Hungary intends to become the regional leader in innovation and R&D, which is why the Central European nation plans to spend 3% of its GDP on research and development by 2030. Taxation-related modifications and a new R&D incentive system have been introduced, including the R&D cash subsidy system launched in 2017 by the Hungarian Investment Promotion Agency (HIPA). The national agency provides information on the Hungarian business environment, labor market, location opportunities, incentives (cash incentives and tax allowances) and assistance finding local suppliers.
The Hungarian Government provides cash subsidies for R&D activities based on individual government decisions throughout Hungary. This opportunity is available to large enterprises implementing an R&D project (qualified as industrial research and/or experimental development activities by the Hungarian Intellectual Property Office) with a minimum value of €3 million (US$3.6 million). They must create a minimum of 25 new R&D jobs and maintain them for at least two years after completion of the R&D project. The maximum aid is 25% of the eligible costs comprising of depreciation or rental fees of buildings; depreciation of equipment; personnel costs, regarding researchers and developers to the extent of their involvement in the project; costs of material (a maximum 25% of total eligible costs); and costs related to contractual research (a maximum 25% of total eligible costs).
In 2019, the pharmaceutical and automotive industries accounted for a combined 59% of R&D expenditure within manufacturing, while the rapidly increasing ICT sector reached almost 12% of the total of R&D spending financed by the business sector in 2019. 2020 saw an increase of 9% in R&D expenditure in Hungary, reaching an overall €2.2 billion ($2.6 billion). The ratio of the Hungarian business sector’s contribution to R&D expenditures was the largest in the region in 2019. Last year, the total number of R&D units was nearly 3,400 while the total headcount of R&D-related employees came to almost 85,000 people.
Where Investors Find ‘The Most Talented People’
Continental has an artificial intelligence competence center, a vehicle-dynamics test track, seven factories and a regional tire trade and logistics center in Hungary, employing more than 8,000 people. Its Artificial Intelligence Development Center in Budapest employs more than 100.
“Our primary focus is neural network-based software development, and we have all the relevant teams and competencies to support this core area, regarding data management and data engineering, infrastructure and development & operations, framework development and production,” says Dr. Balázs Lóránd, head of the center. “Our mission is to find the best neural network-based solutions and implement them in the automotive industry to provide solutions for highly automated or autonomous vehicles that can save lives on the roads.”
Continental’s research and development activities in Hungary are constantly growing; more than 1,000 employees currently work in R&D related jobs. One of the company’s greatest challenges, says Lóránd, is to find the most talented people in artificial intelligence, particularly in advanced driver assistance systems. That challenge is met in Hungary, he says, with its “strong university background and well-known institutes in Budapest. The availability and competitiveness of the workforce was one of the reasons we chose Hungary, along with the attractive investment environment, good infrastructure in Budapest and its power to attract talented people.”
Ericsson is one of the largest telecommunications and IT research and software development companies in Hungary with more than 2,000 highly skilled professionals. “It is a key site for driving global product development and lead innovations, enabling Ericsson to maintain its position as an industry and technology leader,” says Roland Jakab, Head of Strategy for Central Europe. “Most of our colleagues work in the Budapest Research and Development Center developing telecommunications networks. We are working with trending technologies such as IoT, 5G, Machine Learning, Artificial Intelligence, Cloud, and future network security. The innovative work by R&D in Hungary contributes hundreds of patents to the global top-quality patent portfolio.”
Ericsson established the Hungarian subsidiary in 1990 as the first Ericsson in the former Eastern Bloc, after noting the high level of technical education in the country and Hungary’s specialization within the Eastern Bloc in telecommunication. “Cooperation with local universities is a key factor in our operation,” says Jakab. “Our newly inaugurated HQ building, the Ericsson House in Budapest, is located near the university campus and has close cooperative ties with ELTE Science University and the University of Technology and Economics in Budapest. Many freshly graduated engineers joining Ericsson come directly from the jointly operated research laboratories. And the awarded subsidy contributes to the financial competitiveness of the Hungarian affiliate compared to other Ericsson R&D sites.”
GE has been in Hungary for more than 30 years, providing state-of-the-art healthcare, renewable energy, aviation and power generation technology as well as digital solutions and integrated services in its Hungarian plants and offices. It operates four manufacturing sites, two R&D centers and an operations center with close to 4,000 employees. GE invests in R&D in connection with its solutions for healthcare (medical imaging, workflow management and artificial intelligence), aviation (turbofan jet engines component repair) and digital activities. The Budapest-based Digital Technology Hub team is responsible for developing and providing infrastructure and collaboration services for all GE businesses worldwide.
“Hungary is well known for its digital capabilities worldwide, and GE can confidently build on the highly qualified, innovative Hungarian workforce available locally and on the investment-friendly economy,” says Endre Ascsillán, vice president for GE CEE. “GE believes in partnership and common growth, and this partnership has enabled Hungary to become a key GE location in Europe.”
Ascsillán says Hungary provides a transparent and predictable business and tax environment, stable government, a long history of a strong education system and a stable infrastructure. “Due to its Central European location, the time zone is perfect — CET has coverage with the U.S. as well as with the ASPAC time zone. The Hungarian workforce is highly qualified, has a good level of English, is well educated and is motivated to perform at a level that is competitive worldwide.”
This Investment Profile was prepared under the auspices of HIPA, the Hungarian Investment Promotion Agency. For more information, please visit www.hipa.hu.