Overview of Thailand’s Furniture Industry

Posted in International on Wednesday, 11 January 2012. Print

Looking at 2011/2012

Overview of Thailand’s Furniture Industry
— by Fern Kwok

Thailand’s furniture industry continues to be one of the strongest in the region due to production quality, innovative and modern styling, and flexibility in material use. The quality of its infrastructure is better than most of its neighbours, having an advantage in terms of quality of roads, ports, electric and other infrastructure compared to Vietnam, Cambodia, Laos, Philippines and Indonesia and this gap is actually increasing.

Thailand’s competitive strategy relies on the diversity, refinement and the fineness in designs and product manufacturing quality that focuses on Thai characteristics. At the same time, the Thai International Furniture Show (TIFF) focuses on green living and sustainable products.

Thailand has seen political turmoil with the clashes of red and yellow shirts in May 2010 and the floods in late 2011; confidence is still needed in driving economic growth. Exports are affected in Thailand because although most of Asia is recuperating from the global crisis, the US, Europe and Japan are still far from recovered and this affected Thailand in 2011, and will into 2012.

The baht, according to The Bangkok Post, has continued its appreciation, raising concerns over Thailand’s export competitiveness. This means Thailand will have trouble having competitive export prices.

The furniture industry in Thailand has experienced strong growth over the past decade. While domestic demand suffered significantly during the economic crisis, exports have remained buoyant and earned US$794 million in 1999 with the principle destinations being Japan and the US.

The industry’s exports have registered slight growth over the past few years after experiencing a 75 percent increase between 1991 and 1994. Further growth has been registered over the first eight months of 2000 as furniture exports are up 17 percent over the previous year.

The export of furniture from Thailand is dominated by wooden products, which comprise over 70 percent of the total export figure, with metal furniture being the second largest product in the category registering just over 10 percent. Wooden furniture manufacturers have adapted well to the shift to parawood and currently use it in 60 percent of production and 80 percent of wooden furniture exports.

In the first quarter of 2010, the Thai economy surged by 12 percent year-on-year, the highest quarterly growth since 1995. This was mostly due to strong exports (up 32 percent) from continued global recovery; despite the March-May political protests in Bangkok, growth continued through the second and third quarter of the year. The Thai economy expanded by 9.3 percent (year-on-year) during the first three quarters of 2010.

Economic uncertainty with Thailand’s major trading partners and the high baht could also affect the economy. Inflation is expected to gradually climb (3.3 percent) to between three percent and five percent, due in large part to higher world commodity prices.

In a report by the vice president for research and planning at Kiatnakin Bank, Piyasak Manason, believes Thailand’s GDP will contract sharply for at least two consecutive quarters in 2012. Thailands’ economy will grow at between around one percent and 2.8 percent in 2011 - 2012. There are two main reasons for this.

The first is the structural damage wrought by the floods. Mr Manason believes that the flood’s effect on the economy will be long-lasting. Public as well as private infrastructure needs to be repaired or reconstructed. During that reconstruction period, production will not return to full-capacity, which will lead to contraction in the manufacturing dector.

The Kiatnakin Bank’s second point is the dim outlook for the global economy is due mainly to the intensifying European debt crisis. European and IMF inefficiency in coming up with a deal to restore investors’ confidence will make matters worse. This matter will not be resolved in the near future, confidence will erode and financial markets will remain volatile. Subsequently, the real sector will be hit by a slowdown in consumption and investment in the West, which will lead to a slowdown in exports from Asia, including Thailand.

However, furniture and furnishings stores have continued to show an improving trend, showing five percent current value growth in 2010. This is largely due to government policies to stimulate demand in the Thai property market. For instance, the government reduced the transferral fee on property purchases from two percent to 0.01 percent, and also introduced a tax exemption on properties purchased in 2009 until June 2010.

Demand for furniture and home-improvement products is expected to surge dramatically as people will spend a lot of money to restore their flood-damaged homes. Chairman of Furniture Industry Club of the Federation of Thai Industries (FTI), Verachai Kunavichayanont, commented that the flood crisis is expected to be over by the end of 2011. Then furniture manufacturers affected by the flood should finish revising their marketing and sales plans and start up production in January 2012.

