ELECTRONICS INDUSTRY CONTENT ABOUT HUNGARY THE ELECTRONICS INDUSTRY IN HUNGARY LABOUR FORCE LOCATION HUNGARIAN INVESTMENT PROMOTION AGENCY (HIPA)

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1 ELECTRONICS INDUSTRY IN HUNGARY

2 OPENING DOORS FOR YOUR INVESTMENT

3 ELECTRONICS INDUSTRY CONTENT Published by the Hungarian Investment Promotion Agency, HIPA All rights reserved HIPA, ABOUT HUNGARY 12 THE ELECTRONICS INDUSTRY IN HUNGARY 20 LABOUR FORCE 26 LOCATION 30 HUNGARIAN INVESTMENT PROMOTION AGENCY (HIPA)

4 Electronics Industry in Hungary 7 ABOUT HUNGARY MAIN FIGURES FORM OF GOVERMENT PARLIAMENTARY REPUBLIC AREA CURRENCY FORINT (HUF) GDP (PPS) 194,248 MILLION (2015, HCSO) INFLATION 0.4% (2016, HCSO*) TIME ZONE GMT + 1 HOUR 93,022 km 2 UNEMPLOYMENT RATE 5.1 % (2016, HCSO) HUNGARY 9,830,485 (2016, HCSO) 70% 62% OTHER MAJOR CITIES CAPITAL BUDAPEST 1,759,407 POPULATION (as of January 2016) Debrecen (203,059) Szeged (162,621) Miskolc (158,101) Pécs (145,347) Győr (129,568) CLIMATE TEMPERATE 51% 40% 39% (similar to the rest of the continental zone) RISK OF NATURAL DISASTERS VERY LOW 30% Inward FDI stock in 2015 (percentage of GDP) HUNGARY CZECH SLOVAKIA ROMANIA POLAND SLOVENIA REPUBLIC Source: wiiw FDI Database MEMBERSHIP IN INTERNATIONAL ORGANISATIONS EU, UN, OECD, WTO, NATO, IMF, EC EU member: since 2004 (Source: *HCSO = Hungarian Central Statistical Office)

5 Electronics Industry in Hungary 9 ABOUT HUNGARY BUSINESS ENVIRONMENT...has modified its taxation and incentive system related to R&D activities to make Hungary the innovation hub of CEE. INVESTMENTS IN FOCUS IN ORDER TO IMPROVE THE BUSINESS CLIMATE THE HUNGARIAN GOVERNMENT......further improved the practice-based dual education system built on industry needs....is committed to further reduce taxes on employment....was the first to implement a Digital Nation Development Program in the CEE region....has signed more than 70 strategic partnership agreements giving companies fast access to the Government....has introduced a new incentive scheme supporting techintensive investments....has created the most competitive CIT in the EU with 9 % flat rate....has introduced its unique economic development plan based on Industry 4.0 requirements.

6 Electronics Industry in Hungary 11 ABOUT HUNGARY QUALITY OF LIFE BUDAPEST IS THE 2. BEST CITY ON EARTH (Condé Nast Traveler, 2015) EXPLORE THE COUNTRYSIDE Hungary s diverse countryside offers a wide range of outdoor activities: 11,000 kilometres of hiking routes; more than 2,500 kilometres of cycle paths; 22 golf courses; ten national parks; and many protected nature reserves for those in love with fresh air. The protected Pusztaregion, the Great Plain, the romantic Danube Bend with its historic sites, and pretty baroque towns, such as Eger, attract visitors all over the year. Lake Balaton, the largest fresh water lake in Central Europe, is a perfect holiday resort. ARIA HOTEL BUDAPEST #1 HOTEL IN THE WORLD BY TRIPADVISOR 2017 Travelers' Choice Award EXPATS LIKE HUNGARY Budapest is a city full of surprises and wonders, with its lively centre, pretty parks, majestic river, tall church spires, and lavish spas. One of the most exciting cities in the world, Budapest is full of secrets, hidden spots to explore, and old favourites to revisit. This is the city where being bored is not an option. According to TripAdvisor, Budapest is offering the best price-value ratio in the world. According to Condé Nast Traveler readers, Budapest is the second best city on earth. INTERNATIONAL SCHOOLS Expatriates looking to stick with the curricula of their home countries can choose from a range of private international schools for their children. There are also many English, German or French public and private pre-schools for children aged from three to six. The school year starts in September and ends in June, and school buses are usually available at private schools. There are many opportunities to study in a foreign language at universities too.

