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Electronics Summary for Open Publication

- Sectors: Electronics

According to the data from the Central Statistical Office of Hungary (CSO), during the period between 2007 and 2010, electronics manufacturing directly contributed more than 5% to the GDP, and when taking its indirect impacts into account approximately 15% to the GDP, it accounted for 24.5% of the processing industry and it employed around 92,000 people. It accounted for 33% of exports from the country in 2009 and early 2010. Roughly 8300 enterprises are active in the industry in Hungary, including more than 170 medium- and large-size enterprises such as Alpine, Bosch, Elcoteq, Electrolux, Flextronics, Foxconn, IBM, Jabil, National Instruments, Nokia, Philips, Samsung, Sanmina-SCI and Siemens, alongside Hungary-based domestic companies like, for instance, Videoton. It is important to mention that a large proportion of electronics manufacturing capacity has been established outside Budapest (in Székesfehérvár, Zalaegerszeg, Szombathely, Debrecen, Komárom, Vác, Hatvan, Miklós, Pécs etc.), as a result of which it contributes to reducing geographical inequalities observed in the country.

The contribution of the electronics industry to the national manufacturing value added is greatest in Hungary after Korea, Finland and Japan. In other words, Hungary is a major power in terms of its electronics industry, and the electronics industry has a significant role in the country’s production structure even on an international scale. (OECD, IT Outlook 2008)

Although around 90% of electronics industry production derives from the multinational corporations, domestic SMEs hold significant intellectual capital and they carry out most domestic manufacturing development. However, their manufacturing dimensions and their integration into the international division of labour is still relatively small. 

1. Brief historical background to the sector

At the time of the change of system, working capital flowed into the ruins of the domestic industry, first and foremost the electronics industry. However, it is worth noting that it arrived in those specialist sectors requiring lower levels of investment, in other words the components, part elements and cable manufacturing sections strengthened, even if in hourly wage rate employment forms as well. Surveys based on data from the CSO and the latest sectoral studies (IVSZ, AmCham) show that the industry has become an engine of growth for the national economy today.

Even though the economic downturn has not spared this sector either, production figures confirm that the recovery has been significantly faster in the electronics sector. Components manufacturers are receiving major numbers of orders, domestic corporations are expanding their workforces by the thousand, indeed some branches of industry have not even been affected by the impacts of the crisis (for example, medical instruments manufacturing, high-tech electronics entertainment products etc.). Since a significant part of production is expected to return from the Far East – one of the reasons for which is the rapid increase in the cost of labour there, and secondly (and perhaps most importantly), the unresolved situation over the protection of patent rights – it can be assumed that the sector will strengthen even further.

2. Situation of the sector in 2010/2011 (as reflected by the statistics)

The Hungarian electronics manufacturing industry can define itself as competitive since it is able to operate at a low cost and provide identical manufacturing quality, efficiency and know-how to Western Europe, and at the same time the reliability and quality of services are better, and the manufacturing outlets are closer to the end markets than factories operating in the orient, particularly in the Far East.

The electronics sector enhanced its performance by 35.7% in one year, and it now represents 5.3% of Hungary’s GDP, surpassing, among others, the building industry, energy service provision and tourism. The Hungarian electronics industry was able to show a 35% development in just one year (August 2010 – CSO), while industrial production increased by an average 15%.

3. Sub-sectors/technologies/products with potential from an export aspect

The Hungarian electronics manufacturing industry must build on comparative advantages compared to the countries of the West, and the bridgehead that has been established must be exploited to create the conditions for higher added value production in Hungary. The Hungarian electronics industry is not only on a world standard as regards international hourly wage labour manufacturers but also in the area of domestic development-manufacturing companies.

Nearly 80% of the sector’s export sales are realized by the telecommunications and electronics consumer goods manufacturing sub-sector – according to CSO statistics examining the sales of the latter, 99% of revenue is derived from exports. Other dominant sub-sectors include electronic component and hourly wage labour manufacturing, equipment designed for computers, communications instruments, electronic and electrical fittings for vehicles, the manufacture of healthcare instruments, specialized basic manufacturing, and instrument manufacturing for the vehicle industry. The significance of the sector is outstanding in the area of the space industry, too.

Based on the sales data of sub-sectors the electronic medical equipment manufacturing sector is small but developing at an extremely dynamic rate. Between 2005-2009 it achieved strong growth in volume; primarily export performance jumped dramatically (in 2009 it more than doubled in just one year), but domestic sales also increased significantly. The sector is characterized by the manufacture of high added value, home-developed products.

The electronics industry represents a part of the national economy of strategic importance. The quality and standard of Hungary’s electronic equipment designed for national defence has also been noted by the American military (for instance, software radio-based locator system, space industry equipment).

4. Key target markets
    
Western Europe and Central-Eastern Europe are among the most important target markets. The countries of the Commonwealth of Independent States and the Far East also have great potential. 

5. Professional organizations, clusters (name, brief description, website)

Association of Informatics Enterprises - Electronics Section
http://www.ivsz.hu/engine.aspx?page=tagozat_elektronika

Hungarian Electronics Society
http://www.melt.hu/

American Chamber of Commerce (AmCham) Electronic Manufacturers Committee
http://www.amcham.hu/committee/electronic-manufacturers-committee

Hungarian National Technology Platform for Integrated Micro and Nanosystems (IMNTP)
http://www.imntp.hu/

Mobile Innovation Centre (MIK)
http://www.mik.bme.hu

Department of Electronics Technology, Electrical Engineering and IT Faculty, Budapest University of Technology and Economics
http://www.ett.bme.hu/

6. Other useful links, information (later link for the sector publication)

Portal of the electronics industry: ELEKTROnet ONLINE, http://www.elektro-net.hu/
National Innovation Office: http://www.nih.gov.hu/
Technical portal: http://www.muszakiak.com/

Sources:
1. www.ivsz.hu
2. Central European Banker, Online analyses from MKB, Sectoral analyses, Manufacture of Computers, electronics and optical products, Growth prognosis for sector distribution, 2010-2013
3. Amcham Position Brief (Position Brief, No. IX), The electronics manufacturing industry as a pillar of Hungary’s competitiveness, August 2010
4. The significance of and opportunities for the electronics industry in Hungary, the IKT Strategy – 2010, Electronics industry chapter
5. The basis of the National Electronics Roundtable (NEK)
6. The significance of the domestic electronics industry and tasks to strengthen it, NEK position paper – initial proposal

Sector consultant:

András Wittek
andras.wittek@hita.hu