Electronic components production in Turkiye

The Turkish electronics industry, distinguished by its significant added value, innovative approaches, and extensive research efforts, manufactures products intended for both local use and global markets. As reported by the Turkish Ministry of Trade, there are over 2000 manufacturing firms operating within the electronics domain in Turkiye.

The rapid development of the industry commenced in the latter half of the 1980s. Since 1990, the sector’s exports have shown a consistent upward trend, largely attributed to vigorous research and development initiatives and production tailored to the demands of export markets. The advancements in telecommunication technologies during this period significantly contributed to the sector’s expansion. Many Turkish enterprises initiated their operations through foreign licensing agreements, with licensors hailing from countries such as the Netherlands, Germany, Japan, the United States, Canada, France, the United Kingdom, Denmark, and Italy.

Currently, the sector is well-established and possesses a considerable level of technical expertise. Products from the electronics industry, featuring the latest technologies, are made available in the Turkish market concurrently with their introduction in Europe. The majority of electronics exports are primarily aimed at European markets.
According to the International Trade Administration, Turkiye’s youthful population, vibrant entrepreneurial sector, and strategic location have positioned the country as a key hub for manufacturing and distribution. The country capitalizes on lower labor costs and adaptable production capabilities to integrate into the global value chain.

Manufacturing’s contribution to GDP increased to 22,2% in 2022 from 19,1% in 2020. The automotive and aviation sectors in Turkiye are early adopters of advanced manufacturing, led by international firms with support from local suppliers. Other industries like consumer goods, electronics, chemicals, machinery, steel, construction, textiles, energy, and mining are also embracing advanced manufacturing technologies.
The European Union represents the most significant market for the Turkish electronics industry. The leading exporting nation within this sector is England, followed by Germany and France. In addition to the EU member states, neighboring countries such as Iraq and Turkmenistan, along with the United States, also play a crucial role in exports for this sector.

In 2017, the Turkish electronics industry successfully exported to approximately 200 countries. Similar to production trends, consumer electronics and telecommunication equipment were the primary export categories. While the majority of export destinations are within the European Union, the countries from which imports are sourced are more varied, with China holding the largest share of total imports.

The industry today is divided into six main segments: components, consumer electronics, computers, telecommunication equipment, defense electronics, and other professional/industrial equipment. According to TESID – the Turkish Electronic Industry Association, main product types among manufactured components are: circuit elements (capacitors, electrical resistors), solar cells, diodes, transistors, coils and transformers, acoustic elements (microphones, speakers, fasteners, relays, printed circuits. Circuit elements represent the largest portion of imports, whereas coils and transformers account for the most significant share of exports.

Despite Turkiye’s endeavors in semiconductor production facing challenges due to global consolidations, notable advancements have been achieved in the design and manufacturing of VLSI chips, MEMS, and micro/nano chips, facilitated by semiconductor circuit elements. This progress is particularly crucial for Turkiye’s autonomy in the aerospace and defense sectors, TESID elaborates. Enhancing design and technology in this domain is vital for the country, especially as substantial investments, amounting to billions of dollars, are being allocated for production lines, with these investments persisting annually, even as American and European chip manufacturers relocate their production to the Far East, TESID comments.

There is a prevailing belief that sensors will be the key component of the future, offering significant potential for Turkiye in the realms of the Internet of Things, energy, and consumer electronics. It would be prudent for the country to focus on producing such products, particularly given the defense industry’s potential in this area. Furthermore, it would be advantageous to promote the exploration of new markets for electromechanical fasteners, coils, and transformers, which possess considerable export potential, the report summarizes.

Major challenges for local manufacturers

According to TESID, the domestic electronics industry in Turkiye is currently facing a major test against China’s rapid technological development and aggressive marketing strategies. A recent publication on the Association’s website states that China’s low-cost production, large production capacity and government support allow it to have a large share of the global electronics market. This creates serious competition for domestic manufacturers in developing countries like Turkiye.

Challenges facing the domestic industry in Turkiye include cost competition from China, lack of technology, difficulty in market access, and strong government support for Chinese companies. To protect domestic industry, Turkish companies should increase R&D investments, reduce production costs, train a qualified workforce, support SMEs, implement policies that encourage domestic production, and engage in international collaborations, particularly with the European Union and other developed countries. By focusing on innovation, reducing costs, improving the workforce’s skills, supporting small businesses, and enacting supportive policies, the domestic industry in Turkiye can overcome the challenges posed by Chinese competition and strengthen its position in the global market.

