Smartphones’ Assembly and Manufacturing in Pakistan: Opportunities & Challenges!

Smartphones’ Assembly and Manufacturing in Pakistan: Opportunities & Challenges!

With mobile data traffic worldwide now exceeding voice traffic for the first time ever, the demand for data is palpable. It’s predicted that by 2014, we’ll use as much wireless data in a month as we did in all of 2008. These numbers point to exciting opportunities for all stakeholders in the mobile industry. The mobile phone has become the biggest platform available today with almost 5 billion wireless subscribers, of which there are more than 1.5 billion mobile broadband (MBB) subscribers in the world. The number of the MBB subscribers is expected to grow to 3 billion by 2014.

With the expected 3G licensing in Pakistan which the Government of Pakistan has announced to be concluded by End of theCurrent year and network rollouts in subsequent months to follow, the industry tends to benefi t from the data growth and exciting applications and services on the 3G networks in Pakistan. Various full-featured mobile operating systems such as Android, Windows, Java, Brew MP, etc., continue to drive the proliferation of mass-market Smartphone’s offering thousands of applications, services and mobile content. The mobile Operators have already started to educate their consumers for the coming Data packages.

The data applications catering to the local needs will be the key in bringing the benefits of MBB to the mass market. However, to be able to offer these services to a wide audience, there is a need for devices that provide the functionality of a Smartphone but at affordable price points. This will open up the addressable market in Pakistan for an extremely large percentage of the population.

Pakistan has been on the radar screen for being one of the most aggressive and expanding markets for the mobile sector adding up to two million subscribers per month in the past. With much awaited 3G mobile networks in the country, huge growth potential awaits all industry players including operators, 3G device manufacturers, application developers, distributors, and the consumers. The market signs continue to show strong interest and promising growth for the 3G ecosystem with a large number of 3G devices being imported in the country every month indicating strong interest and demand in this market segment.

While on the one hand the consumer demand is an opportunity area on the other hand unhindered import of these devices is costing billions of dollars each year in negative trade balance. There is a dire need to promote local assembly and eventually local manufacturing of such mobile devices in the country.

Local Devices Manufacturing: Current Status
While the use of wireless devices including mobile handsets and fi xed terminals has been phenomenal, the local manufacturing and assembly opportunities have not yet been exploited by the local telecom industry in Pakistan.

A brief view of the current government/semi government telecommunication manufacturing facilities such as TIP, CTI, CTRL, presents a very dismal picture in terms of mobile phone manufacturing. The reason for such is:

• Current facilities are not completely equipped to manufacture mobile handsets of international standard.

• There does not exist any protection or incentive for the industry to compete with imported devices.

• High overheads and unviable cost structures specially lack of electricity.

• Lack of competent HR (both managerial and technical) that has a vision and competency to operate in such a competitive environment.

• A substantial number of mobile imports are attributed to the grey channel where a lot of smuggled devices are entering the country.

The way Forward:
There have been some encouraging developments when it comes to private sector where on a small and unconventional level some assembly, packaging and servicing is being carried out. However the manufacturing & assembly value adds is very nominal. This if promoted in very systematic and cohesive manner can bring huge dividends in achieving the local assembly and manufacturing objectives of mobile handsets and smart phones in the country.

The Government of Pakistan needs to incentivize the local assembly/manufacturing through very aggressive policy,  administrative and fiscal changes to encourage the same. Some of the recommendations that could be very encouraging for such venture is:

• The immediate requirement is to upgrade the plants/capabilities of the existing units such as TIP, Private Cottage Industry i.e. mobile workshops operating in Hall Road & Walton Road market, Lahore, Abdullah Haroon Road & Serena Market, Karachi, Singapore Plaza Rawalpindi and Falaksair Market Peshawar where they can at least be utilized for assembly and subsequently lay the groundwork for developing them to a level where they can manufacture  smartphone and other devices and not only address Pakistan’s Device requirements but also pave way for exporting terminals to neighboring countries.

• Retrain the existing Human Resource staff at TIP and the markets identified in 4 cities to ensure that we bring them to a level where they are aware of international best practices in the mobile manufacturing domain.

• Provide subsidization (though USF or ICT R&D Fund) or other such business Incentives such as tax holidays, interest free bank loans which will encourage local production and assist in competing with the imported device segment.

• Establish and formulate Policies that enables management of such entities to develop cohesive Strategy & future roadmap so the management will have a clear picture for the success of local manufacturing.

• Close liaisons for collaboration with the existing Pakistani private parties/brands such as Q-Mobile, United Mobiles, G-5, G-Tide, MegaGate, ND Telecom, Club Mobile, Airlink and other such entities to take them on board and facilitate local manufacturing initiatives.

• Promote foreign manufacturing entities such as ZTE, Huawei, LG which has presence in Pakistan and other international OEM’s of repute who are major players to assist develop the Mobile Phone manufacturing by either having their own assembly/manufacturing entities or JV with local companies.

• Promote and Start encouraging dialogue with foreign companies such as QUALCOMM Inc., who are major players to assist develop the local industry on similar lines that Oracle & Microsoft has done with the IT Industry. They have in the past offered to assist with QUALCOMM Reference Design Program, which has been implemented for Chinese Manufacturers.

• Encourage development and deployment of local application for integrating with the local smartphone devices to make them more attractive. This will not only help manufacturing of smart phones but give boost to Software industry. Popular applications supporting devices includes like Gamming software, Mobile TV, m-health, e-commerce, video conferencing etc. that can be developed locally and cost effectively.

• To prevent expansion of the grey channel and low quality imports and bring them to zero level to protect local industry a two pronged policy needs to be implemented. First, essential monitoring at customs level. Secondly, at operators and sales outlet monitoring is also essential to ensure Quality and standardization. PTA to ensure swift standardization of cal devices.

• Establish an Industry development Group comprising MoITT, PTA, EDB, Mobile Operators and also adequately represented by Private Producers/Manufacturers to recommend strategy and direction for this sector in an ongoing manner.

• Appropriate Budget/Seed funding needs to be provided to achieve the above mentioned tasks and objectives and consistency of polices.

We wish and hope that Government will lead the initiative through practical steps in this direction and put Pakistan on the world map where Smartphone are assembled and manufactured.

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