SCG's Answer to China's Export Flood: Build Bigger or Get Priced Out

Siam Cement Group is tearing down small factories and building regional-scale ones because Chinese overcapacity is, in its CEO's words, "a fact of life." Thammasak Sethaudom, president and CEO of the Thai industrial giant, laid out the strategy Tuesday on stage at the Fortune Southeast Asia 500 Summit in Ho Chi Minh City on Nov. 3.

"If you look at the current situation, we are facing overcapacity from mainland China," Thammasak said. "There is a lot of good and quite competitive product from China flooding into the whole region…To SCG, this is the fact of life, and we have to adjust."

How big is the Chinese export wave?

The numbers behind his warning are stark. China's exports of polypropylene — a widely used plastic — rose from 1.3 million tonnes in 2022 to 3.1 million tonnes in 2025, according to industry research firm ICIS. That's a near tripling in three years. An ICIS analyst estimates exports could reach about 5.1 million tonnes in 2026 if the January-May pace holds.

Overcapacity means factories can produce more than customers are buying. In petrochemicals — the building blocks of plastics and industrial materials — China's rapid expansion has squeezed producers everywhere else.

What does this change for Southeast Asia's manufacturers?

Thammasak's argument is simple: no single Southeast Asian market is big enough to absorb that shock alone. "The scale that produces only for Vietnam may not be enough," he said. "You need to build the scale that produces for the whole ASEAN."

SCG is practicing what its CEO preaches. "Over the past year, we are scrapping the old small factory and building a big one," Thammasak said, citing a new ceramic plant in Vietnam that is "much bigger than the one in the past."

The bigger structural move came on Oct. 28, when SCG Chemicals filed to combine its Thai olefins and polyolefins business with that of PTT Global Chemical, Thailand's largest petrochemical company. The deal values the combined businesses at 187 billion Thai baht — roughly $5.5 billion. SCG Chemicals would hold 44% of the venture, and shareholders vote Dec. 3.

"The global olefins and polyolefins industry is experiencing increasingly intense competition, placing continued pressure on product spreads and operating rates," Thammasak said in a statement at the time of the announcement.

Automation is about quality, not just cost cuts

In Ho Chi Minh City, Thammasak pushed back on the idea that automation is mainly a way to cut labor costs. He called that "a big misconception."

"The bigger advantage is [that it's] better in terms of quality, because the precision that the robot can do is far better than humans," he said.

Climbing 'out of the middle income trap'

His fellow panelists were optimistic about Southeast Asia's ability to move up the value chain. Salil Chari, FedEx's regional president for Asia-Pacific, described a Vietnamese customer that transformed its business. "I visited a customer in Vietnam just yesterday. They used to make these industrial connectors—old-school industrial goods," Chari said. "Now, with the growth in the AI data center space, they've moved up the value chain to creating fiber-optic cables for all these data centers."

FedEx now runs about 42 flights in and out of Vietnam, Chari added, with small and medium-sized enterprises driving much of that demand.

Liher Urbizu, president and managing director of SAP Southeast Asia, pointed to research spending as the way for the region to climb "out of the middle-income trap and up into the value chain." The gap is wide: Korea invests about 5% of GDP in R&D each year, Singapore manages about 2%, and the rest of ASEAN sits at 1% or lower, he said.

SAP, whose largest development centers have been in India and China for two decades, has spent the past two years building R&D capacity in Southeast Asia. That includes a Ho Chi Minh City lab Urbizu said now houses 500 developers writing code used by customers worldwide.

Urbizu also said ASEAN SMEs are adopting AI faster than their peers in Europe and the U.S. "The conviction that AI can deliver business results is increasing year on year," he said.

Thammasak was blunt about SCG's own constraints: the company cannot match China's R&D budget, so it has to spend smarter. "We need to be smart," he said.

For the region's manufacturers, the message from Ho Chi Minh City is that scale and specialization — not tariff walls or hope — are the practical answers to Chinese pricing pressure.