Published by HITA Contributors: Laser Consult Kft., ITC Association of Hungary, Flextronics International Kft., NI Hungary Kft., Samsung Electronics

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2 Published by HITA Contributors: Laser Consult Kft., ITC Association of Hungary, Flextronics International Kft., NI Hungary Kft., Samsung Electronics Magyar Zrt., Videoton Holding Zrt. Graphic design and layout: Szerif Kiadó Kft. Prnted by: Crew Kft. All rights reserved HITA 2012

3 Contents President s Greetings 3 Country at a Glance 5 The Most Dynamic Sector in the Hungarian Industry 9 The Human and R&D Capital 11 FDI Success in the Electronics Industry 15 Academic background 19 Subsectors in focus 22 Government support, investment incentives 27 Professional organizations 32 Sources 32 President s Greetings In a period of deep financial and economic crisis, solutions that enable corporations to overcome the hard times and stay on a growth path is more challenging then ever. We firmly believe that this ambitious goal can only be achieved by extending manufacturing, service and R&D operations in order to prepare for an economic upturn. Investment decisions are always hard and risky to make, which is the reason why the Hungarian Investment and Trade Agency prepared this booklet for the decision makers of the electronics industry who intend to step forward and overcome the crisis by investing in Hungary. Despite the unfavourable business conditions, Hungary offers an ideal investment climate to foreign companies. The lower corporate income tax rate of 10% is outstanding in the Central and Eastern European region and it is combined with a highly developed infrastructure as well as qualified, relatively inexpensive labour force. The foundation of the Hungarian Investment and Trade Agency (HITA), as of 1st January 2011, reflects the government s effort to further enhance investment promotion and trade development. As a governmental body operating under the supervision of the Ministry for National Economy, it benefits from the synergies of close cooperation between central and local bodies of the Hungarian government. The content of this booklet was prepared by the assistance of our investment promotion experts who assist daily in the site selection processes conducted by foreign enterprises from all over the world. Based on their experience, we could identify the hot topics that are the most relevant for making investment decisions in the electronics industry. For further information, we urge our readers to contact us as we are ready to provide customized assistance to our clients. We thank you for your interest in our country and hope that our publication will ease the hard task of making sound investment decisions. Yours, Ms. Erzsébet Dobos President 3

4 Country at a Glance Located in the heart of Europe, Hungary is a medium-sized, structurally, politically, and institutionally open economy that is part of the EU market. Hungary is a developed country with a business friendly environment and it conforms to EU investment incentives. Besides greenfield and brownfield opportunities, investors can benefit from the presence of international Electronics Manufacturing Service (EMS) firms and take advantage of the long history of industryacademia cooperation. If your company is looking for a well-qualified, creative and flexible work force, combined with a highly developed logistics, transport and communication infrastructure, in a country where the density of motorway network is outstandingly high, then Hungary is the country for your next investment. Hungary in the heart of Europe Country in numbers Area: km2 Population: 10 million Annual GDP: $ billion ( 97.5 billion) GDP per capita: $ ( 9.793) GDP per capita at PPP: $ ( ) Unemployment rate: 10.6% Inflation rate: 3.9% Average wage: $950 ( 811.5) Corporate tax rate: 10%/19% (progressive) 4 5

