An overview on electronics manufacturing locations in Central- and Eastern Europe. To learn more, please visit our blog: http://manufacturinghungary.blogspot.hu/search/label/electronics

1. How to select your new
electronics manufacturing
site in Eastern Europe?
by Dr. Balazs Csorjan, investment promotion specialist
2016 edition

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3. Central- and
Eastern Europe
“Tell me where Central Europe is, and I can tell
who you are.” (Jacques Rupnik)
When we say ‘Central - and Eastern Europe’, we
mean the new (Eastern) member states of the
European Union.
This region went through a fundamental
economic transition in the last 25 years: from a
state-led communists economy to a more or less
free market economy.
The low-cost manufacturing region became the
member of the European Union in 2004, so the
cultural and geographical nearness accompany
to free access to the World’s largest market.

4. Eastern European
electronics
manufacturing
One of the leading electronics manufacturing
location of the world, involving EMS companies
(like Flextronics, Jabil Circuit etc) and OEM
companies (like Bosch, GE, Samsung etc).
Eastern Europe provides for electronics industry
in general: low-cost manufacturing, market
nearness, strong education, developed
infrastructure and stable business environment.
Hungary, the Czech Republic, Poland and
Slovakia have the largest share in CEE
electronics industry.

5. Hungary
Hungary has the largest (25%) share in 2013 in regional electronics
production. The local suppliers, EMS and OEM companies shape two
electronics clusters:
Eastern Hungarian electronics cluster
Bosch, Electrolux, Flextronics, Samsung, National Instruments, Jabil
Curcuit, General Electric - just some of the leading elecronics companies
which are doing business east from Budapest.
The location provides: 30% labour cost discount compared to Budapest;
46% of all Hungarian job seekers live here; 95 developed business parks;
600 kms motorways; awards by Financial Times’ fDi Magaine
Next slide: a short company profile: General Electric Hungary
Western Hungarian electronics
cluster
Foxconn, Visteon, Sanmina-SCI,
Nokia/Microsoft, Sanyo, Valeo,
Phillips - just some of the leading
electronics companies which are
doing business in the Western-
Hungarian electronics cluster, located
west from Budapest.
learn more about Hungarian
electronics industry>>

6. Czech Republic
The country has the second largest regional
share, and the number of electronics headcount
reached 160k employees.
Moravian-Silesian electronics cluster
The 2nd largest Czech city, Brno located in the
South-Eastern part of the country. Brno has
strong technical education on secondary and
university level. Electronics has a 20% share in
Brno’s economic output, and its two business
parks host companies like Acer, Honeywell or
Siemens.
company profile: Siemens
With 12k workers, Siemens is one of the largest
employers of the country. The near Brno
Siemens Electric Machines and Siemens
Electromotors are the leading units.
Central Bohemian electronics cluster
The capital city of Prague and its broader
metropolitan region is the home of the Czech
semiconductor, robotics, consumer electronics
industries and electronics higher education.

7. Poland
Poland is the 3rd largest electronics
manufacturing country in CEE.
International companies like Flextronics, Alcatel,
Jabil, Toshiba etc employ 53,000 people
nationwide. The electronics industry is especially
strong in the central regions of the country, the
Warsaw-Lodz-Bydgoszcz triangle represents the
main cluster. Specialised business parks like
„Crystal Park” closed to Bydgoszcz provide
electronics-oriented environment.
There are a focused Polish chamber of
commerce for electronics and telecom industries.
learn more about Poland electronics industry

8. Slovakia
Slovakia has a Poland-size electronics industry - with
the 15% of Polish population. Behind automotive
manufacturing, electrinics is the #2 industry in the
county.
Western Slovakia electronics cluster
The main cluster bordered by Galanta-Nitra-Trnava-
Bratislava, in the Western part of the country. The
leading companies are Sony, Samsung, Foxconn
and Tesla.
Eastern Slovakia provides much higher
unemployment, emerging infrastructure and focused
tech education for companies like Panasonic.
Learn more about Slovakia’s electronics industry >>

9. Real Estate supply
In Central and Eastern Europe, there are approx.
1,000 industrial parks. Hungary and the Czech
Republic have the most wide-spread industrial
park networks (approx. 200-200 IPs), and Poland
has a modest network, but larger business parks.
The number of industrial brown field sites can be
estimated for more thousands, however be
careful with these old industrial facilities: there
can be relevant environmental issues thanks to
the communistic heavy industrial track record.
Industrial real estate markets are liberalized
everywhere, you can get a property quickly (but
hire a local attorney).

10. Real Estate costs
In CEE, property prices are relatively high, thanks to the weak supply. However, note: the property costs
are under the 25% of total costs of a new manufacturing plant.
In numbers, industrial land average sales prices are everywhere between 20-40€ per sq.meter in larger
cities, and under 20€ in smaller towns. 10€ per sq.meter is a good deal, however some municipalities
offer free of charge industrial land.
Industrial hall rental markets are relatively small outside larger cities, but the average rental fees are
between 2 and 5 € per sq.meter per month.

