Eastern Europe is emerging as a new global hub for the electronics manufacturing industry, according to a new report by researcher Frost & Sullivan. Manufacturing is growing in Eastern Europe because of lower labor costs, increased foreign investment and the growth in the production networks in the region.

The electronics manufacturing services market in Eastern Europe will grow from about $9 billion in 2006 to nearly $24 billion in 2013.

"The need to maintain profit margins in the face of declining pricing trends and high competition has made low-cost manufacturing a necessity," says Santosh Kumar, a Frost & Sullivan analyst. "This is encouraging the continuing migration of manufacturing processes in the electronics industry to low-cost Asian countries and, lately, to Eastern Europe," he says.

The development of the outsourcing model by OEMs and electronics manufacturing service (EMS) providers is essentially driving the growth of the EMS market in Eastern Europe. In fact, the recession of 2001 has led to the establishment of many manufacturing units in countries like Hungary and the Czech Republic, according to Kumar.

The eastward expansion of the European Union (EU) also offers significant potential for future growth and investment opportunities, considering the proximity of these manufacturing locations to various end-user markets.

The challenge for companies doing business in Eastern Europe is the lack of a fully developed supply base. To be cost competitive and to produce quality products "domestic companies need to improve the indigenous supply base," says Kumar.

The electronics manufacturing services market in Eastern Europe will grow from $9 billion in 2006 to nearly $24 billion in 2013.