Potential collaborations with China include technology transfer through partnerships with Chinese companies, cost advantages through co-production in Chinese facilities, market access by collaborating with Chinese companies, and supply chain optimization by working with suppliers in China, TESID summarizes.

In order for the domestic electronics industry in Turkiye to be successful against the rise of China, both protectionist and cooperation-based policies should be implemented together. Giving importance to R&D investments, training a qualified workforce, supporting SMEs and establishing international cooperation will enable the country to become stronger in this area. Cooperation with China will increase Turkiye’s technological development and competitiveness in the global market.

Several priority areas have been identified to maximize the future growth potential of the electronics sector in Turkiye. This involves increasing domestic production, especially for critical components such as semiconductors, to reduce external dependency. Supporting R&D investments through incentives can boost innovation. Strengthening university-industry collaboration can help meet the industry’s need for skilled human resources. Addressing the shortage of skilled labor by developing vocational training programs and updating them is crucial. Improving electronic engineering programs in higher education can attract more students. Encouraging Turkish engineers who studied abroad to return home is essential. To enhance global competitiveness and market access, reducing customs duties and trade barriers for Turkish products is vital. Marketing efforts to increase brand recognition globally are important. Adhering to international standards is crucial for expanding exports and entering new markets, according to TESID.

Opportunities for the sector

Improving access to finance and investment environment is crucial, TESID further underlines. By facilitating SMEs’ access to finance, especially for growth and R&D, sector dynamism can increase. Enhancing investment environment by reducing bureaucratic obstacles, offering tax incentives, and improving legal regulations will attract foreign investors to the country. Moreover, promoting environmentally friendly production methods by supporting studies on electronic waste recycling, energy efficiency, and sustainable production can lessen the sector’s environmental impact.

The main challenges faced by the electronics industry in Turkiye, according to branch experts, include integrating new technologies like AI and big data, cybersecurity risks, impact of 5G technology, and employment policies for women. Studying these issues and achieving positive outcomes will strengthen Turkiye’s electronics sector in global competition, leading to substantial contributions to the country’s economy.

The country has potential for collaboration with foreign partners in software development, electronic design, and production. In software development, cooperation can focus on cyber security, game development, and mobile applications. Turkiye also has competent engineers and researchers for collaboration in electronic design, including embedded systems, artificial intelligence, and robotics. The country offers infrastructure and human resources for electronics production, particularly in areas like white goods, automotive electronics, and telecommunications equipment. Furthermore, Turkiye can provide technology transfer in semiconductor technology, nanotechnology, and materials science. The country’s attractive environment for R&D investments can benefit foreign companies, who can also use Turkiye’s geographical location and large market for expanding market share in electronic products through marketing and sales channels.

Possible countries for cooperation include the European Union, which is Turkiye’s main trading partner and can facilitate access to the EU market in the electronics industry. The United States is a key player in electronics, and cooperation can enhance access to new technologies and R&D capabilities. The Asia Pacific region is a hub for electronics production, and collaboration with countries there can boost Turkiye’s production capacity and exports. Cooperation with Turkiye’s neighboring countries in electronics can support regional development. Africa also presents opportunities for the electronics industry, with potential for Turkiye to export electronic products and services and make investments in the region.

Turkiye’s semiconductor technology roadmap since the 1970s emphasizes the need for the country to have its own production facilities in addition to design capabilities, TESID also states. Establishing various production facilities, with state support like the TOGG Project, can address semiconductor element production needs and involve the private sector. The government should provide supportive legislation, export incentives, and financial aid for facilities and investments. Producing all semiconductor components in a single facility is deemed not feasible. Overall, Turkiye aims to develop production facilities that cater to strategic and critical sectors and bring new technologies to the country.

Turkiye has the potential for collaboration in various other sectors, TESID points out, including automotive electronics, white goods production, telecommunication equipment, defense industry, and medical devices. The automotive electronics market is growing due to industry electrification and autonomous vehicles, presenting an opportunity for Turkiye to play a key role. Turkiye is a significant center for white goods production in Europe, and cooperation in white goods electronics can further strengthen its position.

Similarly, with the increasing adoption of technologies like 5G and the Internet of Things, there is growth in the telecommunication equipment market where Turkiye can also play a crucial role. In the defense industry, Turkiye’s production capacity can be enhanced through collaboration in defense electronics. Additionally, the country has the potential to gain a share of the rapidly growing medical devices market by cooperating in medical device electronics.