5 The local R&D and production in Hungary represent strategically focused territories that are not just for local purposes, but for the international Bosch Company as well. This is why we find it important to support the education of Hungarian engineers. We are convinced about the competitiveness of Hungarian engineers and the value of Hungarian human capital. We also realize the fact that our investments in Hungary are important part of our efforts to create global value Christoph Kübel, President of Bosch Automotive Electronics SLOVAKIA GE imagination at work GE imagination at work UKRAINE Superior infrastructure» Ideal geographical location» Gateway between Europe and Asia» 4 international transit corridors pass hrough the country» Extensive road and highway network» Country-wide railroad network» Fast connection to seaports connecting the country via scheduled block trains. The seaports of Koper and Triest are within 600 km of reach, Hamburg is 1,200 km away.» Access to Black and North Sea via the river Danube» Direct flights to South-East Asia, Middle East, North America and major Western European cities» International airport connection from Budapest to all major destinations European corridors crossing Hungary AUSTRIA Tisza GE imagination at work GE imagination at work HALOM HEGYES- RAJKA M15 SLOVAKIA PARASSA- PUSZTA SALGÓTARJÁN MISKOLC M30 NÉMETI ZÁHONY M3 UKRAINE BEREGDARÓC VÁSÁROS-NAMÉNY SLOVENIA GE imagination at work GE imagination at work CROATIA Balaton Major firms of the inelectronics dustry Danube SERBIA ROMANIA Budapest GE imagination at work Besides the presence of several global OEMs, such as GE, Samsung, Bosch, IBM, Electrolux and SEMILAB (the Hungarian multinational company in automated semiconductor and PV characterisation equipment represented worldwide), Hungary is also a popular location for EMS providers that includes both large volume manufacturing facilities and smaller plants focusing on more specialised manufacturing. Six of the top ten global EMS firms are currently operating in Hungary. Tier One suppliers include Foxconn, Flextronics, Jabil, Sanmina-SCI, as well as leading European OEMs such as Zollner, Scanfil, Seidel and MELECS. Videoton, one of the leading European EMS providers is also headquartered in Hungary. AUSTRIA RÁBAFÜZES SLOVENIA ZALAEGERSZEG TORONY- SZENTMIKLÓS SOPRON- KŐHIDA SZOMBATHELY M8 SOPRON M9 M9 M70 BECSE- NAGY- HELY KANIZSA M7 LETENYE M86 CROATIA M1 BALATON- KERESZTÚR GYŐR KAPOSVÁR VESZPRÉM PÉCS TATABÁNYA SZÉKES- FEHÉRVÁR BALATONALMÁDI LEPSÉNY M8 ZAMÁRDI M7 BALATONSZÁRSZÓ ORDACSEHI M9 M60 BÓLY M1 M7 BUDAPEST SZEKSZÁRD M6 IVÁNDÁRDA M6 M10 M0 DUNAÚJVÁROS M0 M2 VÁC M9 M31 M0 M5 SERBIA M3 M4 KECSKEMÉT M5 RÖSZKE M8 SZEGED SZOLNOK M44 M43 M25 EGER MAKÓ NAGYLAK BÉKÉSCSABA GÖRBE- HÁZA M4 GYULA NYÍREGYHÁZA M3 M35 DEBRECEN NAGYKEREKI M49 ROMANIA CSENGER Existing After 2013 Broadened by 2013 Motorway network covering the entire country 6 7

6 The Most Dynamic Sector in the Hungarian Industry The electronics sector in numbers Hungary is the largest electronics producer in Central and Eastern Europe. CEE Electronics Production 2010 Poland 20% Romania 5% Lithuania 1% Russia 7% Slovakia 13% Hungary 26% Slovenia 13% Estonia 2% Czech 23% Ukraine 1% Bulgaria 1% Source: Reed Electronics Research: European Electronics Market Forecasts, August 2011 Hungary is 4 th worldwide in terms of the electronics sector s contribution to manufacturing value added.» Hungary is the second largest electronics exporter in the region* by providing 28.6% of the sectoral export performance» Production value: $26.65 billion ( billion)» Share of electronics in GDP: 5.34%**» Share of electronics in GDP: 15%***» Balance of trade in electronics: $4.960 million ( million)» Total number of employees: » Export ratio: 92%» Share of total export: 32.2%» Ca. 80% of exports are realized by the communication and consumer electronics» enterprises, out of which are 170 medium to big size companies Source: Central Statistical Office * Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia ** including automotive electronics *** including multiplier effect 8 9

7 Why invest in Hungary?» EU member state» worldwide acknowledged human capital» production quality of international standards» cash incentives and tax holidays» high level of production efficacy» proximity of EU and CIS markets» competitive production costs» flexible and mobile professionals Industry Presence Hungarian Core Electronics Industry Competencies Manufacturing and Assembly Manufacturing Services and Higher Value Added Research Development and Innovation Aerospace Electronics P P Automotive Electronics P P P Computing P P P Consumer Electronics P P P Infocommunication P P Lighting Electronics P P P Medical Electronics P P P Metering and Measurment Electronics P P P Network Infrastructure P P P White goods electronics P P P The Human and R&D Capital 90% of the sector output is generated by multinationals operating in Hungary. Why to work with Hungarians:» High level of education» Well trained and experienced work force of international standards» Highly-qualified engineers and labour pool» Flexible workforce Educated workforce in several fields of the industry Number of engineering students in tertiary education in academic year 2010/ Mechanics and metal work Electricity and energy Electronics and automation Chemical process Motor vehicles, ships and aircraft 447 Source: Statistical Yearbook of Education 2010/20011, Ministry of National Resources 10 11