7 Electronics Industry in Hungary 13 THE ELECTRONICS INDUSTRY ELECTRONICS STRONGHOLD SK UA THE ELECTRONICS INDUSTRY IN NUMBERS A SLO HR HU SRB RO Source: 2015, HCSO, 2016, HCSO, 2016, HCSO 4% Share of electronics of the GDP Electronics account for 20.8% of the total Hungarian manufacturing production 17.4 BILLION Production value ($19.3 billion) Hungary has one of the most productive electronics industry in the CEE region 25 years ago today, Electrolux has opted for Hungary. When the company group decided about the localization of their production capacities in Hungary, flexibility, quality and the availability of local expertise played an important role, as well. Our experience from the recent years shows that we have brought our new capacities to the best possible location since our Hungary-based factories have come to fill a central position in the European production of Electrolux." Dr. Sándor Gönczi, CEO, Electrolux Lehel Ltd. Did you know that Hungarian researchers (Ottó Bláthy, Miksa Déri and Károly Zipernowsky) invented the modern transformer in 1885?

8 Electronics Industry in Hungary 15 THE ELECTRONICS INDUSTRY ELECTRONICS STRONGHOLD THE ELECTRONICS INDUSTRY IN NUMBERS In the global presence of Continental Group, Hungary has been prioritized as a focus country, which clearly shows that one of the world s largest automotive suppliers identifies our country as a key production and research & development location. The required level of expertise, a vast pool of professionals, the necessary system of infrastructures and a number of supports and incentives are available for the automotive industry to efficiently facilitate the growth and developments of the various players in the sector. I'm optimistic about the future of the Hungarian automotive electronics industry, since numerous automotive production and development activities are carried out in this country for driving the global trends of mobility in the future." Dr. Róbert Keszte, General Manager, Continental Automotive Hungary Kft., Budapest Source: 2016, HCSO 27.8% Share of electronics in the total of Hungarian exports 93.5% Export ratio 170,000 Total number of employees in the industry Did you know that Dénes Gábor was a Hungarian electrical engineer and physicist, most notable for inventing holography, for which he later received the 1971 Nobel Prize in Physics?

9 Electronics Industry in Hungary 17 THE ELECTRONICS INDUSTRY ELECTRONICS STRONGHOLD MAJOR ELECTRONICS INDUSTRY COMPANIES BY LOCATION Zalaegerszeg FLEXTRONICS Did you know that t Sárvár FLEXTRONICS Szombathely IQOR Nagykanizsa GE HONEYWELL a Hungarian an physicist, electrical ca engineer and inventor nt gave the Thermographic hi camera (1929) and the Plasma television (1936) to the world? He was Kálmán Tihanyi, who also (co-)invented the modern cathode ray tube and completely electronic television in (1928). Székesfehérvár DENSO VALEO VIDEOTON Veszprém VIDEOTON Kaposvár VIDEOTON Marcali VIDEOTON Komárom FOXCONN Tatabánya SANMINA SCI Tab FLEXTRONICS Budapest CONTINENTAL ERICSSON GE HUAWEI SIEMENS Biatorbágy TYCO ALPINE Tamási PHILIPS SAMSUNG Budaörs GE Vác IBM ZOLLNER Páty Gyál FLEXTRONICS Dunaújváros AIKAWA Pécs HARMAN Göd Szigetszentmiklós NCR Salgótarján MITSUBA Szügy ZOLLNER Ózd GE JOHNSON ELECTRIC Hatvan BOSCH JOHNSON ELECTRIC LEAR Nagykáta CLARION Fót, Veresegyháza GE Miskolc BOSCH SANMINA SCI SHINWA Cegléd INFINEON Kecskemét PHOENIX MECANO Tiszaújváros JABIL Nyíregyháza ELECTROLUX Hajdúnánás VIDEOTON Debrecen NATIONAL INSTRUMENTS Jászfényszaru SAMSUNG Jászárokszállás ROSENBERGER Jászberény ELECTROLUX Törökszentmiklós VIDEOTON Nagykörös SIIX "Hungary created a business environment that supports the growth of the automotive sector. The knowledge e and experience of the workforce in electronics manu nufacturing, as well as the engagement ge and ambit bition of the employees ee contribute to improving competi itiveness, iven and allowing businesses to expan nd their operations. Infrastructure ru and developed ed logistic ics routes provide quick access and ensure smooth oth communication with customers in Weste tern Europe. The seventeen years of operation behind us allow me to confidently say that it is worth building our future ure on local resources." rces Masanori Yanaka, Managing ng Director Alpine Electronics Manufa ufacturing of Europe, Ltd. Nyírbátor ROSENBERGER

