How to select your new electronics manufacturing site in Hungary

by Dr. Balazs Csorjan, investment promotion specialist

2015 edition

How to select your new electronics manufacturing site in Hungary

by Dr. Balazs Csorjan, investment promotion specialist

2016 edition

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HungaryHungary is a low-cost manufacturing location inside the EU market.

Beside pharmaceutics, automotive, SSC, tourism and food processing, electronics is undoubtedly one of the leading branches in the country.

These few slides try to help you when it’s about electronics industrial site selection.

Did you know?Hungary has the largest (25%) share in 2013 in Eastern European electronics production. The local suppliers, EMS and OEM companies shape two electronics clusters:

Eastern Hungarian electronics clusterBosch, 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; 700 kms motorways; awards by Financial Times’ fDi MagaineNext slide: a short company profile: General Electric Hungary

Western Hungarian electronics clusterFoxconn, 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.

HR: UnemploymentUnemployment is maybe the most relevant difference between the Eastern and Western part of Hungary. Western Hungary has shortages in many professions and in many labour market segments, while Eastern Hungary “is a human mine”. With an example: the entire Western Hungarian Region has a similar number of job seekers (30k+) like a single Eastern Hungarian town, Hajduboszormeny and its vicinity (25k).

map: KSH

HR: Labor costsNot independently from unemployment, Budapest and Western Hungary have higher labor costs. In numbers, the average monthly gross earnings of employees was 270 thousand HUF (approx. €900) in Budapest, 200 thousand HUF (approx. €670) in Western Hungary, and 180 thousand HUF (approx. €600) in Eastern Hungary, in 2012.

In Eastern Hungarian electronics industry, a well-trained, experienced, skilled worker earns monthly gross 150-250k HUF and an engineer between 300-600k HUF. These numbers are similar than in Coastal Chinese cities.

EducationThe Hungarian vocational education follows the “German modell”. The so called dual education means: vocational school students learn practical skills at companies.

There are no relevant differences between Western and Eastern Hungarian vocational education, however the leading universities are in Eastern Hungary (Miskolc, Debrecen, Szeged).

Foreign language education at vocational level is an issue, but there are planned projects for low-level, highly industry-specific and large-scale tech language education.

Labor regulationThe new Hungarian Labor Code has 4 main benefits for companies:

● it provides more simple termination of employement contract,

● more flexible rules for compulsory minimum salaries,

● more flexible working time,● and finally: more overtime.

Infrastructure: Real Estate supplyIn Central and Eastern Europe, there are approx. 1,000 industrial parks, and 20% of it are in Hungary.

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 in Hungary, you can get a property quickly (but hire a local attorney).

Real estate costsIndustrial land average sales prices are between 20-30€ per sq.meter in larger cities, and under 20€ in smaller towns. 10€ per sq.meter can be regarded a very good deal, however some municipailities offer a free of charge industrial land.

Manufacturing rental market is small outside Budapest, but the average rental fees are between 2.5 and 5 € per sq.meter per month.

EnergyThe Hungarian 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 >>

Infrastructure: MotorwaysDeveloped infrastructure makes Central- and Eastern Europe more attractive location than other emerging countries of the world. Hungary has 1600 kms (approx. 1000 miles) motorways network, far the largest one in Eastern Europe.

The Hungarian motorway system is Budapest-centric, all the ways are going to the capital city.

Air accessThere are 3 international airports in Hungary.

Budapest Airport: the 2nd largest hub in Eastern Europe, more dozen daily flights inside Europe.

Debrecen International Airport (Eastern Hungary) has a strong air cargo focus; passenger flights to Western Europe and to Mediterranean Sea.

The Fly Balaton Airport in the Western corner of Lake Balaton has a strong low-cost air flight focus.

Grants by the Hungarian governmentWhen 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 provide it?

The main topics when it’s about grants for manufacturing: job creation subsidies, training subsidies and cash grants.

Over €10M investment you can achieve VIP incentives from the Hungarian government.

Grants by municipalitiesYou cannot imagine the creativity of Eastern European mayors when it’s about investment promotion. Some offers a one-year entrance for all your future staff to the matches of local basketball team (“it will support your recruitment”). Others provide international school development projects and family assistance to your expat manager families.

The bravest local governments offer special deals. E.g. the municipality of Hajduboszormeny, Hungary, provides a free of charge industrial property for 50 new jobs + a dedicated vice mayor to manage your investment within the Hungarian public administration. By the way, the location is inside the top10 best cost effective regions of Europe (ranked by Financial Times’ fDi Magazine), so beside basketball tickets you can gain pretty good deals on municipal level, too.

The leading industry associationThe strongest organization is IVSZ, the Association of IT, Telecom and Electronics Companies. Its members cover almost the entire industry, and has working groups for education or EU funding etc.

The networking events of IVSZ can be a perfect first step in the Hungarian market.

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 300+ site selection projects - he knows your questions.

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Otherwise, do not hesitate to e-mail your questions: csorjan@m35businesspark.hu or download the file.

thnx a lot!