8 Hungarians who have made a difference Hungarians have been world famous for their scientific and engineering talents for many centuries. Just few examples of those who have changed the world of electronics are the following: John von Neumann, born as János Neumann ( ), mathematician and chemical engineer, pioneer of computer technology through his usage of the binary system. The Financial Times named him the man of the 20th century. Dennis Gabor, born as Dénes Gábor ( ), Nobel-prize winning physicist and engineer, the father of Holography. John George Kemeny, born as János Kemény ( ), mathematician, computer scientist, has several enduring achievements in the world of computer technology, including the development of the program language BASIC. Andrew Grove, born as András Gróf (1936- ) in Hungary, immigrated to the USA and became the co-founder of Intel Corporation, by now the world s largest producer of semiconductors. Peter C. Goldmark, born as Péter Károly Goldmark ( ), physicist, had several inventions in the field of television technology. Became head of CBS research laboratories and introduced the first colour television and perfected the technology further. Also famous for inventing longplaying records (LPs) and micro TV cameras for the medical field. All eyes are on Hungary The ELI (Extreme Light Infrastructure), also known as the SUPERLASER, will be one of the largest research facilities of the European Union. This will be the first instrument of its kind in the world for studying the interaction between light and matter with ultrahigh intensity laser. This groundbreaking project will be created with Hungarian cooperation and the most significant centre for attosecond pulse light research will operate in Szeged, Hungary. ELI is a European Project, involving nearly 40 research and academic institutions from 13 EU Members Countries, forming a pan-european Laser facility that aims to host the most intense lasers world-wide. The investment is approximately 700 million

9 Higher Education in Electronics research and human capacities to meet industrial demands Several Hungarian Universities offer education of the highest international standards in engineering. Practically, all of these institutions operate knowledge centers with research facilities that work closely with industrial partners. Electronics and IT are focus areas in this regard. University Eötvös Lóránd: Regional Knowledge Centers (RKC) to exploit research and development results in close cooperation with the industrial sector to manage innovative projects focused on research and development at an international level and to transfer R&D results to marketable new products and technologies. University of Óbuda: strong in engineer education with faculties such as mechanical and safety engineering, electric engineering. Operates a knowledge center focusing on the research and development of robot technology. The research center at the information technology faculty of the PPKE in Budapest is engaged with nanotechnology, nanoelectronics, designing and measuring microelectronics systems, medical diagnostics, mobile platforms and systems among many others. Hungarian Academy of Science: Research Institute for Technical Physics and Materials Science focuses on areas such as Nanostructures, Microtechnology and Protonics. BUDAPEST Budapest University of Technology and Economics: education in mechanical chemical engineering, electronics and information technology, transportation engineering. Industrial cooperation in the areas of: biometrics, medical engineering, communication and information technology, automobile, mobile innovation and operates an information technological innovation and knowledge center. Győr Veszprém Balaton GYŐR University of István Széchenyi: Information technology laboratory offers industrial simulation projects and engineering development services for members of the automotive industry. BUDAPEST Danube VESZPRÉM The Information technology department of University Pannon in Veszprém operates several research centers such as Medical information technology R&D center, I&M software research center, info-, bio-, nanocenter, information technology researches for logistics systems. Tisza Miskolc MISKOLC University of Miskolc: several fields of engineering are offered: energy engineering, mechanical engineering, information technology engineering, electronic engineering. Knowledge center is supported by Bosch, Electrolux, TVK, Holcim. Debrecen DEBRECEN University of Debrecen operates an information technology faculty. Masters education in building and environment engineering. Research groups in areas such as building automation, electric vehicle development. FDI Success in the Electronics Industry Several multinational firms have established production capacities with great successes in Hungary over the years with total foreign direct investment reaching $85 billion ( 63.6 billion). Companies from the international arena have been active and working closely with the local communities for decades. Latest success stories» Samsung currently employs around people in Hungary and has built 4 production plants all over the country. At the Samsung Electronics plant, LCD and LED TVs are assembled and the Samsung SDI produces plasma PDPs and 3D TV sets. The company reached a $340 million ( 259 million) turnover in As an expansion of the Hungarian operation, Samsung Chemical opened its first European factory in Hungary in 2011.» As of today, Jabil has become an influential member of the Hungarian electronics sector, contributing substantially to the export and GDP of Hungary. Its Hungarian revenue represents 10% of the company s global and one third of its European turnover. In spite of recession, the number of employees grows constantly and has now reached 7,500 people. Tatabánya Szigetszentmiklós Jászfényszaru Bay Zoltán Foundation for Applied Research comprises of Research Institutes for Technical Physics and Materials Science focusing on areas such as Nanostructures, Microtechnology and Protonics among others. The Institute for Material Science and Technology: laser technology, metal technology, polymer and composite technologies, sensor and instrument development. The Institute for Nanotechnology: nano-composites, nano-deformation, nanodisperion, nano-medicine, nano-metrology researches. The Institute for Applied Telecommunication Technologies: ambience intelligence, integrated systems, sensor networks, intelligent transportation systems, ad-hoc communication networks Göd Samsung Electronics Hungary plant, Jászfényszaru

