlined objectives to move into higher-end segments of the semiconductor manufacturing chain, including chip design and wafer fabrication.

However, notable challenges remain, requiring sound governance, effective oversight, and policy certainty.

On 25th October 2024, the National Semiconductor and Advanced Electronics Industry Policy Committee - referred to as the National Semiconductor Board (NSB) - was established to support the development of the semiconductor and advanced electronics industries.

At present, Thailand's semiconductor sector is primarily focused on assembly and packaging operations, which are relatively limited in scale and yield lower returns compared to higher-value segments of the global semiconductor supply chain, such as chip design and wafer fabrication. The NSB, chaired by the Prime Minister, includes several cabinet ministers, representatives from key economic government agencies, and the president of the Federation of Thai Industries.

The establishment of the NSB builds on prior policy measures intended to increase Thailand's participation in global semiconductor value chains, particularly in the context of ongoing geopolitical tensions between the United States and China.

Between 2014 and 2022, investment incentives offered by the Board of Investment (BOI) were modest, with a focus on the electric vehicle (EV) industry.

From 2021 onwards, in response to intensifying technological competition, several multinational enterprises (MNEs) in the semiconductor sector - such as Hana Semiconductors, Infineon, and Delta - indicated increased interest in investing in Thailand.

As a result, from 2022 onwards, the BOI placed greater emphasis on higher-end activities, including semiconductor design and wafer fabrication, within its incentive structure.

The NSB is supported by two subcommittees. The first is responsible for formulating a national strategy for the semiconductor and advanced electronics sectors and recommending approaches to attract investment from multinational firms. The second subcommittee focuses on expanding the national workforce to address the need for skilled labour. The target is to train 86,000 engineers and scientists in these fields between 2025 and 2030.

A private consulting firm has been contracted to draft an industry roadmap, which will serve as a basis for the national strategy. This roadmap is expected to concentrate on power module segments, which are used in electric vehicles, data centres, and energy storage systems. This focus may limit support to only selected areas of the semiconductor industry.

Expanding the scope to include other product categories - such as communications devices, sensor imaging technologies, and optical components - would reflect the broader performance of Thailand's electronics exports in recent years.

A key issue is the involvement of local firms in semiconductor supply chains. The experience of the 1980s and 1990s, when MNEs operated with limited engagement from domestic suppliers, highlights the importance of strengthening local linkages.

These linkages should be developed carefully, as mandatory local content requirements are generally ineffective within the global semiconductor industry, which relies on tightly integrated networks of certified and trusted suppliers.

Consideration could be given to supporting the development of independent fabless companies in Thailand - firms that design and market semiconductors without owning fabrication facilities.

These companies serve downstream manufacturers of electrical appliances, wearable health devices, health monitoring technologies, and other smart products.

Additionally, investment in upstream wafer fabrication could be explored. Recent technological developments have made smaller, cost-effective fabrication facilities more feasible. Domestic fabless firms could contribute to prototyping activities and enhance the strategic relevance of Thailand's semiconductor sector.

Investment in such facilities could also support the development of a broader industry ecosystem. To complement this, support for technology start-ups - such as through venture capital programmes - could be introduced. These combined efforts would support the growth of the electronics and electrical appliances industries and create more structured opportunities for local firms and workers.

The likelihood of the NSB meeting its objectives remains uncertain. The required investment to support public - private partnerships in this field is expected to be significant.

Lessons from previous failures, such as the case of Alphatec Electronics - which collapsed in the mid-1990s following financial misconduct - highlight the importance of strong governance. The roadmap should be implemented with clearly defined targets and timelines over an extended period.

The formation of the NSB indicates Thailand's aim to develop its semiconductor and electronics industries. Expanding the availability of skilled labour aligns with efforts to attract foreign investment. The subcommittee led by the Ministry of Higher Education, Science, Research and Innovation is expected to articulate clear policy commitments in this regard.

In addition, the NSB should establish an effective monitoring mechanism to evaluate and adjust policy measures as needed. Realising the sector's potential will depend on the consistent allocation of resources and long-term policy coordination.