Electronics Sector in Turkey

Electronics IndustrySouth-East European INDUSTRIAL Мarket - issue 1/2015

The Turkish electronics sector supports more than 2,000 manufacturing companies and employs more than 30,000 people. Representing 2 percent of the total GDP, the Turkish electronics sector offers huge potential for investors. Competitive incentives, along with Turkey’s geostrategic location as a hub connecting Europe and MENA, make the country quite attractive for both production and management operations.

Many multinational companies, including Microsoft, Intel and General Electric, have either established their manufacturing bases in or moved their headquarters to Turkey, as the country offers a robust platform for economic expansion on a regional scale.

Turkey’s young population’s motivation to work in the electronics sector provides a high-quality work force for investors. In recent years, both the number of university students pursuing relevant studies and the number of open job opportunities in the electronics sector have been continuously rising.

In the Turkish electronics market, consumer electronics accounted for the largest share in production with 34.8 percent in 2012, reaching USD 4.4 billion, followed by telecommunications equipment with 19 percent, other professional equipment with 17 percent, computer equipment with 15 percent, defense electronics with 9 percent, and components with 5 percent.

As the second biggest sub-sector in production, telecommunications equipment grew by 1.7 percent in 2012, reaching USD 2.3 billion. Even though telecommunication equipment accounted for the lion’s share in overall electronic exports with USD 2.62 billion, its growth rate corresponded to 5.4 percent, lagging behind consumer electronics export growth.

Turkey attaches great importance to research and development centers, along with clusters. Currently, there are a total of 35 R&D centers related to the electronics sector and 16 relevant clusters, which bring together the industry and academia for innovative technology development projects.

The ongoing growth in the electronics industry allows Turkey to channel strong FDI inflow to the country. In 2011, Turkey’s electronics sector received USD 442 million of FDI, while the country was one of the top recipients of electronics investments, leaving behind European countries such as Germany, Belgium and Denmark.

Electronics sector in Turkey represents 2% of the total GDP
As technology plays a crucial role in today’s world, electronics sector is growing at a unprecedented rate. According to Market Line Industry Profile, consumer electronics sector will have a value of USD 381.6 billion in 2017 which corresponds to an increase of 29.4% compared to 2012.

It is also important to note that even though there has been a moderate increase in CAGR of the market value between 2008 and 2012, this is expected to increase to 5.3% for 2012-2017 time frame. Regarding the geographical distribution of market value in 2012, Europe - which includes Turkey - accounted for 26.9%. Highest share belonged to Americas with 40.4% followed by Asia-Pacific with 29.3%.

Numerous prestigious electronics companies choose Turkey
as their headquarters and managing offices in the Middle East. German company BSH including Bosch, Siemens and Profilo brands is centered in Turkey in order to organize operations, production and sales of the Middle East, North Africa and Central Asia. With the opening of a new manufactory in Cerkezkoy, production of small house appliances shifted to Turkey.

New manufacturing facility of US-based company 3M is established in the European Free Zone in Corlu. The planned production Super Hub will not only serve the Turkish market, but will also provide products and solutions to primarily European, Middle Eastern and African regions.
GE Healthcare manages more than 80 countries from Turkey.

The new hospital positioned as a healthcare IT hub in Istanbul is being used as an international clinical training center for doctors, clinicians and healthcare providers to serve healthcare needs of Middle East, Eastern Europe, Caucasus, Central Asia and Africa.

There are 16 clusters in Turkey related to electronics sector
Clustering as a horizontal policy is becoming increasingly important in the policy agenda of the Turkish government. There were many supporting initiatives had been put in place all aiming to develop a sound clustering policy with effective measures encouraging the SMEs, which are vitally important in the country’s current positive economic development trend registered within the last decade. These initiatives were composed of projects carried out at the national or sectorial level and as well as in the form of government subsidies and supports for the Clusters in Turkey.

Sub-Sectors

Consumer Electronics
According to TESID, consumer electronics is divided in to eight distinct categories including; electronic scale and devices, audio video tapes, cash register, audio devices, TV satellites, TVs, electronic calculators, video players and TV. Exports of Turkey in 2012 increased from USD 1.9 billion to USD 2.4 billion in 2011 which accounts for approximately 18% increase.

It is also observed that imports increased by 48% in 2012, significant effect was seen on TV satellite imports which increased from USD 28 million to USD 875 million. Television sets have been the backbone of consumer electronics exports in Turkey.

Since 2010, majority of the exports were focused on televisions reaching USD 2.2 billion. In 2012, 85.7% of consumer electronics were exported to European Union member states. Regarding manufacturing of TV units there were a total of 11.6 million TV units and 87% of them were exported overseas.

White Goods and Home Appliances
Turkey is one of the largest white goods producers in Europe. Reaching 22 million units in 2012 including refrigerators, dish washers, washing machines and ovens. White goods production have increased at a CAGR of 8% between the years of 2004 to 2012. Turkey also exports a significant number of refrigerators and washing machines to Europe including the United Kingdom (USD 680 million), Germany (USD 508 million), France (USD 433 million), Italy (USD 225 million) and Spain (USD 185 million).

The number of units exported in 2012 was approximately 16.3 million - an increase by 12.7% compared to the previous year. According to White Goods Industry Association, white goods industry in electronics sector contribute significantly to the workforce. It is estimated that there are a total of 120,000 workers in the white goods industry, 105,000 blue collar and 15,000 white collar personnel.

Major manufacturing sites for white goods are located mainly in the Marmara, Aegean and Central Anatolian regions. Leading manufacturing cities in these regions include Istanbul, Tekirdag, Manisa, Eskisehir, Bolu, Bursa, Ankara, Kocaeli, Yalova, Kayseri, Konya and Bilecik. Leading companies in the white goods and home appliances sector majorly consist of local brands such as Arcelik and Vestel. Foreign players in this sector include Bosch-Siemens, Indesit and Candy.

Air Conditioning & Refrigeration
Turkey has a 1.8% market share in the global Air Conditioning and Refrigeration industry. The global market was worth USD 70 billion in 2008 and decreased to USD 63 billion in 2009 due to the global crisis and then reached to USD 85 billion in 2011, highest it has ever been in the last three years. The market in Turkey grew by 40% in terms of units and 25% in terms of value when compared with the figures of 2010 and reached approximately USD 1.5 billion in 2011.

Compared to 2010, units of production increased by a staggering amount of 47% in 2011 reaching approximately 17 million units. Domestic sales in air conditioning and refrigeration industry increased by 53% in 2011, and export quantity increased by 32%. Split air conditioners and finned heat exchangers are the most dominant products in air conditioning and refrigeration sector in Turkey.

For instance in import, split air conditioner dominates the remaining products (VRF, Ducted Splits, Rooftops, Fan Coils, Air Handling Units, Chillers and Finned Heat Exchangers) by 79% whereas in production, domestic sales, and export finned heat exchangers are most prominent. The split air-conditioning market achieved growth of 34% increase in production, 55% increase in domestic sales and 17% in export in 2011. Whereas, for finned heat exchangers a significant increase of 37% was observed in export quantitates and domestic sales increased by 53%.

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