11. Infrastructure:
Motorways
Developed infrastructure makes Central-
and Eastern Europe more attractive
location than other emerging countries
of the world.
The European Union has a vision about
the cross-European transportation,
called Trans-European Transport
Network (TEN-T). The goal of TEN-T
developments (funded by EU) is to make
the EU internal market more competitive
and to speed up the market access. The
developments of member states fit into
this framework, including the low-cost
CEE Region.
Regarding national motorway networks,
Hungary and the Czech Republic have
the most developed motorway systems.

12. Railways
The Central- and Eastern
European motorway network is
underdeveloped compared to the
Western European networks, but
the CEE railway network is in
much better status. The extended
railway network was built in the
last century, and large-scale EU
programmes are running to rebuilt
and develop it. The European
Union prefer railway transportation,
because environmentally it seems
to be cleaner. However, the
Eastern European rail cargo
companies are often not so reliable
and not flexible enough, that's why
the road transportation has
significantly bigger share.
Manufacturing sites and business
parks have often a railway access,
the typical construction cost of 1
km (0.62 miles) industrial rail is
roughly 1 million euros.

13. Energy prices
The CEE electricity market is highly regulated by
the EU. The EU has a competitive energy market
(theoretically), separating the grid developers and
energy providers. (On-site grid development is
managed by business parks). As a key account,
you can achieve competitive energy prices.
EU energy price statistics can be checked here >>
Czech Republic had the lowest and Latvia had
the highest industrial electricity price level in 2014.
Czech Republic had the lowest and Slovenia
had the highest natural gas price level in 2014.

14. Infrastructure:
water and sewage
Water infrastructure is typically managed by local
governments, municipalities price the service and
can fix issues.
However, there are EU guidlines for water
treatment and environmental issues (not country-
specific).
Large-scale water supply is available mostly
alongside the rivers only.

15. Labor market:
Unemployment
As far as CEE is one of the most dynamic
region of the European economy, the
unemployment is relatively not so high
(compared to Spain, Ireland or Greece,
see the map on the right), however, there
are relevant in-country differences.
Generally we can say: Eastern Poland,
Eastern Slovakia and Eastern Hungary
have the highest unemployement rate.

16. Labor market:
Labor costs
Not independently from unemployment,
the Czech Republic and large cities like
Budapest (Hungary) and Bratislava
(Slovakia) have the highest wage level:
average labor costs (involving taxes and
social contributions) are between €1200-
€1800 per month in these locations.
The low-cost Eastern parts of Poland,
Slovakia and Hungary have a much
more modest wage level: average labor
costs are between €600-€1200 per
month.
Romania and Bulgaria provides a
superlow cost wage level (around 5-600
€ per month)
learn more here >>

17. Education
The Eastern European vocational training
systems follow more or less the “German modell”.
The so called dual education means: vocational
school students learn practical skills at
companies. In BSc/MSc engineering trainings
companies are also present.
Recruiting are usually managed by professional
recruitment agencies, but university job fairs and
governmental labor offices recruiting between job
seekers can be a relevant help.
Finally: labor market regulations are definitely
flexible and business friendly.

18. Grants for
manufacturing
When it’s about industrial site selection, grants
can be the cherry on the cake. I don’t suggest to
make a decision based on grants only, but why
shouldn’t calculate with free money when some
governments and municipalities provide it?
Governments provide grants for job creation, for
acquisition of assets, tax relieves and more. Here
you can learn more about Eastern European
grants for manufacturing.

19. Investors told it
„GE has a large Lighting technology production facility in the city
of Hajdúböszörmény. It is a global Center of Excellence for
state-of-the art green lighting technologies and our measures of
productivity, innovation and cost are all globally competitive. The
municipal leadership is pro-business and we have an
outstanding overall experience being part of the city and
Hajdusag.”
Ivan Hutter, Public Sector MArket Development Director
GE Lighting EMEA

20. How to select your new site?
long listing: 10-20 potential sites
might fit to your criteria
site selection questionnaire - answers
from the long listed locations
facilities, transport, labour issues,
regulations and taxes
short listing: the most promising 4-8
sites
visit personally each one
listen to your instincts - it's not a
science
rank and propose 2-3 to your board

21. Potential risks
During the site selection process, beside infrastructure, real estate and labor market,
analyze this:
● start-up time: existing halls for rent? supportive authorities?
● logistics: local service providers? transportation networks (e.g: TEN-T) connections?
● wage trends: competing employers in the city? labour market potential?
● transparency: level of corruption? political stability? fair business customs?

22. Site selection
assistance
There are several ways to get help from
professional site selection resources:
● non-profit governmental investment
promotion agencies (IPAs): HIPA
(Hungary), CzechInvest (Czech Republic),
PAIZ (Poland), Sario (Slovakia)
● World Bank's investment portal, www.
fdiintelligence.com, www.siteselection.com
● consultants and real estate agents
● … and last but not least: ask our free of
charge help

23. About us
Manufacturing Hungary Blog is an information source about the
manufacturing topics in Hungary and Eastern Europe. Our goal is to
support site selection team’s job, providing useful information.
Dr. Balazs Csorjan, investment promotion specialist, the former regional
director of Hungarian governmental investment promotion agency. Dr.
Csorjan has taken part in more hundred site selection projects - he
knows your questions.

24. If you liked this presentation,
please do not forget to share
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like it, too.
Otherwise, do not hesitate to e-mail your questions: csorjan@m35businesspark.hu or download the file.
thnx a lot!