10 Electronics Industry in Hungary 19 THE ELECTRONICS INDUSTRY SUCCESS STORIES NATIONAL INSTRUMENTS National Instruments has announced an investment in 2016 of USD 20 million and in addition to this, the creation of 210 new jobs at the company's Debrecen premises. NI currently employs over 1200 people in Hungary and the majority of the company's total hardware manufacturing takes place in Debrecen. SAMSUNG Samsung SDI has decided in 2016 to restart its activity in Göd by producing battery cells for electric cars. The volume of the investment was EUR 300 million and will create 600 new jobs. Samsung is planning to reach full manufacturing capacity by 2018 when they will service some 50 thousand electric vehicles. Samsung s decision regarding the project in Göd was induced by the fact that all European car manufacturers are dynamically developing their electric cars, and the significance of batteries is continuously increasing. Samsung Electronics's factory in Jászfényszaru has been expanding since its establishment in The past 25 years has seen the production of over 62 million devices, including televisions and projectors. Samsung has 2 manufacturing plants in Hungary and employs around 2700 workers Many multi-national firms have established successful electronics production sites in Hungary. International companies have been active in the country and have been working closely with local communities for decades; to date, the total Foreign Direct Investment in the industry is EUR 4.0 billion BILLION Foreign Direct Investment 1200 ALPINE Japanese electronics company Alpine invested USD 39 million in 2015 at its plant in Biatorbágy, on the outskirts of Budapest, and expects to double its production capacity by 2018 and create 500 jobs. Through the project the company is expecting to invest in new technology and install new production lines, which will enable it to increase the proportion of Hungarian suppliers it relies on. In overall the company employs 1100 people in Hungary. 550 ROSENBERGER The story of Rosenberger Magyarország Ltd. began in Bit-by-bit Jászárokszállás was expanded into the European Assembly and Logistics centre. In addition to the continuous development of the Jászárokszállás unit, Rosenberger will build a new auto parts manufacturing plant in Nyírbátor as a greenfield investment. The EUR 10.3 million investment to be implemented by the end of 2018 has been identified as necessary due to the increased customer demand and new customers. With this investment Rosenberger has 2500 employees in the country. HONEYWELL Honeywell, a US-based company, was set to expand its manufacturing plant in 2014 with an investment of EUR 10 million in Nagykanizsa. The company s investment created 109 new jobs. The facility became the strategic centre of the company thanks to the development. Honeywell has 550 colleagues in Hungary. 2500

