Outsourcing Electronic Manufacturing in Bulgaria

Electronics IndustrySouth-East European INDUSTRIAL Мarket - issue 4/2018 • 23.11.2018

The outsourcing industry in Bulgaria has marked its seventh consecutive year of double-digit growth, and now accounts for 3,6% of the country’s GDP. This information was published in a 2017 report conducted on the Bulgarian Outsourcing Industry by the Bulgarian Outsourcing Association (BAA). According to the study, a number of factors contribute to the preserving positive trends, with the most important being the availability of skilled labor, active interaction between business, education and the state, the preservation of the flat tax and the expansion of the package to encourage foreign investment.

Geographically, outsourcing in Bulgaria is developing not only in Sofia but also in larger cities such as Plovdiv, Burgas and Varna. Outsourcing companies are usually interested in the necessary human resources and educational institutions of a city, whether it has well-developed infrastructure, an appropriate class of office buildings and strategic geographic location.

Outsourcing advantages of Bulgaria

According to the BAA, Bulgaria is a leading outsourcing destination in Europe and the world, situated in the top 10 most desirable countries on a global level. Several different international companies have already established offices in Bulgaria and continue to expand their business, while new investors are also entering the market. The main advantages of the country are its geographical position, the flat tax, which is very attractive to investors, as well as the well-developed human resource in terms of language knowledge and IT training.

Within the last 10 years, employees in the Bulgarian outsourcing sector grew to above 15 000 people. The sector serves various clients from Western Europe, North America and Asia, the majority of which are Fortune 500 or Fortune 1000 companies.

Additionally, Bulgaria has well-developed educational system specializing in electronics, engineering, and computer sciences. The country has 46 universities located in 21 different towns. At any given time, there are more than 10 000 Bulgarian students majoring in computer science, electrical engineering, mathematics, physics, and biotechnology, states another report by the BAA.

Bulgaria boasts the lowest corporate tax in EU, which is 10%. Among the other countries in Southeast Europe, it ranks second, together with Macedonia, Kosovo and Bosnia and Herzegovina, which also have a 10% corporate tax, whereas Montenegro imposes a tax of 9,0%. Bulgaria also has some of the lowest operational costs in the region.

Within the electrical engineering, electronics manufacturing and R&D sector, Bulgaria also provides several important advantages: Availability of experienced engineers; Qualified assembly workforce at affordable cost; Established traditions in the electrical engineering and electronics sector; Infrastructure well suited for the needs of electronics manufacturing; Easy access to EU, Russian/CIS and Middle East markets; Vibrant mix of international and local companies from the electronics sector with successful operations in Bulgaria.

State of the electronic industry
The production of the Bulgarian electronics sector has experienced steady growth with its volume increasing nearly 4 times from 2000 to 2010. In 2010 revenues exceeded EUR 1,5 billion, which is the highest level since 1990. Around 45 000 people in 2300 companies are permanently employed in the industry.
Bulgaria is often considered the electronics manufacturing hub in Southeast Europe, because the sector has been developed on a basis of both local and multinational firms who have established production plants or outsource their production. These companies supply various European markets, among which are the automotive, lighting, renewable and conventional energy equipment, consumer electronics, security, defense, telecommunications and others.

Among the most popular product groups which are produced in Bulgaria are high end energy saving sensors for various applications in different industries ranging from automotive through food and beverage production to agriculture equipment, top quality amplifiers and high frequency power products used in the radio communication sector, the latest generation HVAC and climate control equipment used in modern high speed electric trains, semiconductors and semiconductor products used in medical, machine building and automotive manufacturing globally by companies such as BMW, GM, Mercedes, Printed Circuit Boards (PCBs) and microelectronic components for industrial applications used all over the world, and more.

According to data by the National Statistical Institute of Bulgaria, the InvestBulgaria Agency and the Bulgarian Chamber of Commerce, the majority of electronic production in Bulgaria is export-oriented to several key markets, including the EU countries, Russia and CIS, and USA. These represent more than 75% of total exports. By category, wires and cables account for 25% of the total sector exports, followed by industrial batteries with 11% of the exported production and electrical apparatuses with 8% of the export. The rest of the market is distributed to transformers (7%), integrated circuit (7%), telephone devices (6%), panels and el. tables (6%), PCBs (3%), electric heaters (2%), radio and TV equipment (2%), and others (23%), according to official statistical data.

Human resources and industrial clusters
Because of the traditions in the sector, Bulgarian engineers are highly qualified for the needs of the electrical engineering and electronics manufacturing. There are experienced assembly workers available at very affordable labor cost, states a report by the Bulgarian foreign investment agency Invest in Bulgaria. The sector is characterized by very good overall quality/cost ratio of the workforce.

As for education, there are five technical universities in Bulgaria offering majors in electronics and electrical engineering. A total of about 30 000 university students are enrolled in majors related to the Electrical Engineering and Electronics manufacturing. About 9000 of the current Technical University students study majors directly related to Electrical & Electronics sector. About 20 000 more students are enrolled in other majors in Technical Universities and may be suitable for a career in the electronics sector as well.

As for industrial clusters, there are several established cluster zones in the country. Among them Botevgrad is considered the electronic manufacturing center of Bulgaria with its strong historic traditions in the industry and close location to the capital and another big cluster zone – Sofia. Sofia is the executive, legislative and judiciary power, as well as financial hub of the country. Another big cluster is the Plovdiv one, which is the second largest city and major administrative, industrial, transport and tourist destination.