Japanese parts suppliers in Thailand: expansion of production capacity and other ventures

Tigers Polymer, Toray, Nippon Light Metal, Nittan Valve, Aisin Chemical, JTEKT, Panasonic, etc.

2016/11/08

Summary

Map of automotive plants in Thailand (click to see a map of facilities)

 The following is a report on Japanese parts suppliers in Thailand. It will look at initiatives including the construction of new production facilities, production capacity augmentation, operational structure and development function enhancement, and production item expansion (covering a period of roughly one year leading up to late September 2016).

 The number of automobiles produced in Thailand between January and August 2016 has recovered to 1.304 million vehicles (a year-over-year (y/y) increase of 3.4%). Although domestic sales have dropped for some models due to the introduction of a new commodity tax in January 2016, healthy sales of SUVs and pickup trucks that were relatively unaffected by the tax led to vehicles sales of 493,000 units for a y/y increase of 0.2% in the period January to August 2016. Exports also increased y/y by 1.0% to 788,000 vehicles during the same period.

 There have been no changes to the strategies of Japanese OEMs that use Thailand as a global export base. Although sales in the Thai market were expected to expand in the second half of 2017, there is concern that the death of the King of Thailand may have negative effects on consumer sentiment.

 In the midst of these events, Thai-based Japanese automotive parts manufacturers are continuing to actively expand production capacity to support increases in mid-term demand and exports, expand production items, and strengthen cost competitiveness. Additionally, other trends are visible including enterprise integration or formation of joint ventures to newly enter market or strengthen operations, and the establishment of new development companies.




Trends of Japanese automobile parts manufacturers in Thailand

New companies Kuraray (butadiene derivatives), Saitama Kiki (steering parts for large vehicles), Daido Steel (forged parts for transmissions), Toray Hybrid Cord (automotive cords), Marugo Rubber Industries (vibration-proof rubber)
Expansion of production capacity <New plants>
Tigers Polymer (fourth plant for air conditioner ducts, etc.), Toray/Toray Carbon Magic (transferred to new carbon fiber-reinforced plastic parts plant), Nippon Light Metal Holdings (second plant for aluminum secondary alloy) 
<Expansion  of plants or delayed plans>
Mitsuchi (new building for seat framework mechanism parts), Jatco (delayed expansion of CVT plant)
<Enhancement of facilities>
Nittan Valve (new engine valve rationalization line), Press Kogyo (new line for pickup truck parts)
New production items at existing plants <New plants and companies>
Aisin Chemical (new construction of a plant for automatic transmission-use wet friction materials), Kobe Steel (establishment of a joint venture for special steel wire materials), JTEKT (construction of a second plant, steering wheel cloth, shell bearings), Nachi-Fujikoshi (forged and machined parts production company established for integrated production of bearings)
<Enhancement of facilities>
Sumitomo Riko (establishment of an exclusive line for plastic hose modules), Toray (new production equipment installed for PPS resin compound), Panasonic (production line installed for heat-resistant phenolic resin molding materials used in onboard parts)
Strengthening of business structures Asahi Tec(plant’s aluminum business made independent), JTEKT(comprehensive base for Southeast Asia established in Thailand), Nippon Steel & Sumitomo Metal (business integration of two sheet metal companies), Nissin Kogyo(joint venture established to strengthen brake business), Futaba Industrial(legal liquidation of press mold-related company), Meiwa Industry(acquired complete ownership of interior parts company)
Development <Establishment of new companies>
Denso Corporation/Toyota Tsusho Corporation (joint venture established to strengthen onboard software development)

(Source) Created from each company’s plans

 Trends of Japanese automobile parts manufacturers in Southeast Asia aside from Thailand are reported in the report “Japanese Parts Manufacturers in Southeast Asia: Indonesia, Vietnam, Malaysia, The Philippines, Laos” from July 2016.

Japanese Supplier Reports:



New establishment of production facilities: Kuraray, Daido Steel, Toray Hybrid Cord, Marugo Rubber Industries, etc.