11 Electronics Industry in Hungary 21 LABOUR FORCE EDUCATION The leading Hungarian universities offer engineering courses at the highest international standards. These institutions operate knowledge centres and function as research facilities which work closely with industrial partners. Electronics and IT are the key focus areas. GYŐR Széchenyi István University BUDAPEST Eötvös Loránd University University of Óbuda Pázmány Péter Catholic University ity Hungarian Academy of Sciences Budapest University of Technology and Economics Bay Zoltán Nonprofit Ltd. for Applied Research MISKOLC University of Miskolc DEBRECEN University of Debrecen SPECIALIZED HIGHER EDUCAT TION IN ELECTRONICS RESEARCH TO EXPAND HUMAN RESOURCE RCE CAPACITIES FOR THE DEMANDS OF THE INDUSTRY VESZPRÉM University of Pannonian GYŐR: Széchenyi István University The IT laboratory offers industrial simulation projects and engineering development services for the automotive industry. PÉCS University of Pécs SZEGED University of Szeged MISKOLC: University of Miskolc Courses in energy engineering; mechanical engineering; IT engineering; and electronic engineering. Knowledge centre supported by Bosch, Electrolux, Bosch, Electrolux and MOL. PÉCS: University of Pécs The Faculty of Engineering and Information Technologies was founded in Today has more than 3,000 students. The 8 basic training programmes cover technical, artistic and information technology ogy related fields of study in the following branches: architecture, civil engineering, environmental engineering, electrical engineering, information technology and architectural design. SZEGED: University of Szeged The University has a technical faculty with 50 years of educational and R&D experience. The faculty has a practical training as well which based on extensive industrial relations. VESZPRÉM: University of Pannonia The IT department operates a medical IT R&D centre; an IBM software research centre; an infotech, biotech, and nanotech centre, and conducts IT research into logistics systems. DEBRECEN: University of Debrecen Masters education in building and environment engineering. Research groups in areas such as building automation, electric vehicle development.

12 LABOUR FORCE EDUCATION Electronics Industry in Hungary 23 BUDAPEST Eötvös Loránd University The Center for Innovation manages the university s tasks for organization of research. It supports the preparing of the development of research strategies. It attends ELTE s tasks relating to innovation, cooperation with businesses and technology transfer is responsible for facilitating the exploitation of the research results produced by the University by acting as a bridge between the University and industry. University of Óbuda Strong engineering faculty, especially electrical engineering and mechanical and safety engineering. Operates a knowledge centre focusing on robot technology R&D. Pázmány Péter Catholic University The IT Faculty s Budapest research centre is engaged in nanotechnology, nanoelectronics, designing and measuring microelectronics systems, medical diagnostics, mobile platforms and systems, and more. Hungarian Academy of Sciences The Research Institute for Technical Physics and Materials Science focuses on areas such as nanostructures, microtechnology and protonics. Budapest University of Technology and Economics Higher education in mechanical and chemical engineering, electronics and IT, and transportation engineering. Industrial cooperation in the areas of biometrics, medical engineering, communications and IT, automobile, mobile innovation. Also operates an IT innovation and knowledge centre. For 130 years, Siemens has developed a strong footprint in Hungary and has contributed significantly to the economic and social development of the country with its expertise and manufacturing capabilities. We have committed, motivated and well-educated Hungarian colleagues, who ingeniously work for achieving excellent results on all levels in all fields from skilled craftsmen to engineers, from business managers to software developers." Dale A. Martin, CEO, Siemens Zrt. Bay Zoltán Nonprofit Ltd. for Applied Research The Bay Zoltan Nonprofit Ltd for Applied Research is a leading applied research institution of Hungary, with its Engineering Division operating in the Hungarian cities of Budapest, Miskolc, Eger and Tatabánya. The Engineering Division is active in the fields of R&D, engineering consultations and services such as development and services for industrial laser technologies and improvement of material testing methods, etc.