10 » Flextronics is the second largest EMS company worldwide, and one of the biggest export companies in Hungary. Flextronics Hungary offers complex service in its 5 Hungarian plants employing 12,000 people. Its activities include a wide range of production and service areas in computer technology, data storage devices, servers, telephones, consumer and household electronics. The company s financial results in the last financial year were $22.3 million ( 17 million). Amongst its production capacities in the region, the growth of the Hungarian entities is by far the largest. Besides production, the company operates one of the largest after-market service facilities in Europe with activities such as maintenance, spare part management and product distribution. Flextronics works in strategic alliance with Huawei from its Pécs site, and offers an after-sales service from its Budapest repair center. From its factory in Sárvár, the company supplies Lenovo and offers CTO/BTO services.» National Instruments Hungary Ltd. was founded in In the last several years, the Hungarian subsidiary has been producing more than 90% of National Instruments hardware products in Debrecen. The company has achieved significant results in the fields of establishing global services, information technology, technological development, finance and supply chain with 1,000 employees working in 13 different departments.» S e m i L a b is a Hungarian owned company that designs, produces and sells metrology equipment for the characterization of semiconductor and photovoltaic materials, the monitoring of the manufacturing process of semiconductor devices and solar cells, and also for R&D purposes. The company employs more than 70 physicists and 90 engineers worldwide. They participate in various international R&D projects, and have a frame agreement for metrology development with IMEC, the largest international research center for the development of semiconductor products. SemiLab is the 4th biggest pure-play semiconductor metrology company, and also the market leader in the front-end electrical characterization of the solar cell manufacturing process in the siliconbased photovoltaic market. Hungary provides the right mix of technical qualification of its labor force, infrastructural support network and competitive low-tomedium cost pricing. In recent years, it has been evident that Hungary has moved further up the value chain, making it competitive with Western level manufacturing and innovation, at a far beneficial cost structure. Furthermore, access to the entire EMEA, CIS and Russian markets is relatively easy from Hungary s central geographical location. All of this makes Hungary an ideal location for technology related investments. Márk Hetényi, Regional Senior Finance Director Flextronics I am very proud of the work with which NIH employees contribute to National Instruments business activities, and with their talent and efficiency they help NIH to achieve global success. Last year, we celebrated its fantastic ten years, and we are looking forward to its next period. Dr James Truchard, President, CEO and Co-founder National Instruments 16 17

11 Latest news from the sector Siemens Group increased its net profit by 76.8% totaling $32 million ( 24.3 million) in Hungary. The company created 100 new jobs in 2011, which adds up to a total of 2,000 employees. 670 new workplaces and a $103 million ( 79 million) investment was made by Jabil in Tiszaújváros when the company extended its production in Harman International has increased capacities in car soundsystems production employing 300 new staff. Sanmina-SCI has cut back its operations in higher cost locations and Hungary has become the company s principal production centre in Europe with 1,000 employees. Academic background Close cooperation of industry and academia Many international companies have developed a close cooperation with educational institutes over the years in order to participate in and support the development of highly skilled labor and exploit the capacities in terms of researches, product development, testing for return. Flextronics and Huawei Hungary have expanded their strategic supplier alliance in Hungary. Flextronics opened a new plant near Pécs, where the communication equipment of Huawei is now assembled. Laboratory, involvement in curriculum» The technical high school, Brassai Samuel, the Technical Faculty of the Debrecen University, and National Instruments are developing a new worldclass laboratory for the education of studies in electronics.» Hewlett-Packard and the University of Óbuda are refurbishing a new lab with the latest technology in order to aid studies in the areas of infrastructure, automation, virtualization, next generation cloud computing technologies.» The cooperation between Intel and the Budapest University of Technology and Economics includes a curriculum provided by Intel in areas such as IT Infrastructure design. There is also a new lab founded under the name Intel Virtualisation and Platform Management Laboratory.» The vocational school, Gyula Andrassy, and the Robert Bosch Energy and Body Systems Kft have formed a partnership to educate technicians and skilled labor on up-to-date theoretical and practical knowledge.» Microelectronics design lab was founded founded at Budapest University of Technology and Economics by Mentor Graphics. The lab equipped with EDA software is aimed to promote education of highly skilled professionals and is worth 20 million USD. Curricula and scholarships are granted by Mentor Graphics

