Why European OEMs Are Moving Electronics Manufacturing to the Baltics

"Selection of the manufacturing location depends on the sourcing strategy, the geographical sales regions, and where the final product is assembled," says Luinys. An OEM selling into Asia will usually manufacture locally rather than ship goods from Europe. Sales into the US bring trade regulations and tariffs into the equation — there, Asian non-China locations such as Malaysia, Europe, or the Americas all compete. 

The Baltics case is specific: it is strongest for European or global OEMs with a European presence who want a local supply chain. Estonia sits next to the Nordics — with direct flights, Tallinn can be reached in 30–90 minutes from any Nordic capital. Goods can be delivered within a few business days rather than weeks on the ocean. A shared European business culture, English as the working language, and easily accessible engineering support keep the supply chain simple and efficient.

Having Estonia, China, and Malaysia inside one group changes the question itself, Luinys argues: "The discussion is no longer ‘which country do I choose’ — it becomes ‘where does this specific product belong, for this specific sales region, at this specific stage of its lifecycle’. Inside one group that question can be answered and re-answered without changing the supplier." 

• Sold in Europe → built in Tallinn. European regulatory environment, short lead times, European origin. In defence and dual-use programmes this is now an eligibility criterion: under the European Defence Industry Programme (EDIP), at least 65% of component cost must originate in the EU or associated countries, and design authority must generally sit in the EU. 

• Sold in Asia → built in Suzhou. Local-for-local supply base, competitive BOM cost for mature higher-volume products, and a sourcing entity in Shanghai with more than 20 years of China–Europe experience next to the component market. 

• Exported to the US or global markets → Kulim, Malaysia. As of late 2026 the tariff picture is clear — electronics from China carry roughly 25% with the Section 301 stack, the EU sits at a 15% ceiling, Malaysia at the 10% baseline — plus the Penang/Kulim semiconductor ecosystem and Kulim Hi-Tech Park incentives. 

When to split production across two sites? Luinys names three situations: when one product sells into two regions with different trade or content rules; when business continuity demands a qualified second source (inside one group, without a second supplier audit, AVL approval, or commercial negotiation); and by lifecycle — NPI and the engineering-heavy first phase in Tallinn close to the customer’s R&D, then volume migration to Asia once the design is frozen. 

And when not to: "A transfer is not a file transfer. It means duplicated test equipment, pilot builds, new first articles, component qualification at the receiving site, customer approval and, in regulated markets, a full new validation. Below a certain annual volume that qualification cost is never paid back." The value of a multi-site group is that the option stays open for later.

Luinys does not expect — or want — a mass reshoring wave: Europe represents around 2.5% of the global EMS and ODM market, while Taiwan and China together hold more than 80%. Commodity consumer electronics are not coming back, "and it is not worth fighting for them". 

What changes is the mix. European electronics manufacturing will grow in the segments where regulation, reliability, lifecycle length and sovereignty matter: defence and dual-use, energy and grid infrastructure, rail, medical, industrial automation, critical communication. Defence is the strongest driver — today only around 5% of the European EMS market, expected to multiply within five years. The Baltics sit at the centre of it: Estonia, Latvia and Lithuania are moving toward 5% of GDP on defence, and Estonia’s defence industry alone approaches €1 billion in annual revenue, built on electronics-intensive technologies — drones, counter-drone systems, electronic warfare, sensors. EDIP’s 65% European-content requirement turns this from a market trend into a regulatory one. 

Automation will advance for demographic reasons rather than cost: according to the European Chips Skills Academy (ECSA), the European electronics sector needs to fill roughly 270,000 positions by 2030 — and in Estonia the annual shortfall is around 1,400 specialists and 700 skilled workers. Expect automation built for high-mix, low-volume production — vision-based inspection, AI-supported quality data, robotised material handling, flexible cells — not fully automated mass lines. 

Two further developments Luinys expects: consolidation continues — Europe’s top 20 EMS companies are spread across 14 countries, and deals such as Hanza–BMK and Kontron–Katek, plus acquisitions by Scanfil and Kitron, point one way — while the component supply chain remains the unsolved part. "Moving assembly to Europe does not move semiconductors, passives and printed circuit boards to Europe." Laminate prices are up 15–20%, capacity is being allocated toward data centre products, and parts of 2026 semiconductor capacity were sold out well in advance. "The trend is not reshoring but rebalancing: less volume, more value, defence and energy taking the lead, automation driven by the shortage of people, fewer and larger EMS companies — and a component supply chain that remains global."