13 Electronics Industry in Hungary 25 LABOUR FORCE INNOVATION R&D IN HUNGARIAN ELECTRONICS INDUSTRY DRIVING AUTOMOTIVE INDUSTRY EVOLUTION THE BOSCH GROUP Employs approximately 14,000 people in Hungary, making automotive parts, power tools, security systems and home appliances in four production plants. The company established an R&D Development Centree in Budapest in 2013 (automotive technology) which is the company s largest European R&D centre and employs 1600 people. The company and the University of Miskolc (central town of Borsod-Abaúj- Zemplén county, Northern Hungary) established the Bosch Department within the University to support practical-oriented education and research in engineering sciences, devoting special attention to mechatronic applications. Practical oriented education is based on a modern laboratory system, with dedicated labs for pneumatics and hydraulics, sensor techniques, PLCs and modular mechatronics systems, as well as robotics and electrical driving systems. Bosch management intends to invest in the globally competitive knowledge of Hungarian engineers. Dedicated to innovation: double the number of Government incentives for R&D activities in In recent years, a great number of international companies have developed a close cooperation with Hungarian educational institutes. The common aim was to support the development of highly-skilled labour and to explore research, product development, and testing capabilities. CONTINENTAL AUTOMOTIVE HUNGARY KFT. Continental develops pioneering technologies and services for sustainable and networked mobility of people and their goods. Founded in 1871, the technology company offers safe, efficient, intelligent and affordable solutions for vehicles, machines, traffic and transport. In 2016, Continental generated sales of EUR 40.5 billion and currently employs more than 227,000 people in 56 countries. Continental in Hungary has six factories, one distribution centre and sales office and more than 8000 employees and is one of the leading automotive suppliers. As a producer of brake systems, power unit and running gear components and systems, instruments, infotainment solutions, vehicle electronics, tyres and technician elastomer products it contributes to development of safe transportation and global climate protection. Four of Continental AG s five divisions (Interior, Chassis & Safety, Powertrain, ContiTech) do producing and software development activities in Budapest, Veszprém, Szeged, Makó, Vác, Nyíregyháza. The tyre division has been present in the Hungarian market since 1991 with distribution storehouse and sales office. Great innovation capacity available + Great research and development potential THE BUDAPEST UNIVERSITY OF TECHNOLOGY AND ECONOMICS Involved in joint projects with Nokia, Cisco Systems, Ericsson, Flextronics, GE, IBM, and Siemens. Projects cover research and education, applied theory, design, manufacturing and testing of semiconductor devices, micro- and nanoelectronics, and energy transfer systems.

14 Electronics Industry in Hungary EXCELLENT TRANSPORT NETWORK LOCATION LOGISTICS & INFRASTRUCTURE TEN-T CORE CORRIDORS CROSSING HUNGARY 3 MEDITERRANEAN ORIENT / EAST - MED RHINE - DANUBE European Commission, REGULATION (EU) No 1316/2013 O.J. L348-20/12/2013 AT THE CROSSROADS OF THREE TEN-T CORRIDORS After examining numerous possibilities, the leadership of National Instruments Corporation announced in December, 2000 that NI decided to open its first overseas manufacturing facility in Debrecen. Both the economic and scientific environment played a crucial role in the decision besides the logistics background and the significant fact that the local University constantly provides qualified workforce to the industry. László Ábrahám, General Manager, National Instruments 27 EXTENSIVE ROAD & RAILWAY TRANSPORTATION NETWORK HIGHLY DEVELOPED LOGISTICS & TELECOMMUNICATIONS INFRASTRUCTURE COMMERCIAL CORRIDORS & INFRASTRUCTURE MOTORWAYS IN HUNGARY M1: Budapest AUT M3: Budapest RO/UKR/SK M5: Budapest SRB M6: Budapest Pécs M7: Budapest SLO LEGEND existing planned

15 Electronics Industry in Hungary 29 LOCATION AVAILABLE INVESTMENT SITES 110 INDUSTRIAL PARKS MORE THAN 200 OFFICES ARE WAITING FOR YOUR INVESTMENT 650 GREEN- AND BROWNFIELD SITES HIPA operates an internal database of industrial parks, investment sites, and industrial halls in Hungary. The Investment Sites Database is one of the most comprehensive resources of its kind, the HIPA database is part of the information package for potential investors. LOOKING FOR INVESTMENT SITE? HIPA WILL SUPPORT YOU! The Investment Sites Database lists nearly 1000 green- and brownfield sites, industrial parks and offices throughout Hungary. It simplifies the task of matching investors needs to potential locations. Searchable by size, location, available infrastructure and incentives, the database is an excellent starting point for any prospective investor.

