Electronic Manufacturing Heats Up in Eastern Europe

Former eastern block countries are switching to market economies, joining the European Union, and attracting foreign investment. That, combined with their central location and moderate labor rates, has already transformed countries such as Poland, the Czech Republic, Slovakia, and Hungary into manufacturing powerhouses, according to an article in the Financial Times in early December.

“Central and Eastern Europe is the factory of Europe, just as China is the factory of Asia,” Lee Tai-sik, chairman of the Korea Business Centre, which promotes South Korean trade and investment in Poland, told the Financial Times .

A recent report by market researcher Technology Forecasters Inc. (TFI) backs that up. TFI estimates that electronics production in the region is about $85 billion, including output from OEMs, EMS providers, ODMs, and electronic components and materials suppliers. The research firm expects that to grow to $100 billion in the next few years.

Hungary, the largest electronics producer in the region, is home to 8,100 electronics companies, according to TFI. Among them are global EMS companies {complink 2125|Foxconn Electronics Inc.}, {complink 2862|Jabil Circuit Inc.}, {complink 2085|Flextronics Corp.}, {complink 1744|Elcoteq Network Corp.}, and {complink 4773|Sanmina-SCI Corp.}; Hungarian EMS companies Zollner and Videoton; and multinational OEMs {complink 4267|Royal Philips Electronics N.V.}, {complink 5114|Sony Corp.}, Bosch, {complink 1879|Ericsson AB}, and {complink 4929|Siemens AG}.

The manufacturing boom was spurred in part by a migration of automotive manufacturing to the region. Many car companies launched facilities in the region between 2003 and 2009: Volkswagen in the Czech Republic, Hungary, and Slovakia; Daimler in Hungary; Peugot, Toyota, and Kia in the Czech Republic; {complink 12709|General Motors} in Poland; Hyundai in Slovakia; and Renault in Romania.

This migration brought with it all the electronics suppliers to the car companies and helped cement a solid infrastructure and tight supply chain in the region. In 2009, however, auto manufacturing was hit hard by the global recession. That year, auto production in Hungary fell by 43 percent, in Poland by 7 percent, and in Slovakia by 20 percent.

But the presence of a strong supply chain as well as tariff-free access to EU markets has continued to attract technology manufacturers. Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia are now EU members; Croatia, Macedonia, and Turkey are official candidates to join.

These manufacturers also like the advantages of being close to their markets, including the ability to customize particular products for a specific region or customer. In fact, almost half of the respondents in TFI’s study consider Central and Eastern Europe to be more desirable manufacturing locations than Asia for products heading to Europe, Middle East, and Africa (EMEA) customers.

“We’ve been so skewed toward China and Asia for the last 10 years, some companies are looking up and asking whether that is really the best place for them to manufacture,” says Pamela Gordon, president of TFI. She estimates that there are 30 percent more electronics companies in the region today than in 2007.

“Given that most of the world’s large electronics companies — and many smaller ones — are growing their operations in Central and Eastern Europe, we are confident that the strategic role of the region will only increase,” she notes.

— Tam Harbert has been covering electronics since the dawn of surface-mount technology. She lives online at

7 comments on “Electronic Manufacturing Heats Up in Eastern Europe

  1. Barbara Jorgensen
    January 6, 2011

    With costs rising in China and the EU's debt crisis, attracting manufacturing to the neighboring region makes a lot of sense. The question is whether companies will go for the low-cost areas or be attracted by efforts such as the UK's building a high-tech center in London.

    An interesting side note: with snow, volcanoes and everything else stalling air travel, the EU rail system is something to consider when building a supply chain. A UK-based colleague of mine told me his life was uninterrupted by the volcano activity of last year.

  2. Ariella
    January 7, 2011

    Barbara, good point about logistical concerns. However, natural disasters are unpredictable.  New York, for example, is not associated with disruptions caused by weather.  Nevertheless, the snow that struck at the end December caused cars and public transportation to grind to a halt, not to mention all the flights that were grounded for upwards of 24 hours. That is not a long-term problem, but I'm sure many businesses were disrupted as a result.

  3. itguyphil
    January 7, 2011

    Absolutely. Do not forget to mention the power outages and loss of phone/internet connectivity taht took place. I had at least a handful of clients calling with a server down, etc issue.

  4. mfbertozzi
    January 8, 2011

    Tam, I really appreciated your column contribution and posts from people below. All of you are reporting exactly a true picture. Based on my experience, I can report several financial actions to promote investments there, are on the table.
    Supply chain is one of the key factor in recovering back economy; US Agency for International Development has launched projects there, for example.
    Furthermore for example, big sportive events in Eastern Regions (european and then worldwide football championships) within next years could attract more & more investments especially in the electronic and telecommunication sectors.

  5. itguyphil
    January 8, 2011

    Two things:

    1. What kind of programs has the US initiated in Europe that you know of?

    2. I am a sports fan and I have seen the huge crowds that show for live sporting events in Europe. What if they implemented some type of initiatives to get some positive cycle of currency going based on the large amounts of people? Does this even seem possible of just a dream in my head?

  6. mfbertozzi
    January 8, 2011

    Re.1: an example of program to support projects and investments is available here “”. It was founded by USAID (United States Agency for International Development)

    Re.2: to support for example European Championship in '12, they are improving messaging services just to provide by (mobile) ads infos on results, bettings or heritages to visit and so on.


  7. stochastic excursion
    January 10, 2011

    Eastern Europe is promising in many ways with regard to return on investment.  Not sure if Finland is officially in that category, but certainly in the neighborhood; Nokia a major player both in competitiveness and innovation.

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