As Cambodia strives for economic diversification, the shift from agriculture to manufacturing has become a key national priority. In this process, the Electrical and Electronics (E&E) sector emerges as a key driver for the country’s transition to secondary industry and deeper integration into the global value chain. However, Cambodia’s foreign direct investment (FDI) in the E&E sector remains heavily reliant on imported primary components, which represents a missed opportunity for local growth. By creating stronger linkages between local factories and FDI projects in the E&E sector, Cambodia can enhance domestic production, improve competitiveness, and fully capitalize on the benefits of industrial development.

Overview of the E&E Sector

The E&E products use electrical energy to perform tasks. These devices convert electricity into other forms of energy, such as heat, light, or kinetic energy.  The E&E products are essential to modern consumer life, with common electrical devices including microwaves, dishwashers, fridges, lights, or televisions. On the other hand, common electronic devices include mobile phones, laptops, digital cameras, or Bluetooth speakers. 

The industry related to production, marketing, and distribution of products that use electrical energy is known as Electrical and Electronics Equipment (EEE) industry. This industry is divided into four subsectors: electronic components, consumer electronics, industrial electronics, and electrical products.

EEE in Global Value Chain GVC

The global value chain (GVC) of the EEE involves multiple stages. The first stage begins with the inputs, which include silicon, metals, plastics, chemicals and packaging. These materials are essentials for creating components, which are divided into electronic components (e.g., semiconductor wafers, integrated circuits and circuit boards) and electrical components (e.g., wires, switchgear and transformers). These components then move to the next stage of assembly, where subassemblies like printed circuit boards (PBCs) and motors are produced. The final products serve various markets, including consumer electronics, automotive, medical, industrial equipment and aerospace.

Cambodia’s Emerging E&E Sector

In recent years, Cambodia has seen the emergence of its own EEE industry. The first EEE company was established in 2005, specializing in the manufacturing of construction wires, power cables and telecommunication cables. 

According to the GIZ’s Sector Brief: Cambodia Electrical and Electronic Equipment Industry, Cambodia's electrical and electronics manufacturing sector employed around 54,000 people in 2020, accounting for 1.43 percent of the country's workforce. 

This is relatively small compared to Thailand, where the industry employed 600,000 (1.57 percent of the workforce), and Vietnam, with over a million workers (1.78 percent). Notably, approximately 47 percent of workers in Cambodia's EEE industry are women. 

The sector's growth has been driven by significant foreign investment, attracted by low wages, international trade agreements and Special Economic Zones (SEZs), which offer favorable tariffs and tax incentives. 

Most EEE companies are located in SEZs, such as the Royal Group Phnom Penh Special Economic Zone, as well as industrial zones near Thailand and Vietnam, which are strategically positioned for low-value, labor-intensive production.

According to GIZ, the EEE industry in Cambodia consists of 99 companies and employs about 54,000 people. In 2023, EEE exports reached $0.73 billion, accounting for 13.7 percent of total exports. This compares to $1.99 billion in exports (8.9 percent of total) in 2022 and $1.08 billion (5.6 percent) in 2021. 

EEE imports totaled $0.36 billion in early 2023, or 6.3 percent of total imports, and $1.46 billion (4.9 percent) in 2022, with $1.19 billion (4.1 percent) in 2021. The sector has attracted $450 million in FDI since 2011. 

Key products in the EEE sector include cables, diodes, semiconductors, and electrical motors. In 2021, major export markets included the USA (50.7 percent), Thailand (14.5 percent), and Japan (11.9 percent), while imports were primarily from mainland China (61.9 percent), Thailand (17.6 percent) and Vietnam (6.3 percent). 

The role of manufacturing and assembly in Cambodia’s E&E landscape

According to the Council for the Development of Cambodia’s 2022 Electronics investment overview, FDI in Cambodia’s Electrical and Electronic Equipment (EEE) industry has steadily grown since 2011, reaching a cumulative total of $450 million and 79 Qualified Investment Projects (QIPs) in 2022. 

This growth is fueled by the wave of Japanese investment through the 'Thailand Plus One Strategy,' where companies set up production in Cambodia to reduce reliance on Thailand. Over 85 percent of the investment focuses on manufacturing and assembling electronic components, small motors and wire harnesses. 

Trade Pattern and Domestic Market

According to the Observatory of Economic Complexity (OEC), Cambodia’s economic profile reveals that the EEE sector has experienced notable growth in recent years, both in exports and imports. In 2023, Cambodia exported a total of $34.3 billion, ranking as the 68th largest exporter in the world. 

In the first five months of 2023 alone, Cambodia exported EEE products worth approximately $1.253 billion. On the import side, Cambodia imported EEE products worth US$1.58 billion during 2023.

By 2025, according to the CDC’s QIPs scheme, Cambodia is expected to attract more than 100 FDI projects. This influx of FDI creates thousands of jobs and presents an opportunity to strengthen and diversify the country’s economy, particularly in the E&E sector. It paves the way for enhanced industrial linkages and technology transfer, with spillover effects that might help upskill the labor into more skilled positions.  

EEE Structural Challenges

Despite Cambodia’s fast-growing economy and rising demand for EEE products across sectors like tourism, construction, and manufacturing, most local factories producing EEE products are still focused on exports. Cambodian buyers in these sectors often prefer sourcing from international markets like Thailand and Vietnam rather than domestic supply chains.

More data is needed to fully understand this preference, as there is no clear data on the share of locally manufactured versus fully imported EEE products. EEE firms in Cambodia largely rely on imported materials such as wires, diodes, and transistors due to the inability of local suppliers to meet the required quality standards, along with a lack of domestic processing facilities for primary components. 

As a result, the sector remains heavily reliant on imports, particularly from China. Despite its growth, Cambodia still faces challenges in terms of scope, scale, and the complexity of EEE production compared to other regional countries.

Policy Recommendations

It is crucial for Cambodia to focus on diversifying its industrial base, particularly by developing industries that produce primary components to support the existing assembly and manufacturing sectors established through foreign direct investment (FDI). 

Although the Cambodian government has set ambitious targets for the electrical and electronics (E&E) industry through policies such as the Industrial Development Policy 2015–2025 and the Automotive and Electronics Roadmap, implementation challenges persist. 

A key issue is the disconnect between FDI-driven operations, which rely heavily on imported components, and local factories that are primarily export-oriented. This gap represents a missed opportunity to integrate local manufacturers into global value chains.

To address this, the government should conduct a comprehensive supply chain mapping to identify opportunities for connecting local factories with FDI-led projects, particularly within Special Economic Zones (SEZs). 

A relevant case study is the Penang cluster in Malaysia, where strategic industrial clustering contributed approximately RM599 billion in sales value in 2023, accounting for 40.4 percent of Malaysia’s total exports. 

Penang has since earned the reputation of being the “Silicon Valley of the East.” This success was driven by strong linkages between multinational corporations (MNCs) and local small and medium-sized enterprises (SMEs), supported through initiatives such as the Vendor Development Program (VDP), Industrial Linkage Program (ILP), and partnerships led by SME Corp and the Malaysian Investment Development Authority (MIDA).

For Cambodia, it is vital to establish a dedicated committee to monitor the development of the local E&E industry, both formal and informal sectors. Only then should the second phase of creating linkages with FDI-led E&E projects be pursued. 

This approach can promote greater local production, enhance spillover effects, and reduce the country’s reliance on imported components.