After writing my post last week about Poland, I got to thinking about other places in Europe that haven't been much in the news recently but which are also trying to increase their role in the electronics supply chain. Hungary came immediately to mind. (See: The Other Europe: A Look at Poland.)
Much like Poland, boisterous OEM and EMS chatter about Central Europe's low-cost tech opportunities brought to Hungary significant manufacturing investment about a decade ago. Although information from Hungarian Investment and Trade Development Agency (ITD Hungary) is dated, it shows who flocked there. Flextronics, Jabil, Tyco, Elcoteq, GE, Siemens, Philips, and others like them were pretty quick to open shop there, making it one of the region's largest electronic producing countries. (This chart shows electronics production in Eastern Europe.)
The question now is whether Hungary is still attractive today. The answer probably depends on what companies are looking to get from establishing a presence there and what trade-offs they are willing to swap for either geographical access and/or potential savings.
It's no surprise, given the weak economic climate everywhere in the world, that Hungary is bumping along like many other nations. In June, when the most recent data was released, a drop in industrial exports raised some concerns. Hungary's year-on-year adjusted industrial output increased one percent in June, slowing from a 2.3 percent rise in May, according to business press reports. Unadjusted output fell 1.4 percent. Exports slipped 0.6 percent year-on-year in June, coming off an 11.2 percent rise the previous month.
Pressure on wages is also noticeable. A report recently in the Hungarian press noted an increase in business sector “regular wages,” excluding premiums and bonuses; they have accelerated to 5.1 percent in June from 4.4 percent in May. Apparently, this data subset is something the National Bank of Hungary (MNB) mulls over when evaluating inflationary trends, according to reports.
And, even though the region's purchasing managers' index, which measures the health of the manufacturing sector, has started to slow across Central Europe, it's hard to say exactly how the industry is faring in Hungary, especially when companies like German car maker Audi are still placing bets there.
The company is expanding its Hungarian engine factory to the tune of a 900 million euro investment by 2013, a move that, according to various reports, will create somewhere between 1,800 to 2,100 new jobs.
What's even more interesting to me is that an Indian company is high-tailing to Hungary as a way to strengthen its relationship with European auto OEMs. SMR Automotive Mirror Technology Hungary, a manufacturer of automotive components owned by the Indian strategic investor Samvardhana Motherson Reflectec Group (SMR), has built a second manufacturing facility there. The new plant doubles the company's capacity of passenger car rearview mirrors and strengthens ties to European auto partners.
It makes sense to me that Western European and North American OEMs would keep a watchful eye on places like Hungary; their money goes further for labor and operational overhead than it does in their home markets while giving them broader geographic reach in a mature but wealthy market. But, when companies from the Asian sub-continent start scanning for additional growth opportunities here, I can't help but give a curious, “Um, that's interesting” nod. Maybe the conversation has come full circle once again, and Hungary deserves a second take.
Any other Eastern or Central European countries you think would be worth checking in on? Let me know in the comments section and I'll see what I can dig up.