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Thursday, May 23, 2024

Reshoring. Shifting investments out of Asia. Poland benefits from this

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Our country benefits from the so-called reshoring, experts believe. In their opinion, new investments will flow to Poland related to moving production centers closer to target markets, including in the semiconductor and electromobility sectors.

As Monika Grzelak, deputy director of the investment department at the Polish Investment and Trade Agency (PAIH), noted, the pandemic and the resulting disruptions in the supply chain have exposed the weaknesses of the current investment model – locating factories, also from key sectors, in Southeast Asian countries. – As a result of these events, many enterprises have revalued, resulting in the so-called reshoring or nearshoring, i.e. diversification of the supply chain by opening new production centers (plants) closer to target markets – explained Monika Grzelak.

Polish advantages

According to her, Poland is benefiting from this trend, both as a country where new investments are located, as well as a place for reinvestments consisting in increasing the production capacity of existing plants, transferring some of the processes considered the most crucial to Polish factories, or opening research and development centers. – Poland's obvious advantage is its geographical proximity to Western European and partly American companies, but a high level of education and the availability of highly qualified employees are also very important. Additionally, Poland offers investors stability and energy security, which is a very important factor in the current international situation, Grzelak emphasized. According to PAIH data, in the years 2020-2023, with the support of the Agency, a decision was made to locate 355 investment projects in Poland with a total value of over EUR 17 billion. Most came from the USA, Germany, China and South Korea. At the end of January 2024, the agency's portfolio included 151 active investment projects with a declared total value of over EUR 10 billion. – However, it is still too early to say which of them will be implemented. It is also difficult to predict what new projects will appear in the near future, Grzelak noted.

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Rebound in investments

She added that Poland's attractiveness as an investment destination is proven by, among others, a slight decrease in the number of investment projects caused by the pandemic – in 2020 it amounted to 1.6%. (data from fDi Report 2021), which was one of the best results in Europe.

– If we look at the projects supported by PAIH, in the years 2021-2023 there was a rebound in investment values, which increased every year, up to a record EUR 7.3 billion in 2023 – said the representative of the Agency. According to PAIH, a good example of nearshoring is Intel's investment announced in June last year. The company announced the construction of a Semiconductor Integration and Testing Plant near Wrocław worth USD 4.6 billion.

– Together with the other investments of the American technology giant in Germany, Ireland and France, it is part of the process of diversification of supplies in the key semiconductor sector, at the same time constituting the largest foreign direct investment in terms of value in the history of Poland – Grzelak noted. She added that PAIH expects an inflow of new investments from the semiconductor and new technologies sector, as well as continuation of nearshoring in the electromobility industry in the coming years.

Poland enjoys the greatest interest

Global research by the consulting company EY shows that in the years 2020-2023, the percentage of companies declaring that they are considering or starting operations in Europe increased from 27%. up to 67 percent In turn, according to the Maersk report from 2023, Poland enjoys the greatest interest among European companies considering reshoring. Our country was chosen as the preferred location by one quarter of respondents. – These data are reflected in reality. We are observing an acceleration of industrial development in our region. The number of orders is increasing, and companies are increasing their capacity and investing in technologies – Wojciech Obst from PSI Polska, a supplier of IT systems used by both Polish and foreign companies, told PAP. As he pointed out, the disorganization of supply chains caused by lockdowns during the pandemic was visible primarily in the area of ​​electronics, which had a strong impact on many branches of production, from consumer electronics to the automotive industry. In 2021, the chip supply crisis caused a significant decline in car production, which resulted in an increase in car prices. And while the situation has since improved, semiconductor availability has not returned to pre-pandemic norms. – Semiconductor production is concentrated in Asia, with 90 percent of chips smaller than 10 nanometers made in Taiwan. For geopolitical reasons, such concentration is a potential ticking bomb. In the event of a sudden reduction in supplies, the Western world may find itself in a serious crisis, noted Obst. According to Obst, because of these threats, Europe has become a magnet for new investments in the electronics and electrical engineering sector in recent years, and Poland is among the countries that will benefit the most from this trend.

– Our country attracts the attention of not only Intel, but also companies such as Samsung and Daikin – he pointed out.

A driving force for the economy and innovation

Obst noted that technologically advanced production plants, including those intended for chip production, are powerful engines of the country's economic growth. Their role goes beyond just creating new jobs, because they offer employment in specialized positions, becoming incubators of innovation and technological breakthroughs thanks to significant investments in research and development. – Poland's maximum use of the opportunities offered by reshoring requires robotization, automation and the use of modern software. This will reduce production costs and increase efficiency, which is crucial in the conditions of global competition. The higher the level of digitization of our economy, the better position we will achieve on the market, concluded Obst. The Polish Investment and Trade Agency (PAIH) is a state-owned company that is responsible for increasing the inflow of foreign direct investments into the country and the internationalization of Polish enterprises. It operates both in Poland and around the world through foreign sales offices.

Main photo source: Grand Warszawski/Shutterstock

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