Electronic manufacturing growth in Eastern Europe

Rost and Sullivan analysis indicates high growth for Eastern Europe in the field of electronics manufacturing services

With the electronics manufacturing sector in eastern Europe witnessing tremendous growth in the past decade, the region is emerging as a new global hub for the electronics manufacturing industry.

Regional factors such as reduced labour costs, increase of foreign direct investments (FDIs) and the growth in the production networks in the region, are influencing the growth in this industry and changing the overall dynamics of the market.

New analysis from Frost and Sullivan Growth of Eastern Europe as an Electronics Manufacturing Services (EMS) Hub, finds that that the electronics manufacturing services market in eastern Europe earned revenues of $9.0 billion in 2006 and estimates this to reach $23.7 billion in 2013.

A structural transformation of the market is underway with manufacturing companies expanding to new locations and adopting a more global presence, resulting in the separation of product design and development from the manufacturing process itself.

"The need to maintain profit margins in the face of declining pricing trends and high competition has made low-cost manufacturing a necessity," notes Frost and Sullivan Research Analyst Santosh Kumar.

"This is encouraging the continuing migration of manufacturing processes in the electronics industry to low-cost Asian countries and, lately, to eastern Europe".

The development of the outsourcing model by original equipment manufacturers (OEMs) and electronics manufacturing service (EMS) providers is essentially driving the growth of the EMS market in eastern Europe.

In fact, the recession of 2001 has led to the establishment of many manufacturing units in this region and countries like Hungary and the Czech Republic have significantly exploited these opportunities to strengthen their economies.

The eastward expansion of the European Union (EU) also offers significant potential for future growth and investment opportunities, considering the proximity of these manufacturing locations to the various end-user markets.

Despite the encouraging growth context that is prevailing in eastern Europe, countries in the region are being challenged to transform an under-developed supplier base into a fully developed one that is adequate for supporting manufacturing facilities.

"Domestic companies to be cost-competitive and capable of producing similar quality products as that of global suppliers in the volumes required by OEM and EMS companies to improve the indigenous supply base," explains Kumar.

"In addition, factors such as government policies and proximity to western Europe need to be adequately addressed to facilitate the development of eastern Europe into a key global location for electronics manufacturing".

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