China Plus One in Thailand: What Contract Manufacturers Should Assess Before Adding a Thai Site

On 1 October 2026, Germany's Infineon opened a new semiconductor backend manufacturing site in Samut Prakan, Thailand. In its announcement, Infineon said the site strengthens and further diversifies its global manufacturing footprint while adding capacity for future growth.

For Taiwanese manufacturers, the useful part of this news is how a global company is arranging its next stage of production and supply capability.

I think Taiwanese supply-chain companies should seriously consider one approach: keep the manufacturing capability they already have in China or Taiwan, and add a site in Thailand that can actually produce, pass customer qualification, and deliver reliably.

For a contract manufacturer, the value of this "plus one" is that customers planning supply sources outside China can still choose us. The production location can change. The working relationship, the technical experience, and the trust in quality can carry over.

Customers' sourcing questions now extend to the country the factory is in

Suppliers used to compete mainly on quality, price, lead time, and capacity. Those still matter. But once a customer starts planning production across countries, the supplier has another set of questions to answer:

Can you produce in the country we specify?
Has your other site already been qualified?
If the original plant is disrupted, can another site take over the orders?

So the value of a Thai site should be assessed as part of overall supply capability.

China has deep manufacturing clusters and supporting industries. Taiwan has built up technology, management, and customer relationships. A company can keep those strengths and extend suitable products, processes, and services to Thailand, creating a division of work across countries.

When one supplier can offer qualified capacity in more than one country, the customer gains another way to allocate orders and manage risk. For the supplier, that can become a condition for keeping existing orders and joining new projects.

This is a business judgement drawn from the cases below. The actual benefit depends on customer demand, product characteristics, and how well the new site is executed.

German and Japanese companies are both building more flexible supply networks

Infineon's Thai investment is a clear starting point: a global manufacturing network can add a site to gain flexibility in capacity allocation and supply.

Japanese companies show a similar logic. MinebeaMitsumi states on its product page that, as of June 2026, its PM stepping motors are produced at plants in Lopburi (Thailand), Phnom Penh (Cambodia), Kaohsiung (Taiwan), Cebu (Philippines), and Korea, and it explicitly links this multi-site network to supply stability and business continuity planning (BCP).

Murata announced on 1 September 2026 that its subsidiary Murata Electronics (Thailand) will invest about 6.2 billion yen in a new production building for EMI suppression filters on its existing premises in Lamphun, to meet growing demand and strengthen stable supply. Construction started in September 2026 and completion is expected in November 2027.

These cases have different backgrounds. One stresses diversification, one stresses multi-site supply, and one is an expansion driven by demand. Not every investment should be read as a move out of China.

From a supply-chain point of view, though, they point the same way: companies are using manufacturing capability in different regions to support long-term demand and delivery. The question for Taiwanese contract manufacturers is how to become part of such a network.

After the large manufacturers arrive, opportunities spread along the supply chain

Whether a factory runs steadily depends on what is available around it: materials, components, equipment maintenance, testing, logistics, and technicians who can handle problems.

When large manufacturers add capacity in Thailand, new local demand may appear in the surrounding supply chain. Roles a Taiwanese company can assess include component manufacturing, material supply, jigs and automation equipment, maintenance services, and quality and testing support.

Between industry demand and an actual order, however, there is customer qualification, procurement procedure, cost competition, and mass-production validation. A large plant opening does not mean nearby suppliers receive orders right away.

The questions worth studying are:

Which items does the customer want to buy in Thailand?
Which capabilities still have to be supplied across borders?
Which gap can our process, quality, or service fill?

A factory plan has a commercial basis only when these have concrete answers. They also tell a company whether to build a full line, start with a specific process, or begin with technical service and local partnerships.

The 60% local-materials figure shows what Thailand expects from foreign investors

Another point in the Infineon case is how the BOI links the investment to local industry.

In its press release of 25 September 2026 (No. 167/2569), the BOI said Infineon will develop no fewer than 14 Thai businesses and has a target to raise the share of locally sourced materials by value, with 60% as the stated direction, focusing on producing high-value parts such as DCB, frames, housings, diodes, and pins in Thailand. The same release says this promotion carries conditions requiring the company to develop more than 600 Thai science and technology personnel.

The Investment Promotion Act B.E. 2520 helps in reading the 60% figure:

Section 20 lists the matters on which the BOI may set conditions in a promotion certificate. Item (4), "amount of local raw materials to be used", was repealed by Amendment Act No. 4 in 2017, together with item (18) on exports. One stated reason for the amendment was that parts of the old Act were inconsistent with international obligations.
Item (6) of the same section, "training and employment of manpower", remains in force. Making talent development a condition of promotion has a clear legal basis.
Section 54 gives the BOI the power to withdraw rights and benefits, in whole or in part, when a promoted company violates or fails to comply with the conditions the BOI has set.