16 Electronics Industry in Hungary 31 HIPA OUR SERVICES HOW DO WE SUPPORT YOUR ELECTRONICS PROJECT? BEFORE YOU MAKE A DECISION WE OFFER YOU AFTER YOU HAVE CHOSEN HUNGARY...one-stop-shop management consultancy services to address your business needs....tailor-made incentive offers and information packages on the business environment, labour market, tax regulations, etc.... location search & evaluation + site visits. We are open to your feedback and offer mediation between government and business based on your inputs. We support your further expansion and plans. PLEASE CONTACT US...meetings with HR & real estate agencies, law firms and other consultants based on your needs....reference visits at companies that are already established in Hungary....assistance with your incentive application. Address: H-1055 Budapest, Honvéd utca 20. Customer service: investment@hipa.hu Telephone: Web:

17 Electronics Industry in Hungary 33 HIPA SUPPLIER DEVELOPMENT FOR OEMs / SUPPLIERS OUR SERVICES FOR INTEGRATORS B2B, SUPPLIER FORUM = Personal encounter between potential suppliers and producers CERTIFIED SUPPLIER DATABASE = Online, interactive certified supplier database and virtual marketplace PUBLICATIONS, MARKET INFORMATION = Information about the current Hungarian supplier base SUPPLIER LISTS = Filtering SUPPLIER LISTS by company requests PARTNERSHIP AGREEMENT = Cooperations and common projects to develop Hungarian suppliers DEVELOPMENT OF ACTUAL SUPPLIERS = Training for the Hungarian suppliers, and potential suppliers FOR SUPPLIERS UNIVERSITY AND R&D COOPERATION = Supporting educational and R&D cooperation between universities and suppliers EDUCATION, TRAINING = Professional trainings in several fields (efficiency trainings, benchmarking techniques, automotive standards) EXHIBITIONS = Appearance on Hungarian and international exhibitions and fairs

18 Electronics Industry in Hungary 35 HIPA INCENTIVES OVERVIEW GOVERNMENT INCENTIVES As a member of the European Union, Hungary s regulations on incentive opportunities are in accordance with the EU rules. One of Hungary s competitive advantages over other countries in the region is the Government s strong commitment to increase the competitiveness of SMEs and large enterprises in Hungary. Alongside the regulatory tools that contribute to the competitive business environment of local companies, Hungary offers wide-ranging incentives to facilitate foreign direct investments and reinvestments by local enterprises. Subsidies may be granted as regional aid or specific aid, such as R&D subsidies. Regional grants are the most typical forms of incentives for greenfield / brownfield investments or reinvestments. The maximum amount of regional incentive is shown on the regional aid intensity map. The map above illustrates that regional aid available for investment for a large enterprise may be up to 50% of the eligible costs of the investment, depending on the region. For investments not exceeding 50 million, the maximum intensity ratio can be increased by 10 percent for medium-sized and by 20 percent for small enterprises. In case of R&D activities, the maximum aid intensity is 25% all over the country. THESE INCENTIVES INCLUDE, BUT ARE NOT LIMITED TO CASH SUBSIDIES for investments, training, job creation and R&D TAX INCENTIVES reduction of corporate tax, social tax, or for encouraging R&D activities... TRAINING SUBSIDIES LOW-INTEREST LOANS INVESTORS MAY APPLY FOR VIP CASH SUBSIDY WITH CAPACITY EXPANSION AND TECHNOLOGY-INTENSIVE INVESTMENT PROJECTS WHICH DO NOT RESULT IN THE INCREASE OF THE HEADCOUNT. The maximum available aid intensity decreases if the investment is a large investment (exceedingeding 50 million): 50% of the maximum m aid intensity ty determined in the regional aid map is availableailable for investment between 50 and 100 million, with 34% of the maximum aid intensity for investment over million. For information on up-to-date and individual incentive packages please contact HIPA directly.

19 Electronics Industry in Hungary 37 THEY HAVE ALREADY CHOSEN US! SIIX IQOR

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