Company name Activities
Kuraray Construction of a joint-operation plant for butadiene derivative products, production planned to start in 2020
In September 2016, Kuraray announced it is considering the construction of a high-performance plastics plant in cooperation with PTT Global Chemical Public Company (PPTGC), a subsidiary of the major Thailand petroleum corporation PTT, and Sumitomo Corporation. Several billion yen will be invested in the project, with Kuraray taking a stake of 50% or more in the joint venture. Production is scheduled to start in 2020, and a final decision will be made about investments in the second half of 2017. This will be the first time for Kuraray to produce chemical products in Thailand. The plant will be constructed in a petrochemical industrial park in Rayong, and have an annual production capacity of 13,000 tons of high heat-resistant polyamide, which is now seeing expanded use as a lightweight material for cooling, intakes, and fuel-system parts; as well as 16,000 tons of thermoplastic elastomer. Butadiene, the main raw material used for production of these substances, will be supplied by PTTGC, and the plant will utilize Sumitomo Corporation’s sales network.
Saitama Kiki New plant for large vehicle steering parts comes on stream in summer 2016
Saitama Kiki’s plant, which is operated by Saitama Kiki (Thailand) Co., Ltd. (located in Chonburi Prefecture), a subsidiary established in 2014, came on stream in summer 2016. The plant produces steering-related parts such as drag links and tie rods, and supplies them for Hino Motors and Isuzu Motors’ strategic vehicles that are targeted at developing countries. Until the plant came online, parts were exported from Japan, but due to the local procurement policies of its clients, Saitama Kiki decided to establish a local production facility for Thailand, making the plant the first overseas production facility for the company. It aims to generate sales of JPY 400 million in FY 2016, and 800 million in FY 2017.
Daido Steel Plant for forged transmission parts comes on stream in April 2016
Daido Steel’s plant, operated by its Chonburi Prefecture-based subsidiary Daido Steel (Thailand) Co., Ltd. (established in 2015), came on stream in April 2016. The plant features a state-of-the-art hot high-speed horizontal forging machine, and began shipping prototypes of forged parts for transmissions. The plant has a monthly production capacity of 1 million units, and a total of JPY 3 billion has been invested in the project. With its state-of-the-art equipment, Daido Steel aims to increase cost competitiveness through means such as improvements to product quality and productivity and the increasing its production yield. Daido Steel will expand its die-forging business expansion in the ASEAN region with the plant as its production base. Furthermore, it will also act as a base for providing support to group companies planning to advance into Thailand.
Toray Hybrid Cord New company for the production and sales of industrial cords established in June 2016, plant scheduled to come online in October 2017
In June 2016, Toray Hybrid Cord established Toray Hybrid Cord (Thailand), Inc., which is located in Samutprakarn Prefecture and will produce and sell textile products for industrial materials. The plant is scheduled to come online in October 2017, and will produce automobile-related and general industrial cords, and will have an annual production capacity of 1,200 tons. Additionally, the plant will also commission production of tire cords from processing companies in Taiwan, Vietnam, and India to raise its total annual production capacity 20,000 tons. The company aims to sell to Japanese parts suppliers in Southeast Asia such as tire manufacturers, automobile hose and belt makers, and carpet makers, as well as the western upper-middle market. The plant will also be used as a base for export to Japan. The company’s sales target in 2021 is 12,000 tons, with proceeds of JPY 5.8 billion.
Marugo Rubber Industries New plant to be constructed for manufacture of products like vibration-proof rubber, scheduled to come on stream in September 2017
Marugo Rubber Industries currently outsources production of vibration-proof rubber and air hoses to local manufacturers in Thailand, but this results in a slow response to requests from customers related to areas like quality improvement and cost reduction, and the company anticipates increased future demand, so it has decided it needs to enhance its own supply structure. In June 2016, Marugo Rubber renamed its sales base Asian Rubber Parts Co., Ltd. as Marugo Rubber (Thailand) Co., Ltd. A new plant will be constructed in Chonburi Prefecture and come on stream in September 2017. The plant will cover an area of approximately 20,000 square meters, with a building area of roughly 5,700 square meters, and future production capacity expansion is possible. The company is expected to invest JPY 1.3 billion in the project.