In other words, the Act no longer contains "amount of local raw materials" as a certificate condition. So the 60% figure:

is not a common threshold that every BOI-promoted foreign company must meet;
is not a level Infineon has already reached;
is described as a "target" in the body of the release, with no deadline and no calculation method given. Its legal nature within Infineon's promotion cannot be determined from the press release alone.

What an individual company is actually obliged to do depends on the BOI announcements that apply to it and on the wording of its own promotion certificate.

The BOI has also used incentives to encourage local sourcing. On 27 June 2025 its board approved a Local Content measure, applied first to the electric vehicle and electrical appliance industries, under which projects that reach the specified share of local parts receive additional tax benefits.

The policy direction is clear. Thailand wants foreign investment to bring local procurement, supplier development, and technical capability, so that more of the industry's value stays in Thailand.

For a company preparing to invest, this means the plan should cover the local supply chain:

Which materials can be sourced in Thailand?
Which components are worth producing in Thailand?
How will supplier qualification, quality management, and training be set up?

Calculating a local-sourcing ratio needs real production and purchasing records. Whether imported materials bought from a trader inside Thailand count as local in a given case has to be confirmed against the applicable rules.

Thailand's rising technical level will shape conditions for the next group of factories

Whether advanced manufacturing investment upgrades the wider industry depends on whether technical and management capability gradually builds up locally.

As engineers become familiar with tighter process control, suppliers learn material traceability and quality validation, and equipment service providers handle more complex repairs, those capabilities can support the companies that arrive later.

On 24 September 2026, Thailand's national policy committee for the semiconductor and advanced electronics industry approved the country's first national semiconductor industry development strategy. It has three phases (to 2030, 2040, and 2050) and five mechanisms: incentives, high-skilled personnel, technology and research and design infrastructure, physical infrastructure, and the business environment, including cooperation between foreign and Thai companies. The meeting also called for an action plan to follow. For now these are policy plans, and results depend on implementation.

When assessing a Thai site, it is worth watching how the industrial environment changes. Is the pool of technical talent growing? Can suppliers take on more demanding products? Are testing and maintenance capabilities being put in place?

If these conditions keep improving, Thailand becomes more feasible as a base for higher-technology manufacturing. Companies that enter early may also take part in building the supply chain and accumulate customer relationships and local execution experience.

For Taiwanese contract manufacturers, "plus one" starts from customer demand

Adding an overseas site takes capital, management, and time. A new plant may face a slow production ramp, qualification delays, a shortage of people, and overlapping costs at two locations. So the decision has to come back to the company's own conditions:

Does the customer have a clear need to source outside China?
Is the customer willing to qualify a Thai line?
Can expected orders support the new site?
Which key materials and processes can be localised?
Can the management team keep the same quality standard at both locations?

These questions are closer to the core of the decision than comparing land prices or wages alone.

For a contract manufacturer that already has technology and a customer base, the value of a Thai site is that it turns existing strengths into one more option that can deliver. When customers adjust their global supply chains, we can still join the discussion, offer a plan, and compete for the orders.

The Infineon and Japanese cases show that cross-border manufacturing networks keep developing. Thailand's localisation policy is a reminder that a new site has to build capability together with local industry.

What is worth working toward is this: when a customer looks for supply outside China, it can clearly see that we also have reliable manufacturing, quality, and delivery capability in Thailand.

Points still to be confirmed

The actual conditions in Infineon's promotion certificate, the scope and deadline of the 60% figure, and the list and progress of the 14 Thai businesses are not publicly available.
The scope and ratios of the 2025 Local Content measure should be checked against the BOI's official announcement.
The action plan under the national semiconductor strategy has not been published.
The Japanese cases support only multi-site supply and demand-driven expansion. They do not show that either company intends to leave China.

Legal basis

Investment Promotion Act B.E. 2520, as amended by Amendment Act No. 4 (B.E. 2560): Section 16 paragraph 2, Section 20, Section 54

Sources

Related article

Setting Up a Factory in Thailand Doesn't Start with Land: The Order Foreign Investors Should Follow

Information checked on 4 October 2026. This article is a general explanation. Laws and policies may change, and each case has to be assessed on its actual business, the applicable BOI announcements, and the conditions in its promotion certificate.

Questions about your own case? Connect with the author on LinkedIn.

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China or Taiwan, Plus Thailand: The Next Supply-Chain Contest Is About One More Site That Can Deliver