Key sectors

The production of electronic components and electrical equipment has been one of the most rapidly developing industry sectors in Estonia, the turnover of which has grown more than four times since 2005. The growth has been achieved by introducing new value-added products and growth of efficiency.

The sector is strongly orientated towards foreign markets as most of the large companies are foreign-capital owned. There are about 180 companies in this sector. Geographically the companies are concentrated in and near Tallinn.

World-famous Ericsson has a subsidiary in Estonia – Ericsson Eesti AS – which produces communication network equipment including mobile broadband connection modules.

Many innovative and small-scale sector companies are gathered under the Tartu Science Park. For example, VTT-NTM OÜ has focused on fine optical-mechanical technology, and its customers include giant Japanese and Korean electronic producers.

Switzerland-based Enics’s Estonian daughter – Enics Eesti AS – is a producer of electronic components for industrial and medical equipment. The largest local computer producer AS Ordi sells computers mainly to the domestic market. The largest turnover in the production of electrical equipment and devices is generated by ABB AS. Their main field of activity is the production of power distribution equipment and generators. This arm of the international technology group has been present in Estonia for 20 years.

PKC Eesti AS, a subsidiary of Finnish-listed company PKC Group, was recognised as the overall winner in 2012 of the Entrepreneurship Award. The producer of wiring harnesses has two factories in Estonia, employing 1100 people.

The history of AS Tondi Elektroonika, the Tallinn-based producer of hearing aids, dates back to the 1950s when it was the leading factory of electrotechnical components for the military of the Soviet Union. After privatisation it has successfully managed to continue the production of hearing aids, selling its products to more than 40 countries.

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Main advantages and strengths of Estonia in the electronics sector

Well-developed infrastructure that supports the development of the electronics sector

• Favourable location. Estonia has a highly developed transportation and logistics infrastructure, with a favourable location due to its close integration with Scandinavian countries (with one-hour air transport to Stockholm, and a half hour to Helsinki), its proximity to Russia, and rapid and direct ferry connections with Germany. Estonia's numerous ports offer relatively cost-efficient sea transport.
• Lower transportation costs. In the overall trend of near shoring, the Estonian electronics sector is further favoured by relatively low transportation costs due to its proximity to Scandinavia, Russia and Western Europe.

Skilled labour force and low labour cost create a competitive advantage

• Low labour costs. Skilled low cost labour in comparison with Western Europe allows for lower manufacturing costs, which offers a direct competitive advantage; the monthly gross salary in manufacturing was ca 850 EUR in 2012.
• Extensive know-how. The know-how of the Estonian electronics entities is at a world-class level and establishes an advantageous basis for innovation-related solutions.
• Comprehensive R&D. Estonian electronics entities have the ability to implement key technologies and to increase competitiveness in the international market by performing on-going comprehensive research & development projects (e.g. smart dust and chips) in co-operation with universities and development centres. R&D departments gain from a skilled workforce and lower labour costs.
• Constant productivity increase. There has been a notable productivity increase in the sector through the usage of new technological solutions and increased labour skills. Enterprises are encouraged to invest in new technological solutions, as the Estonian taxation system offers zero per cent corporate taxation on reinvested profits.
• Long traditions. Estonia has long traditions in the electronics industry and skilled labour for the industry. Educational programs have been clearly designed to provide a highly qualified labour force for the electronics industry. The Tallinn Technical University (TTU) and Tartu University provide high-class electronic engineering studies (e.g. in 2008 157 bachelor's and 145 master's degree students graduated in information technology and electronics from TTU).
• Cooperation with university and technology centers. Estonian electronics companies maintain good co-operation with universities and technology development centers, which ensures a good scientific base for future developments.

Stable local environment forms a great basis for business development

Sources of additional information

Overview of The World Bank's report on the Estonian business environment, compared to 185 world economies.
http://www.doingbusiness.org/data/exploreeconomies/estonia

Tehnopol - Science Park

Tehnopol is a science and business environment for knowledge-based companies. Today 140 companies, Tallinn University of Technology and IT College are located in Tehnopol. Tehnopol provides a set of value adding business development services, infrastructure and international cooperation opportunities for companies.
http://www.tehnopol.ee/en

Constantly updated news and information about electronics in the Baltic states.
http://www.einnews.com/baltics/newsfeed-baltic-electronics