The home-furnishing market is expected to enjoy a 15 percent jump in sales in the first quarter of 2012, according to the FTI. Thai furniture exports are likely to contract but the domestic market should grow by 15 percent as flood victims renovate their homes.

The outlook for the furniture market for the whole year is uncertain because home-buyer behaviour will change to preferring condominiums over single family homes and to delaying their decision to buy a residence. This will have a direct impact on demand for furniture. CEO of Modernform Group, Thaksa Busayapoka, said demand for furniture in the first half of 2012 could explode, driven by the replacement market.

However, the rest of year remains in limbo. “We cannot estimate the demand for furniture all of next year (2012) because there is more business risk,” said marketing director of SB Furniture Industry, Tanyaruck Chawaldit.

President of the Thai Timber Association and secretary-general of the Thai Furniture Industries Association, Jirawat Tangkijngamwong, expects a 10 percent decline in exports for 2011 (US$1.2 billion) compared to 2010, failing to meet the earlier projection of 10 percent growth.

The Department of Export Promotion reported furniture exports from January to October in 2011 totalled 29.3 billion baht, down by 5.46 percent year-on-year.

The flood cut exports in October 2011 by about 20 percent and the situation is unlikely to improve this month because exporters still face logistics problems, causing buyers to source from other countries. However, some remain optimistic. “Reconstruction efforts will spur spending by both the public and private sectors and help economic growth pick up in 2012”, says Senior Country Economist for Thailand, Kirida Bhaopichitr.

The associations predict an inactive export market in the first quarter next year, as most Thai exporters are small and medium-sized companies that will still be renovating. They predict the market will resume by the second quarter. Costs may increase 10 - 20 percent in 2012 due to an increase in minimum daily wages and possibly raw material costs, which could reduce exports by 20 percent from 2011.

Mr Jirawat said Thai furniture exporters should look to high-potential new markets such as Asean, China, India, Brazil, Mexico and Russia, as traditional markets such as the United States, Europe and Japan face economic problems.

He estimated the domestic furniture market would reach 40 - 50 billion baht this year, growing well into next year on the strength of low to mid-priced pieces. He believes consumers will shift from buying build-in pieces to knock-down furniture.

Thailand’s wooden furniture industry faces considerable competition from regional competitors, Malaysia, Indonesia, Vietnam, Taiwan and China in particular. Malaysia was the first country to use parawood for large-scale furniture production and benefits from slightly lower production costs than Thailand.

China is beginning to import processed rubber-wood for use in its furniture manufacturing industry and enjoys the advantage of significantly cheaper labour expenses. As rival countries advance their production quality, the level of competition for Thailand’s furniture exporters is expected to heat up.

Various government agencies and industry representatives have been active in promoting and encouraging Thailand’s furniture exports. The Department of Export Promotion (DEP) stepped up its efforts in showcasing Thailand’s furniture exporters during the economic crisis when domestic purchases of furniture slumped by over 70 percent. The DEP currently works with the Thailand Furniture Industry Association to stage an annual trade show, along with coordinating participation in relevant trade events abroad.

The Thai government recognises product design with the DEmark, or Design Excellence Award. It is presented annually by Thailand’s prime minister under the Department of Export Promotion, Ministry of Commerce. The DEmark is a logo that manufacturers may use to promote the products’ design internationally. It has been a good marketing tool for Thai industries.

Furniture manufacturers have also been active in displaying their products in the DEP’s ‘Export Mart’, which allows exporters a site to showcase their products on a permanent basis to prospective buyers visiting Thailand. Thailand’s Board of Investment has also been active in lobbying for lowered or exemptions on import taxes on imported raw materials for Thailand’s furniture industry, including those on paint, glue, lacquer and hinges.

The country’s primary markets for furniture and related products are the US, Japan, the United Kingdom, Australia, and Germany, to which Thailand exports nearly 62 percent of all its furniture and related exports.

Deputy director-general of the Business Development Department in Thailand, Itiipol Changlum, said this showed that foreign companies still want to do businesses in Thailand despite the severe flooding in some provinces.