Expansion of production capacity: Tigers Polymer, Toray, Nippon Light Metal, Mitsuchi, Jatco, Nittan Valve, etc.

Company name Activities
Jatco Plans to increase CVT production capacity in FY 2016 postponed
Jatco supplies Nissan’s Thailand plant with CVTs for small cars through JATCO (Thailand) Co., Ltd. in Chonburi Prefecture. Jatco planned to expand its plant to increase its annual production capacity from 500,000 units in FY 2015 to 700,000 units in FY 2016, but postponed the project due to a decrease in demand. For the time being, the company will aim to increase the operation rate of its existing equipment by producing parts and units for other regions, and will carefully observe the situation moving forward to find the right timing to expand capacity.
Tigers Polymer Fourth plant constructed with flood control measures, scheduled to come online in the fall of 2016
Tigers Polymer has constructed a fourth plant for Tigerpoly (Thailand) Ltd. (located in Ayutthaya Prefecture), which will come online in fall 2016. The plant will have a floor space of 10,000 square meters. Roughly JPY 700 million has been invested in the project. The building has had flood control measures implemented, and provisions for business continuity have been strengthened. For now, in addition to enhancing its equipment, to increase production efficiency the company will relocate a production line from its first plant, which has become inefficient, to the fourth plant. Production items will include air conditioner ducts that air conditioning and exhaust gases travel through. The fourth plant building has space secured for additional production lines in preparation for future increases in production.
Toray/Toray Carbon Magic New plant for molding and curing carbon fiber-reinforced plastic parts opens in February 2016
Toray and Toray Carbon Magic (TCM) constructed a new plant for Chonburi Prefecture-based Carbon Magic (Thailand) Co., Ltd. (CMTH)  that produces molded carbon fiber composite materials, and launched it in February 2016. As unit orders expanded from triple to quadruple digits, large parts also have seen increasing demand, which led to existing facilities become cramped and required the transition to a larger plant. The material prepreg is produced by Toray in Japan and CMTH molds and cures it to manufacture products. Afterward, almost all products are exported to TCM’s facilities in Japan, where they are then shipped to clients around the world. In the future, the manufacturer aims to ship directly from Thailand.
Nippon Light Metal Holdings Second plant for aluminum secondary alloy constructed, scheduled to come on stream in January 2017
Nikkei MC Aluminum, a subsidiary of Nippon Light Metal Holdings, established a secondary plant for Chachoengsao–based Nikkei MC Aluminum (Thailand) Co., Ltd. The new plant is in Chonburi Prefecture (southern Thailand), and will begin production of aluminum secondary alloy there in January 2017. The alloy is used as a material for engines and wheels, and is primarily supplied to Japanese parts manufacturers. The second plant will have an annual production capacity of 18,000 tons. Combined with its existing plant, the company’s annual production capacity in Thailand will increase by roughly 45%. A total of approximately JPY 1 billion has been invested in the project. Automobile production in Thailand is stagnant at present, but the manufacturer has decided to expand its facilities in anticipation of a future recovery. At the second plant, production for low-cost products will also be established in order to utilize aluminum scrap, which has low aluminum content, and demand will be incorporated from a broad range of clients, including non-Japanese makers.
Nittan Valve New rationalized production line introduced at engine valve plant, active since August 2015
Nittan Valve introduced a new rationalized line at the engine valve plant operated by Nittan (Thailand) Co., Ltd. in Chonburi Prefecture, and it has been active since August 2015. In FY 2016, Nittan Valve plans to install a second line. The cutting and forging of materials, as well as finishing has been automated to save labor and stabilize product quality. Furthermore, the automation of production processes has lead to space reductions at the plant, allowing the company to depart from its labor-intensive production structure to increase competitiveness and sales.
Press Kogyo

New production line for pickup truck parts comes on stream in fall 2016, production capacity expands

