Electronics manufacturers are beginning to transfer capacity from Kaliningrad

The contract assembler of TVs from Hyundai, BBK, Toshiba and others, Telebalt, which closed production in the Kaliningrad region in 2022 due to rising costs and problems with logistics, plans to launch new facilities in the Leningrad region in 2024, Kommersant has learned. Experts believe that other Kaliningrad electronics assemblers can move their production “to the mainland.” However, the Ministry of Industry and Trade assures that enterprises are adapting and at the end of 2023, an increase in “manufacturing industries” was observed in the region.

The Kaliningrad contract manufacturer of TVs Telebalt (Telebalt T LLC) plans to launch a plant in the Leningrad region in 2024, three interlocutors among household appliance vendors told Kommersant. According to one of them, the company was forced to stop assembly in 2022 due to logistics difficulties and rising costs. The owner of the LLC, Yulia Chinaeva, confirmed to Kommersant that Telebalt T is not currently producing products, refusing further comments.

According to a Kommersant source in the market, initially companies located contract production in the Kaliningrad region due to tax incentives and convenient logistics: “But after the closure of land borders and airspace, the only possible option for supplying products was the sea route, which is more expensive and longer than air. and railway transportation.” Exports to Europe, for which the region was also a convenient starting point, have been stopped. Kommersant’s interlocutor clarified that there are other contract TV manufacturers in the region, for example STI Group, Polar, Assembleon. The companies did not answer Kommersant.

The regional Ministry of Economy and Industry confirmed that Telebalt ceased production in 2022 due to rising costs of component supplies: “Although cargo delivery capabilities then expanded and many regional enterprises rebuilt logistics, Telebalt, unfortunately, did not have time to spare to adapt to new conditions.”

The government of the Leningrad region told Kommersant that so far there have been no requests to create production: “But the region is ready for new investors, a favorable investment climate has been created, and thanks to the Green Corridor (the business support system of the Regional Economic Development Agency.— “Kommersant”) project implementation times have been significantly reduced.”

Fedor Boyarkov, vice president for production development of another Kaliningrad electronics manufacturer GS Group, emphasizes that the region attracted exporters due to its proximity to Europe. “However, with the closure of western borders, the situation changed; export-oriented companies had to switch to the domestic market or build new supply chains,” he says, adding that those companies that were unable to quickly adapt to new conditions closed or moved facilities closer to Central Russia. Mr. Boyarkov clarified that conditions have become more complicated for those organizations that focused on the domestic market.

A member of the Korean Information Display Society (KIDS), Ivan Kulemanov, believes that if logistics restrictions remain, other Kaliningrad factories may migrate to other Russian regions or stop production.

The Ministry of Industry and Trade of the Russian Federation, however, assured Kommersant that the industrial potential of the Kaliningrad region “shows positive dynamics and is gradually adapting to numerous sanctions restrictions.” Thus, the ministry clarified, in the fourth quarter of 2023, manufacturing saw an increase of 10% compared to the previous quarter: “The dynamics are confirmed by the increase in the share of capital investments in the manufacturing industry to 26% in 2023.”

Timofey Kornev