Mr Changlum said: “Thailand is still an interesting destination for investment thanks to its strong economic fundamentals and the government’s clear plan to boost the economy with post-flood recovery measures. The government will urgently facilitate investors, as investment is one of the engines driving the economy.”

More than half of the furniture made in Thailand is wood, some teak, but primarily rubber wood. A by-product of Thailand’s rubber industry, rubber wood is the most ecologically friendly of all lumber used to manufacture furniture. When a rubber tree is about 30 years old and has stopped yielding sufficient latex to be viable, it may be harvested for wood.  A member of the maple family, the rubber tree produces a beautiful, dense-grain, durable lumber that is used to make high-quality furniture.

To help preserve Thailand’s natural forests and provide a sustainable wood alternative, the government has worked with the Thai Furniture Association and other groups such as Green River Thailand to improve rubber wood production, harvesting, and marketing. The Royal Thai Forestry Department also supervises the production and limited harvesting of teak wood.

While the style and quality of Thai furniture products has been well received, further efforts should be made to improve the quality and styling of the products to maximise their competitiveness in the world market. Thailand’s furniture manufacturers have been slow to achieve industrial standards certification for quality (ISO 9000) or environmental management (IS0 14000), which are increasing in importance for exports targeted at Western markets.

The liquidity problems currently being experienced in Thailand’s financial sector are preventing numerous furniture exporters from taking advantage of sales opportunities. However, with Thailand’s domestic furniture sales beginning to recover from the crisis and continued strong export sales projected for the future, the industry’s prospects continue to appear bright.

In Thailand, timber and eucalyptus trees are grown and sold in log form to produce wood chips. Wood chips are a raw material widely used in furniture construction.

The market growth potential is huge, thanks to a handful of players in the Thai industry, which produces 10 million tonnes of wood chips annually, six million tonnes of them, used locally.

Shaiyo-AA, a Thai paper maker and wood chipper, produces more than five million tonnes of wood chips annually for its own use, as well as supplying the export industry with another four million tonnes for a 40 percent share of the market.

The company has developed its own breed of eucalyptus tree and has patented them as ‘paper trees’. The fast-growing trees, which mature in only three to five years, supply quality wood pulp for paper production. Most eucalyptus-growing projects have been carried out by pulp and paper companies on a contract-farming basis.

Most eucalyptus logs come from the Northeast of Thailand, which has much poor-quality soil, and some Central provinces through integrated farming. One attraction is the price of wood chips, which has continuously moved up in recent years. Zero-moisture content is best, reflecting good-quality fibre content.

The local price is US$102 to US$120 a tonne, while export prices range between US$120 and US$125. Australia’s wood chips are sold at US$30 to US$50.

Major importers include Japan, China, South Korea and Taiwan. Wood chip imports from China have been rising substantially in recent years, from a few tonnes in 2005 to more than 10 million tonnes last year. Japan is the largest consumer. It used to import 17 million tonnes annually, but the volume has declined in recent years.

While the outlook for 2011 is for slightly lower growth as the global economy also begins to moderate, Thailand is well positioned to make continued economic gains. The government continues to make every effort to strengthen investor confidence, to resolve all outstanding issues related to environmental impact, and to improve the transportation and logistics capacity of the nation.

The improvement of the global economic situation, the Nation newspaper reports especially that of US economy, has brought more stability to the world economy, even though there are several threats faced by many countries. The momentum of global economic recovery will support the expansion in export, production, and tourism sectors of Thailand. Moreover, Thailand’s diversified export markets will alleviate the impact of economic decelerations in major countries.


Thailand’s Ministry of Commerce and the Department of Export Promotion are working to establish Thailand as an Asian hub for furniture product exports. Their strategies include:

  • Organising the annual Thailand International Furniture Fair
  • Differentiating Thai products for niche markets
  • Penetrating potential markets such as Russia, India, the UAE, Vietnam, and Singapore
  • Importing less expensive raw wood materials from neighbouring countries
  • Establishing the National Thai Rubberwood Institute to manage the structure of Thailand’s rubberwood businesses
  • Developing and strengthening Thai-owned product brands
  • Maximising Thai trade negotiations and free trade agreements with Australia, New Zealand, China, India, and ASEAN


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