The production of electronic and electrical devices

The production of electronic and electrical devices has been one of the fastest growing industries in Estonia. Corporate sales volumes increased nearly five times in the time period from 2005 to 2013. The growth of production volumes has been achieved with the introduction to the market of new products with higher added value and the increase in productivity. Capture has fluctuated during the years, but growth has only been 9 per cent if 2013 is compared to 2005 . The sector is strongly oriented towards foreign markets; most of the larger companies are based on foreign capital. Nearly 200 companies are in reality active in the production of electronic and electrical devices.

The production of electronic and electrical devices is characterised by the geographic concentration in Tallinn and its close proximity, while at the same time it also influences regional development significantly. The electronics industry has been one of the biggest sources of new jobs in Saaremaa, Pärnu, Elva and Koeru.

The production of electronic and electrical devices is divided into two sub-branches. In the production of computers, electronic and optical devices, the largest companies are Ericsson Estonia Plc (produces mobile network devices), Enics Estonia Plc (electronic parts for industrial and medical devices) and Scanfil Ltd (telecommunication devices), and the largest in the production of computers is Ordi Plc. In contrast to the overall direction of the branch, the sale of computers is mainly directed to the internal market. The biggest company in the production of electrical devices is ABB Plc, whose main activity is the production of electrical switchboards and alternators. Other major companies are Ensto Ensek Plc (electrical switchboards and control panels), Konesko Plc (electric motors and devices), and Draka Keila Cables Plc (cables).

During the years 2010-2011, the production of electronic and electrical devices experienced a rapid growth phase. The deterioration of the economic climate in foreign markets during the years 2012-2013 had a negative impact on the development of the sector and the growth of production volumes was significantly inhibited.

Stat2014 The weakened foreign demand did not enable the companies in the electronic and electrical sector to increase their production significantly in 2013, but both sales as well as export growth compared to the previous year accelerated slightly. It also allowed to employ more workers.

During the year 2013 the production volume in the electronic and electrical devices sector increased at constant prices 8 per cent, which was 3 percentage points more than in the previous year. Also, the sales and export growth rates at current prices improved somewhat, reaching to 6-7 per cent respectively. As exports accounted for 96% of the sales in the sector and because the export prices of electronic products were on decline for a full year and the prices of electrical devices stayed constant, the growth came mainly from the increase in volume.

In 2013, from all sales in the electronic and electrical sector, three quarters continued to be the sale of computer, electronic and optical device production and a quarter the sale of electrical devices production. As the main part (97%) of the output of the first industry branch goes for export, the importance of export in the production of electrical devices also rose in the year 2013 by 7 percentage points and reached 89%.

In the production of computers, electronic and optical devices, exports increased by 5% within the year, which was one and a half percentage points higher growth than in 2012. Strong sales in foreign markets in the first half of the year helped to accelerate growth, but the weakening of external demand in the second half of the year led to the fall of exports in the last quarter. The largest proportion of the exports in the branch continued to be mobile devices (84%), the sales of which to foreign markets increased by only 2%, due to significant decrease in demand at the end of the year.

More rapid developments took place in the production of electrical devices. Export growth accelerated to 17%, surpassing the previous year's indicator by more than two times. Nearly one third of the branch's exports were power strips, almost one fifth were transformers and static converters and more than one tenth were insulated electrical wires and cables. At the same time, the sales of electrical devices to the internal market decreased by 30%, which lowered the branch's total sales growth to 9%.

In 2013, the biggest market for electronic and electrical device exports continued to be Sweden, where half of the sector's total exports went. The growth of sales to Sweden accelerated to 10%, an indicator three times higher than in the previous year. Mobile devices accounted for 85% of exports to Sweden; their exports increased by more than a tenth. Other important export goods included power strips and insulated electrical wires used in telecommunications. In 2013, exports to Finland did not do as well as the year earlier; exports decreased by 5%. The largest number of electrical devices were sold to Finland, which also led to the total decline in exports. Goods with a larger volume were power strips, static converters and electric motor and generator parts.Stat 2014 Of the top five export markets, the exports decreased the most to the United States of America, by a quarter, caused by a significant drop in demand for mobile devices. Also, exports to Germany were in a slight decline. More mobile devices, powers strips and AC alternators were sold to the market there. However, a new country that rose to the forefront of the sector's exports was Great Britain, where mobile device sales grew rapidly.

 Under the conditions of an increasing production volume, the employment in the production of electronic and electrical devices rose in 2013, according to business statistics, by a moderate 4%. According to the workforce survey data, the number of employees in the sector increased by as much as a tenth. Wage growth remained at 5%, same level as in the previous year, and the average wage in the branch was 1006 euros, continuing to surpass the Estonian average wages. The raise in wages was enabled by the increase in the value added per employee by nearly a tenth. On the basis of the added value, the productivity indicators also had a small increase following the strong decline in the previous year.

After the weak year of investments in 2012, the investments into tangible fixed assets in the production of electronic and electrical devices grew, according to provisional data, by nearly one third in 2013. Both of the sub-branches had strong growth, 38% and 23% respectively. Three quarters of the investment went into machinery and equipment, the capacity of which increased by nearly a quarter within the year. 17% of the total investment was directed into buildings and facilities, 5% into the acquisition of land, and 3% into the purchase of transport equipment and computers. The investments were divided among the sub-branches 62% and 38% respectively.

In the first quarter of 2014, the production of electronic and electrical devices has not done very well. The sales volume of the sector has decreased by a tenth compared to the same period last year. At the same time, the decline is caused by the production of electronic and optical devices only, which have a high base of reference from the previous year. The sales of electrical device production showed a slight increase. Entrepreneurs from both sub-branches participated in a study by Estonian Institute of Economic Research conducted in March, according to which their confidence still remained negative, but was already considerably higher than three months ago. The electronic production companies forecasted a growth in production volume within the next three months, whereas the electrical device producers expected the volume to remain the same. The vast majority of them did not intend to change the number of employees. The entrepreneurs in both branches considered the only obstacle to the growth of production volume to be insufficient demand.