12 Research projects» The Bosch group spent $49.5 million ( 37.8 million) on R+D employing 500 engineers in 2010.» The University of Technology and Economics, along with members of the electronics segment (Ericsson, Nokia, Siemens, Telenor, Sun), cooperate in the research of high rate mobile communication technologies that include new technology directions (B3G) beyond third generation mobile systems (3G) and 3G/4G mobile and wireless technologies and network services.» The Budapest University of Technology and Economics and the Faculty of Electrical and IT Engineering Department of Electron Devices are working together in joint projects with Philips, Nokia, St. Microelectronics, Infineon, Tima and Oriered in the fields of research and education and in the applied areas of theory, design, manufacturing and testing of semiconductor devices, microand nanoelectronics, VLSI electronics, semiconductor sensors, energy transfer systems, microelectronic mechanical systems (MEMS) and systems in a package (SiP).» GE Healthcare has invested $890,000 ( 678,000) to research heart arrhythmia in cooperation with the Szeged University of Science. Scholarships, grants» H u a w e i has founded a new scholarship program entitled The innovative leaders of tomorrow for Hungarian students at Corvinus University and the Technical University of Budapest. Students can obtain useful knowledge and institutes can extend the curriculum with new elements. At the same time, it is important for Huawei to be involved in the training of such professionals who will be influential parts of the information technology industry. Gavin Dai, general manager of Huawei Technologies Hungary Kft Twelve Hungarian companies and higher education institutes have formed the association entitled Together for the engineers of tomorrow in Budapest with the aim to contribute to education in engineering. The founders of this association include: ABB Kft., Audi Hungaria Motor Kft., Bosch Hungary, Continental Teves Hungary Kft., Ericsson Hungary Kft., Jabil Circuit Hungary Kft, NI Hungary Kft.,Nokia Komárom Kft., Siemens Zrt., ThyssenKrupp 20 21

