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How to select your new electronics manufacturing site in CEE?


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An overview on electronics manufacturing locations in Central- and Eastern Europe.
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How to select your new electronics manufacturing site in CEE?

  1. 1. How to select your new electronics manufacturing site in Eastern Europe? by Dr. Balazs Csorjan, investment promotion specialist 2016 edition
  2. 2. [NOTE] These slides are designed not to present but to read as a document. Switch to Fullscreen View, please!
  3. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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., ● consultants and real estate agents ● … and last but not least: ask our free of charge help
  23. 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. 24. If you liked this presentation, please do not forget to share it - maybe your partners will like it, too. Otherwise, do not hesitate to e-mail your questions: or download the file. thnx a lot!