This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/6/2019

Electronics and Cybersecurity

The audio-visual sector was the largest contributor to consumer electronics industry output in Hungary in 2015, although the industry was in decline from 2011-2016.  As TV set output contracted the industry became more concentrated on audio equipment (loudspeakers, amplifiers).  The Hungarian LCD TV market has major investors such as Samsung, LG, Sharp and Philips, but more and more companies have taken their production to East-Asia due to its low-cost environment. Hungary’s growth potential in the consumer electronics market is limited due to high penetration of devices such as PCs, flat-panel TVs, and mobile headsets.  Therefore, the main opportunity will lay in an increase in household purchasing power which is forecast from 2018-2022.   Vendors will then be able to sell higher value models (premium gaming, hybrid notebooks, flagship smartphones).  Industry forecasts show growth potential in the following categories:
 
  • Computer hardware sales: $577 million in 2018
  • Audio-Visual sales: $409 million in 2018
  • Handset sales: $815 million in 2018
The Hungarian PC market was already mature in 2012, but there was room for further increases.  In 2017, household penetration reached 80%, although it had less of a shift towards tablets than higher income Western European markets. The competitive landscape is fairly concentrated with HP leading the market ahead of Lenovo, Acer, Dell and Asus.  The tablet range is ruled by Apple; however, the lower cost Android alternatives are also successful.
Hungary’s e-commerce sector is growing rapidly. Internet sales exceeded EUR 1.8 billion in 2018 according to Ecommerce News. Even though the country is one of the fastest growing e-commerce markets in the region, it is still behind the EU average with 62% of the population having used the internet for retail in 2018.  The creation of new access channels to grocery and non-food products could become a driving force in the future. Hungary’s shifting demographic might cause negative long-term consequences for online retail as the 20-39-year-old age group is forecast to be the fastest shrinking in the country.  Main online retailers in Hungary include Tesco, Media Markt, H&M, Stradivarius, Árukereső, Jófogás, and Vatera.  Local web shops generated $1.64 billion in turnover, more than 5% of the total national retail trade volume.  Although there were at least 6,000 web shops operating in Hungary, the five largest online retailing brands accounted for a combined 20% share of internet retailing in 2016. The most popular product categories were information technology and entertainment electronics, clothes, toys/gifts, and household machinery/white goods. The category was led by Tesco with a 4% market share, followed closely by retailers with a focus on consumer electronics, including Extreme Digital (edigital.hu), MS-E Commerce (mediamarkt.hu) and SC Dante International (emag.hu). Based on numerous predictions, e-commerce will continue to grow rapidly in the coming years. Revenue in the "e-Commerce" market expected to be $2.04 million in 2019 and is projected to show an annual growth rate (CAGR 2017-2021) of 10.6%.
Hungary’s IT hardware industry in important to the domestic economy and a significant production center in Europe but it has declined over 2017-2018 due to restructuring/closures by major vendors like Flextronics, Foxconn, Samsung and HiSense. Production of hardware and electronic components totaled EUR 3.66 billion in 2015 which is a relatively good outcome, but it is still way below the 2011 level (EUR 4.0 billion).  The number of people employed in the sector is also down with most of the decline occurring in the components industry. The country’s IT hardware market is vulnerable to competition from other production centers such as East Asia, but there is reason to believe that the Hungary is adapting to stay competitive as production output per employee increased by around 45% over 2011-2016.
The issue of cybersecurity falls under the remit of the Ministry of Innovation and Technology in Hungary. Since the country is part of the European Union it follows EU laws and strategy when it comes to the privacy of its citizens on the internet. The European Commission promotes cloud computing since 2012 which has the potential to boost GDP by EUR 160 billion by 2020 and create 2.5 million new jobs.
In order to protect the European citizens, the EU has worked out a document that regulates the use of data provided by Europeans for all companies serving the European Union and/or processing the personal data of EU citizens.  Please see the data privacy section of this report for more information.

Sub-Sector Best Prospects

Following global trends, devices for private use have shifted in Hungary from desktops and laptops to tablets.  Consequently, retail sales of the former have fallen. However, the corporate and state sectors differ in these attributes. As tablets could not entirely replace the administrative and secure solutions of desktops and laptops, these latter devices remained popular among private and governmental organizations. As such, these purchases kept business computer sales afloat despite consumer trends.  The state sector is an important client in Hungary for computers, as the underdeveloped IT infrastructure of the governmental sector and educational institutions are a target for EU-financed IT-development projects, along with state money allocated for such projects.
Distribution of consumer electronics continued to be dominated by electronics and appliance specialist retailers, which held a dominant share in 2016. The evolution of mobile shopping and increasing consumer confidence in web shops are expected to drive category sales to new levels. By 2021, all consumers across the country will have access to the internet for personal use through their mobile or broadband connection at home, as the result of large infrastructure development.
As e-commerce became more and more significant, hypermarkets such as Tesco and Auchan launched online sales.  Among the different offline retail formats, hypermarkets enjoyed a noticeable share given that consumers tend to save time by doing their regular grocery shopping and the purchase of electronics products at the same place.  The strong overall position of hypermarkets in the Hungarian retail space ensures continuous customer flows.  However, larger offline channels were losing share to online retailing which dynamically grew over the last few years.  Internet retailing was strengthened by the entrance of a notable player, eMag a few years ago, and an established presence online by traditional offline retailers Euronics and Media Markt.  For online sales in general, cash payment upon delivery dominates, but bank card payment upon delivery could be the future.
Subscription growth in the Hungarian mobile market will be modest over 2017-2021 due to a combination of market saturation and negative demographics.  Meanwhile, Telenor and T-Mobile's 4G infrastructure-sharing partnership has helped the market leaders to roll out advanced new services, and these investments, along with those of the third largest operator Vodafone, will help sustain growth in the data subscriptions market.  This will create an upgrade factor for smartphones users seeking faster connection speeds.

Opportunities

The future development of consumer electronics in Hungary will be strongly correlated with the development of the country’s economy. Over the next few years, Hungary’s economic situation is expected to continue improving. The country is performed a record a 4.9% GDP growth in 2018. At the same time, unemployment rates are set to decline constantly resulting in a tight labor market and inflation will remain low. Consumer electronics’ volume and value of sales are expected to register healthy growth. The slow, but steady growth of real wages predicted will support this trend.
Growth will be supported by the fact that replacement cycles of many consumer electronics in households have been lengthened by the economic crisis, and such products are reaching the end of their lifecycle. The most successful consumer electronics categories will be relatively new ones featuring innovative products such as smartphones, tablets, and LCD TVs.  On the other hand, growth will be slow for products that are heading towards the end of their lifecycle such as feature phones, DVD players, in-car navigation systems and others.
In terms of IT, opportunities exist for mobile computing devices where functionality is clearly differentiated from smartphones, for instance hybrid notebooks.  Low penetration for enterprise software in some verticals, including enterprise resource planning, customer relationship management and supply chain management, means a potential growth market for vendors, particularly as software-as-a-service development deepens the market.  Harmonized EU rules on data privacy and security could catalyze the development of the local cloud computing market and create the potential for Hungary to develop into a regional hub.  Companies will have to invest in key IT services and products to compete with EU rivals, with cloud delivered services expected to outperform.  Spending on IT security products is expected to grow rapidly in the coming three years.
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