13 Subsectors in focus The main segments of the electronics sector are well represented by local and international producers and service providers in the areas of consumer electronics, computers, communications, automotive electronics and medical electronics. Consumer electronics Consumer electronics represent 21 % of total sectoral output with substantial contributions coming from international players such as Samsung Electronics, Philips Industries, Alpine and Clarion. The main source of revenue of the segment is the production of TVs, monitors and DVD equipment. Samsung alone produces or assembles an annual number of 5 million TV sets and employs 3,000 workers in Hungary. The Hungarian plant of Royal Philips Electronics is one of the most important European assembly centers in the company. This plant brings LCD TVs and DVD-based products to the market. Philips also annually produces 500,000 3D TVs in their Hungarian subsidiary. The Hungarian center also serves as a logistic hub for supplying Eastern European markets. From 2012, Philips will continue its TV manufacturing operation in Hungary by forming a joint venture with Hong Kong based TPV Technologies. Electrolux is also operating in the Hungarian consumer electronics arena with two production sites in Nyíregyháza and Jászberény and it employs over 4,000 employees. The Nyíregyháza site has become the company s biggest European refrigerator production sites. Jászberény is the only facility in Europe where Electrolux vacuum cleaners are produced, and the number of units produced at this facility is now well more than 20 million. Capacities are available in contract manufacturing. Videoton, a Hungarian-owned company, is the most important EMS in the Central- Eastern European region and is ranked 4 th in Europe and 26 th worldwide. The company provides complete solutions for the Automotive Industry (38%), Household Appliances (24%) and Industrial Applications (23%). Its services range from part manufacturing, to final assembly & testing, to transportation and the distribution of the manufactured products. In their new product development projects, they are offering a wide range of development and engineering services, including the complete industrialization of new products. Today, the company employs over 7,500 people at multiple locations in Hungary, and has two low cost manufacturing units located in Bulgaria and a new plant in Ukraine. In 2010, the company reported $409 million ( 312 million) revenues. In 2011, Videoton began the assembly of battery packs for the Japanese company FDK. Videoton already assembles Li-on battery packs for the Japanese company Sanyo. Sanmina SCI assembles telecommunication switchboards and stations. The company supplies the biggest international telecommunication companies from their 3 Hungarian locations: Miskolc, Székesfehérvár, Tatabánya. Foxconn employs 6,000 employees in their 3 Hungarian locations. As a strategic partner to Huawei the company delivers optical network equipments for them; and also works in close cooperation with Nokia. Telecommunication This segment is represented by international players such as Ericsson, Nokia, Sanmina, Jabil and Foxconn. Ericsson puts a great effort into their R&D activities in Hungary. They currently employ 1,150 engineers and are regarded as the biggest R&D driven company in the country. The R&D center receives assignments such as microwave network and network management projects. Intellectual properties coming from this Hungarian center play influential role on the systems enabling mobile or broadband communications worldwide. Automotive A number of companies have established automotive electronics facilities in the country, and this list includes Continental, Bosch and Delphi to supply the European automotive industry. Both Continental and Bosch announced major investments to expand their Hungarian operations in 2010/2011. The German ThyssenKrupp develops eletromechanic wheels for major car manufacturers with the assistance of 250 Hungarian engineers. The company has been on a steady growth in spite of economic circumstances. Alpine Electronics Inc. is one of the biggest producers of audiovisual aids for vehicles. The local company assembles auto hi-fi sets for export markets. Bosch Group s dedication to its Hungarian businesses The Bosch Group has 5 local production plants that employ around people in Hungary. An R&D center has also been developed for automotive technology research in Budapest. The firm has invested $225 million USD ( 171 million), including a $117 million USD ( 89 million) investment in an automotive production site, and it sees further investment opportunities in the country. The Robert Bosch Energy and Body System Kft. produces windscreen wiping systems, injection engines, electronics for AC systems and new electric bicycle engine as the latest investment. Hatvan Budapest Miskolc Eger 22 23

14 Dynamically growing sector: solar cell production Components production has accounted for 11.8% of output in 2010 and a growth of 20.5% is reported in Overseas companies have established facilities in the country including Sanyo, which started mass production at its $20 million ( 15.4 million) solar cell plant at the beginning of The Hungarian-Chinese joint venture, called Orient Solar, builds solar cells and panels at its assembly plant in Hungary and plans to employ 300 workers. Phoenix Mecano inaugurated a new plant in Kecskemét with a $9 million ( 6.8 million) investment, where parts for solar cells are produced for export thereby creating hundreds of new jobs. Medical electronics Hungary has always been seen as a pioneer in hospital and medical technology through its production of highly specialized technical equipments with strong export base. Economic strength» The Hungarian medical technology market is estimated to generate $675 million ( 514 million) annually.» Seventy large companies and at least 3,000 SMEs with approximately 10,000 employees operate in the health sector manufacturing, trading and offering health services.» Hungarian medical health companies (medical and hospital technology) have achieved double digit growth rate on average over the past five years. Forecast for medical electronics: 15% annual growth (Source: MKB Bank, online studies) Hungarian market players as potential suppliers Main players include» 77 Elektronika producing blood sugar level meters and laboratory medical analytic equipments,» Medicor as the biggest medical device and equipment producer in the EU,» Mediagnost produces mechanical parts for X-ray equipments and supplies Philips, GE and Siemens as well.» Mediso Medical Imaging Systems is a dynamic supplier of Nuclear Medicine and modern Hybrid Imaging techniques to the health care and medical research institutions of the world. The company was founded in 1990 by experts of the largest research and manufacturing company of the region, and has been engaged in nuclear equipment manufacturing since The main activities of the company are researching innovative human and pre-clinical imaging technologies, developing leading edge human and preclinical systems, manufacturing, servicing and selling imaging equipment. 24

