Eastern Europe - an emerging global hub

Eastern Europe is emerging as a new global hub for the electronics manufacturing industry given the cheap labour costs, rising foreign direct investments (FDIs) and the growth in production networks in the region. "Labour rates in eastern Europe may not be as low as in China, however, the relatively lower labour rates compared with western Europe are counterbalanced by potential savings in freight costs, inventory and reduced time to market," notes the analyst. "Electronics manufacturing activity in eastern Europe is now estimated to account for more than 50.0 per cent of the overall European market." The emergence of eastern Europe as a production location started during the mid 1990s with the manufacturing of high-volume electronic products for companies based in western Europe shifting to the region. Moreover, the recession of 2001 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 increase in the number of manufacturers in the region is likely to further boost the level of market penetration. The eastward expansion of the European Union (EU) into countries like Bulgaria and Turkey also offers significant potential for future growth and investment opportunities, considering the proximity of these manufacturing locations to the various end-user markets. Availability of Quality Labour Force in Eastern Europe Vital For Market Expansion Eastern Europe possesses a large pool of skilled labour with a high level of education. Developments in R&D and engineering encourage companies to expand into eastern Europe as the well-established markets of Hungary, Poland and the Czech Republic start to run out of skilled low-cost labour. The increase in demand for Russia's qualified technical labour force and the inexpensive availability of quality engineering talent is a typical example of this phenomenon. The presence of a quality labour force catering to growth markets like telecommunications makes these countries ideal for electronics manufacturing. However, eastern Europe still needs to compete vigorously with Asia to maintain this growth trend. "With labour shortages developing in Hungary and the Czech Republic, other solutions to the availability of skilled labour need to be found," cites the analyst. "Factors such as government policies, proximity to western Europe and an improving supplier base need to be adequately capitalised on to facilitate the development of eastern Europe into a key global location for electronics manufacturing."