Eastern Europe Electronics Trade
Low Costs and Proximity Attract Western European Manufacturers
In the past decade, Eastern Europe has become a prime focus for electronics manufacturing companies due to low labor costs and its geographic closeness to the West.
Eastern Europe is quickly becoming a focal point in the global market for the manufacture and design of consumer electronics. Attempting to maintain profit margins while dealing with declining price trends and high competition, electronics manufacturers are looking for low-cost production alternatives, and Eastern Europe currently provides an appropriate environment.
Outlook for Eastern Europe Electronics
iSuppli Corporation, a supplier of applied market intelligence, sees a bright outlook for Eastern European electronics manufacturing. The region has a population over 400 million people and electronics consumption by both consumers and businesses has recently risen almost 10%, providing for a growing local market. Another plus is the proximity of Eastern European manufacturing to end-user markets in Western Europe.
Studies have determined that the manufacturing services market in Eastern Europe is estimated to grow from approximately $9 billion in 2006 to $24 billion by 2013. Conversely, the rest of Europe is looking at declining growth. Production in Eastern Europe is increasing for the following products: LCD televisions, desktop and notebook computers, mobile communications devices, and other consumer electronics.
Market Direction
Original equipment manufacturers (OEM) and electronics manufacturing service (EMS) companies have developed an outsourcing model that is driving the growth of the electronics market in Eastern Europe. Some corporations have chosen this methodology to have components or complete products built without having to pay the costs associated with construction and maintenance of manufacturing plants and other infrastructure. The companies also do not need to directly deal with potential labor disputes or labor costs including salaries and benefits. So far, electronics manufacturing has grown substantially in both Hungary, Poland, and the Czech Republic, and is expected to increase in other Eastern European countries in the near future..
The emergence of this trend began in the mid 1990s with the manufacture of high-volume electronics for Western European companies. The global recession in 2001 led to the establishment of more manufacturing operations in the area. Eastern Europe is viewed as a valid alternative for electronics manufacturing because the labor force typically has a higher education level compared to other developing nations.
Troubles and Competition for Electronics Production
Will this growth be able to last for a sustained period of time? Labor shortages have begun to spread across Eastern Europe as workers have started leaving for better job opportunities in Western Europe. Eastern Europe will also have to compete with Asian countries for manufacturing investments. Countries such as China and India are able to provide low-cost labor as well, but with no signs of labor shortages.
References
Carbone, James. "Electronics industry eyes Eastern Europe." Purchasing. February 16, 2006.
Taylor, Colleen. "iSuppli: Eastern Europe emerges formidable in tech manufacturing." Electronic News. April 26, 2007.