Press Kogyo has installed a new production line for 1-ton pickup truck frames and axles at the plant operated by Thai Summit PK Corporation Ltd. in Rayong Prefecture, which came on stream in fall 2016. In addition to orders for new for export pickup truck parts from Japanese OEMs, the expansion also supports increases in production volume that accompanied a rise in pickup truck export destinations. The plant has an annual production capacity of frames for 79,000 vehicles and axles for 99,000 vehicles. With the addition of the new production line, Press Kogyo’s total annual production capacity in Thailand for all three of its production facilities is now frames for 795,000 and axles for 987,000 vehicles, increasing the total for both components 10%. Roughly JPY 1.7 to 1.8 billion has been invested in the project.
Mitsuchi

New plant building constructed with roughly 1.5 times more floor space, increased production of seat framework mechanism parts and fasteners

In 2016, Mitsuchi constructed a new plant building at Thai Mitchi Corporation Ltd. in Pathum Thani Province to increase floor space to 150%. The company has introduced cold forging equipment, and will increase production of seat framework mechanism parts and fasteners for door parts. Roughly JPY 200 million has been invested in the project. The new plant building will be utilized to transfer equipment from existing plant buildings, as well as for inventory storage, and production space across the entire plant will be secured to increase efficiency. Mitsuchi aims to increase sales in FY 2020 to JPY 2.5 billion, or by 25% of its anticipated FY 2016 sales.


Production item expansion: Aisin Chemical, Kobe Steel, JTEKT, Sumitomo Chemical, Toray, Panasonic, etc.