15 Multinationals success stories Among the international market players, GE Healthcare carries out production activities in Hungary by focusing on mammographic and heart diagnostic appliances. Its R&D activities focus on software development for diagnostics and oncology and its local company also serves as a sales and after sales center of CEE region. B. Braun employs 1,400 employees and produces wound drainage systems, infusion and transfusion parts, and vacuum devices. Its R&D focus includes electronic hardware and software development for dialysis machines. They are to invest $18 million ( 14 million) in the extension of production plant by MediCluster» The Cluster of Hungarian Medical Manufacturers and Service Providers was formed in 2006.» MediCluster is a network of companies and institutions engaged in development, sales and services related to medical devices, or involved in import activity and consulting.» Business activities of the companies include the development, production, distribution and support of medical equipments that provides the society with high quality health services. Government support, investment incentives Incentives for Manufacturing Projects Incentive Package may consist of the following elements: 1. EU co-financed tenders below EUR 25 M Type: cash, non-refundable, post-financed Amount of subsidy: max. 35%, approx. EUR M (min. 100 max. 1,000 M HUF) Conditions: investment volume min. EUR 0.92 M (285 M HUF), new jobs or increasing personal related costs, outside Central Hungarian Region Application: tender package shall be submitted to Hungarian Center for Economic Development Provider of incentive: National Development Agency 2. Subsidy based on individual Government decision above EUR 10 M and no EU funds are available or above EUR 25 M Type: cash, non-refundable Amount of subsidy: decided individually by the Hungarian Government Conditions: min. 50 new jobs (25 in preferred regions) Application: request list containing core investment data shall be submitted to HITA, official subsidy offer of the Hungarian Government in short deadline Provider of incentive: Hungarian Government Additional incentives: job creation and training subsidy please contact HITA for further information 26 27

16 3. Development tax allowance Type: tax allowance for post-investment period Amount of subsidy: exemption for 80% of the corporate tax payable for 10 years following installation. Up to HUF 500 M turnover the corporate tax rate is 10%, above HUF 500 M the tax rate is 19%. Conditions: investment volume min. HUF 3 BN (EUR 9.6 M), min. 150 new jobs OR HUF 1 BN (EUR 3.2 M) investment volume and 75 new jobs in preferred regions Application: depending on investment volume request or application needs to be submitted Provider of incentive: Ministry for National Economy 4. Job creation subsidy Type: cash subsidy, non-refundable Amount of subsidy: HUF 340 M (EUR 1.1 M) per project Conditions: cash subsidy based on individual Government decision is granted; in preferred or most preferred locations; min. 500 new jobs. Application: letter of intent needs to be submitted to HITA Provider of incentive: Ministry for National Economy Incentives for Research and Development Projects Incentive Package may consist of the following elements: 1. Direct cash subsidy Option 1 EU co-financed cash subsidy up to EUR 25M project volume Name: GOP /A - KMOP /A - Support of corporate R&D Type: cash, non-refundable Amount of subsidy: up to 45% (up to 35% in Central Hungarian Region), HUF M (EUR 48 K-1.6 M) Conditions: primary-, applied research or prototype development Application: tender package shall be submitted to Hungarian Center for Economic Development, official subsidy offer within approx. 38 days Provider of incentive: National Development Agency Additional incentives: job creation and training subsidy please contact HITA for further information Criterion Option 2 Project approach cash subsidy based on Government decision above EUR 25M investment volume or no available EU tender Type: cash, non-refundable Amount of subsidy: between 10-25% of the project based investment costs according to the following chart Conditions: min. 10 new jobs, min. EUR 10 million project costs, R&D validation Application: request list containing core investment data shall be submitted to HITA, official subsidy offer of the Hungarian Government within approx. 30 days Provider of incentive: donor Ministry Additional incentives: job creation and training subsidy please contact HITA for further information Scale of subsidy (a percentage of the total investment volume) Base subsidy, all qualified projects may receive 10% In case the company has proven co-operation with a governmental research institute, a non-profit research institute or with a university may be entitled for the following additional subsidy. In case the company has proven co-operation with a small- and mediumsized company between 10% and 19% of the total eligible costs of the R&D project, may be entitled for the following additional subsidy. In case the company has proven co-operation with a small- and mediumsized company between 20% and 29% of the total eligible costs of the R&D project, may be entitled for the following additional subsidy. In case the company has proven co-operation with a small- and mediumsized company between 30% and 39% of the total eligible costs of the R&D project, may be entitled for the following additional subsidy. In case the company has proven co-operation with a small- and mediumsized company between 40% and 49% of the total eligible costs of the R&D project, may be entitled for the following additional subsidy. In case the company undertakes to maintain the capacity, the basic and newly created workplaces for minimum one year and maximum five years after the close of the R&D project may be entitled for the following additional subsidy per year. 1% 1% 2% 3% 4% 2% 28 29

