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Electronics Production | May 05, 2009

Eastern European EMS markets shows great potential for investors

Investors in electronic manufacturing services (EMS) are no longer confining themselves to Asia, as Eastern Europe - with its impressive gross domestic product (GDP) growth and low rates of inflation and population expansion - is emerging as an investor-friendly destination. The reduced working capital, immediate availability of trained staff, and the ability to offer after-sales and 'product after-care' services have further endeared Eastern Europe to potential investors.
New analysis from Frost & Sullivan- Eastern European Electronic Manufacturing Services Outlook, reveals that this market earned revenues of $10.0 billion in 2008 and estimates this to reach $21.1 billion in 2013.

"The globalization of many companies is changing the face of the EMS market, which is undergoing a massive transition with the product design and development being separated from the manufacturing process," says Frost & Sullivan Financial Analyst Janani Sankaran. "The Eastern European electronics manufacturing market alone accounts for more than 50.0 percent of the overall European EMS markets and is expected to grow with a rise in the number of manufacturers in the region."

Original equipment manufacturers (OEMs) are increasingly turning their attention to smaller, emerging economies such as Romania, Bulgaria, Slovakia, Estonia, Lithuania, Belarus, and Turkey.

Although market participants have reasons to feel upbeat about their market prospects, EMS providers are faced with constant cash shortage. They have not been able to tap the Eastern European market as effectively as they have cashed in on the Western European market. Setting up an EMS facility would involve substantial investments, which, in the current economic environment, are difficult to come by.

"Companies with lesser exposure to OEMs that engage in in-sourcing activities are likely to benefit in these economic conditions," notes Sankaran. "Governments in Eastern Europe are also doing their bit to encourage investments in the region by facilitating special economic zone (SEZ) allocations to EMS companies and providing them with tax rebates to set up their units in the Eastern European region."

Apart from the governments' efforts, market participants could also consolidate with original design manufacturers (ODMs) to take advantage of the competitive market conditions.

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