Company name Activities
Aisin Chemical New plant for automatic transmission-use wet friction materials under construction, scheduled to come on stream in June 2017
Aisin Chemical has established a fourth plant for wet friction materials for automatic transmissions on the premises of Aisin Chemical (Thailand) Co,. Ltd. (located in Rayong Prefecture), and production at the plant will begin in June 2017. The project is a major move for the company to establish a supply structure to support its major client, Aisin AW, which will begin production of automatic transmissions at its new plant in July 2017. JPY 1.49 billion was invested in the plant, which will have a monthly production capacity of 600,000 units. The new plant will aim for sales of roughly JPY 1.4 billion by 2020. It will be the company’s fourth production facility for friction materials after those in Japan, the U.S., and China. In the future, Aisin Chemical will take orders for wet friction materials for automatic transmissions from other groups to expand its business.
Kobe Steel Established a joint venture for the production and sales of special steel wire materials in February 2016 
In February 2016, Kobe Steel established a 50:50 joint venture with Millcon Steel Public Company Limited in Thailand called Kobelco Millcon Steel Co., Ltd. (KMS), and located it in Rayong Prefecture. Kobe Steel has taken a stake in a steel wire manufacturer Millcon acquired in 2014, Millcon Special Steel (also in Rayong), and changed the name to KMS. KMS will begin producing special steel wire in May 2017 and become fully operational in 2020. Materials for special steel will be imported from Japan. The annual production quantity will be 480,000 tons (including regular steel wire materials). A total of THB 6.79 billion (approximately JPY 24.1 billion) has been invested in the project. Most of the special steel wire materials will be shipped to secondary processing manufacturers in Thailand that Kobe Steel also has a stake in. Currently, special steel wires are imported from Japan with delivery requiring three or more weeks, but with the new plant, the time can be reduced to a minimum of one day. In the future, the plant will also export products to Indonesia and Malaysia.
JTEKT Second plant for steering parts comes on stream in September 2015
In September 2015 JTEKT began production of cross and shell bearings used in intermediate shafts for steering systems outside of Japan for the first time at the second plant of JTEKT Thailand Co. Ltd (JTC), the new Gateway plant in Chachoengsao. Roughly JPY 5.7 billion has been invested in the project. The plant has a monthly capacity of 4 million shell bearings and one million cross bearings, and production volume will be increased to meet these levels by the end of 2016. Additionally, production of needle roller bearings will begin, adding to JTEKT’s lineup.
Sumitomo Riko Establishes of a dedicated line for plastic hose modules
Sumitomo Riko established dedicated production lines for plastic hose modules (plastic filler neck modules) that connect to fuel tanks at its plants in Thailand and China, and began production in 2016. The annual production capacity in Thailand is 105,000 units, and in China it is 108,000 units. The amount invested has not been made public. Plastic hoses are approximately 40% lighter than metal hoses, have superior refueling performance, and also achieve collision safety performance equal to metal alternatives. Products will be supplied to Japanese OEMs for global vehicles, but the company also aims to sell to non-Japanese OEMs as well. In Thailand, Ayutthaya Prefecture-based Inoac Tokai (Thailand) Co., Ltd., produces automobile hoses.
Toray New production facility for PPS resin compound established, scheduled to come on stream in October 2016
Toray has established a new production facility for PPS (polyphenylene sulfide) at its plant operated by its facility for resin compounds, Thai Toray Synthetics Co., Ltd., which is located in Bangkok. The new facility is scheduled to come on stream in October 2016, and will have an annual production capacity of 3,000 tons. Approximately JPY 500 million has been invested in the project. In addition to existing injection molding machines for resins such as nylon and PBT (polybutylene terephthalate), secondary evaluation equipment required for injection molding machines and the development of PPS resin has been introduced to the resin technical center at the plant. The facility will be Toray’s third production facility for PPS resin compound after those in Japan and Korea. In Thailand, it will be the industry’s first production facility for the material.
Panasonic  Production of heat-resistant phenolic resin molding materials for onboard parts begins in February 2016
Panasonic Automotive & Industrial Systems installed a new production line for onboard parts-use heat-resistant phenolic resin molding materials at Panasonic Manufacturing Ayuthaya.,Co,Ltd., in Ayutthaya Prefecture, and began full-scale production in February 2016. The new production line was installed to support local production demand from onboard parts manufacturers and molded parts manufacturers, and will allow Panasonic to establish a support system for the development projects of its clients. It will have an initial monthly production capacity of 250 tons. JPY 1 billion has been invested in the project. The facility will be Panasonic’s third production facility for phenolic resin molding materials following those in Japan and China, and will be the first facility in the industry in Thailand producing the material.
Nachi-Fujikoshi Forged and machined parts production company established, integrated production of bearings begins in Thailand
In 2015, Nachi-Fujikoshi established a production company for forged and machined parts in Rayong Prefecture called Nachi Forging Technology (Thailand) Co., Ltd. The company has capital of THB 573 million (roughly JPY 1.833 billion). The plant came on stream in October 2016. The company will handle forging and machining processing and supply its products to Nachi Technology (Thailand) Co., Ltd. (Rayong), which is located nearby and which manufactures bearings. Integrated production will begin in February 2017. In addition to constructing a stable procurement structure by internalizing processes, the company will also be able to decrease costs in areas such as transportation and customs to increase its competitiveness. A total of JPY 4.2 billion yen will be invested through 2017. The new plant will also supply Nachi-Fujikoshi’s bearing production facilities in China. In the future, the company is considering exporting to overseas production facilities in areas including the U.S.


Strengthening of business structures, establishment of regional headquarters, strengthening of development: Nippon Steel & Sumitomo Metal, JTEKT, Denso Corporation/Toyota Tsusho Corporation, etc.