17 2. Development tax allowance Type: tax allowance Amount of subsidy: exemption for 80% of the corporate tax payable for 10 years following installation. Up to HUF 500 M turnover the corporate tax rate is 10%, above HUF 500 M the tax rate is 19%. Conditions: investment volume min. HUF 100 M (EUR 0.32 M) Application: depending on investment volume request or application needs to be submitted Provider of incentive: Ministry for National Economy 3. Job creation subsidy (available only for SMEs) Type: cash subsidy, nonrefundable Amount of subsidy: HUF M (EUR 3,800-7,000) per new job Conditions: min. 2 new jobs Application: February-March every year, through the relevant regional labour office Provider of incentive: Ministry for National Economy 4. Other R&D incentives» R&D direct costs or depreciation of activated/ accounted R&D can be 100% deducted from corporate tax base» Tax free employment of PhD, MSc or MBA students (up to the official minimum wage) in the field of educational and research activities» Tax allowance for corporate donations to organisations of public benefit supporting exclusively public duty R&D activities» Tax free development reserve for four years 50% of pre-tax profit (max. HUF 500 M, approx. EUR 1.6 M)» Tax benefit on credit agreements is the only type of incentive besides the cash and development tax allowance, which is set by the regional intensity ratio.» 300% R&D direct expenses - maximum HUF 50 M (approx. EUR 160 K) - if operation of the company R&D unit located at university or public research institute can be deducted from corporate tax base» The Research and Technology Innovation Fund (KTIA) is established to subsidize R&D and technological innovation activities in Hungary. It is envisioned to promote demand driven innovation and the knowledge based competitiveness of companies. To reach this goal grant programs support the creation of innovative products, technologies or services of SMEs, the strengthening of university-industry cooperation

18 Professional organizations The American Chamber of Commerce in Hungary Electronic Manufacturers Committee Chairman: László Ábrahám (NI Hungary Kft.) Coordinator: László Metzing Tel: ICT Association of Hungary (IVSZ) Section of Electronic Companies Head of Section: József Gacsal (Intel Hungary Ltd.) gacsal.jozsef@ivsz.hu Tel: National Electronics Society of Hungary (MELT) Chairman: Miklós Lambert lambert@milambi.hu Sources: The Central & East European Electronic Manufacturing Services Industry September 2011, Reed Electronics Research Position Brief August, 2010, American Chamber of Commerce European Electronic Markets Forecast, August 2011, Emarketforecasts Invest in the Hungarian electronics sector, September, 2011, HITA presentation Ágazati elemzések, MKB Bank A hazai elektronikai ipar jelentősége és erősítésének feladatai, IVSZ, June 2011 Nemzeti Elektronikai Kerekasztal Állásfoglalás The Yearbook of World Electronics Data, Volume /2012, Reed Electronics Research Electronics industry in Hungary, ITD leaflet Medical technology in Hungary, ITD leaflet Medtech R&D in Hungary, ITD leaflet Company websites University websites

19 Hungarian Investment and Trade Agency at your disposal HITA is the Hungarian Government s Investment and Trade Development Agency and operates under the supervision of the Ministry for National Economy. Through its extensive network of contacts in both the public and private sectors, HITA provides foreign investors with high-quality support for key decision-making processes and a wealth of supplementary services. Project preparation» In-depth, tailored information on the local economy and business climate, corporate taxation and the legal environment, as well as sector-specific overviews» Site visits, meetings with local, regional and government bodies and introductions to local suppliers, service providers and experts» Information on available incentives Implementation» Site selection assistance, coordination of license procedures» Finalization of incentives agreements» Recruitment and visa application assistance After care» Intermediary role for future developments between government bodies and companies operating in Hungary» Support and generation of reinvestments For further information, please contact: Mrs. Katalin Németh Investment Promotion Director katalin.nemeth@hita.hu Ms. Eszter Varga Senior Consultant eszter.varga@hita.hu