Company name Activities
Asahi Tec Aluminum business department of Thai subsidiary becomes independent
In July 2016 Asahi Tec separated the aluminum business department of Asahi Tec Aluminum (Thailand) Co., Ltd. (ATA) in Chonburi Prefecture, which is located at the Bangbor plant in Samutprakarn, and established the new company ATA Casting Technology Co., Ltd. (ACT). Businesses such as aluminum die-cast parts, and the production and sales of processed materials were transferred to the new company. ATA has changed businesses to become an aluminum wheel company. The new company has a capital of roughly JPY 4.5 billion. This is part of Asahi Tec’s plan to divide all of its departments into new companies in order to increase independence and competitiveness.
JTEKT Establishment in 2016 of a regional headquarters for Southeast Asia in Thailand
In 2016 JTEKT will establish a regional headquarters for Southeast Asia in Thailand. The company has eight local subsidiaries in Southeast Asia, including steering parts and hub bearing production facilities in Thailand, Indonesia, and Malaysia. In order to efficiently increase production and expand local procurement in the future, JTEKT has determined that it requires a regional headquarters in Thailand. The “ASEAN Technical Center,” which also has development functions, is located in Thailand as well, and in order to increase local procurement of parts, the center will lead efforts to discover local companies. The company plans to double its sales in Southeast Asia from 2015 to JPY 140 billion by 2020.
Nippon Steel & Sumitomo Metal Two sheet-metal businesses in Thailand integrated in 2016
In September 2016, Nippon Steel & Sumitomo Metal integrated The Siam United Steel (1995) Co., Ltd., which produces and sells cold-rolled steel, and Nippon Steel & Sumikin Galvanizing (Thailand) Co., Ltd., which produces and sells automotive hot-dip galvanized steel sheets. The new company name is to be NS-Siam United Steel Co., Ltd., and it will be located in Rayong Province. The company will have capital of THB 13 billion (roughly JPY 43 billion). Nippon Steel & Sumitomo Metal has an 80.2% stake in the company. It will have an annual production capacity of one million tons of cold-rolled steel, and 360,000 tons of hot-dip galvanized steel sheets. The company will aim to construct an integrated production system for high-quality steel and increase sales efficiency to support increased demand.
Denso Corporation/Toyota Tsusho Corporation Development of a joint venture to strengthen development of onboard software in July 2016
In July 2016, Denso Corporation and Toyota Tsusho Corporation established the joint venture Toyota Tsusho DENSO Electronics (Thailand) Co., Ltd. in Bangkok. It will develop and design software for engine ECUs to strengthen development of onboard software. The company has capital of THB 20 million (roughly JPY 70 million). Denso Corporation Group has a 51% stake, and Toyota Tsusho Corporation Group a 49% stake. The joint venture will utilize simulation models in all software development processes, including control development, design, and testing. In anticipation of developing various ECUs, the company will standardize software to increase development efficiency and speed.
Nissin Kogyo Brake business joint venture established with Autoliv in November 2015
In November 2015, Nissin Kogyo established joint ventures with the Swedish company Autoliv in Japan, the U.S., China, and Thailand. Autoliv has a 51% stake, and Nissin Kogyo a 49% stake. By combining Nissin Kogyo’s technical capabilities and production capacity for brake systems with Autoliv’s ECU and radar sensing technology and utilizing these together with the Swedish supplier’s global customer base, the companies will aim for further growth in the mechatronics and brake apply businesses. The Nissin Kogyo’s regenerative cooperative brake system, master cylinder and master power, rear toe control, and ESC/ABS products have been transferred to the joint venture. It has been named Autoliv Nissin Brake Research Asia Co., Ltd. (located in Bangkok), and has capital of THB 12.6 million.
Futaba Industrial Legal liquidation of related companies including those that manufacture press molds
Futaba Industrial announced that in February 2016, its related company YMP Press & Dies (Thailand) Co., Ltd. (Chonburi Prefecture), which produces and manufactures press molds, has filed for legal liquidation proceedings at a local court. Due to the economic downturn in Thailand, the company’s finances have suffered, and as a result it has struggled with interest-bearing debt. The company will aim to rebuild itself based on local legal liquidation proceedings. As of March 2015, the company’s total liabilities were approximately JPY 29.554 billion. Futaba Industrial has a 30% stake in the company.
Meiwa Industry Thai subsidiary converted to a wholly-owned subsidiary, interior parts business strengthened
Meiwa Industry already had a 49% stake in Meiwa Industry (Thailand) Co., Ltd., which is located in Bangkok, and in addition to increasing investments in it, the company acquired shares from other investors to make it a wholly-owned subsidiary in May 2016. The subsidiary had performed poorly with continued operating losses. Meiwa industry plans to stabilize its wholly-owned subsidiary’s financial base and increase management mobility. Interior parts businesses such as mat and trunk parts will be strengthened to expand their business scope.

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Keywords
Thailand, parts makers, suppliers

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