Local Mobile Manufacturing-The Next Potential Industry of Pakistan

The inception of 3G/4G services in Pakistan has opened new venues of growth and innovation in the country. With 146 million cellular subscribers, teledensity has reached 72% whereas, 3G/4G penetration stands at 24%. According to Pakistan Bureau of Statistics, overall telecom imports grew 12.06 percent during the first half of FY 2017-18 compared to same period last year, up from $659.991 million last year to $739,618 million this year. Talking specifically about mobile phones, Pakistan’s mobile phone imports during the first half of the financial year 2017-18 increased 14.38 percent, touching $376.498 million against $329.177 million in the corresponding period of FY 2016-17. The growth in tech startups, m-services, IT exports, and cloud services is another example of how rigorously this industry is growing and becoming the fundamental contributor to the socio-economic development of the country.

Local Mobile Manufacturing-The Next Potential Industry of Pakistan

Anyone with serious stakes in the handset industry can enjoy abundant benefits by setting up a mobile manufacturing facility here

With 200 million population and these ever-increasing sustainable demand graphs, Pakistan has become a very promising market for IT and Telecom industry. Therefore, local mobile manufacturing has the potential to become the next big industry of Pakistan. Anyone with serious stakes in the handset industry can enjoy abundant benefits by setting up a mobile manufacturing facility here. Also, it will strengthen the socio-economic fabric of the country as well.

The growth in tech startups, m-services, IT exports, and cloud services is another example of how rigorously this industry is growing and becoming the fundamental contributor to the socio-economic development of the country

India started its mobile manufacturing in late 2004 and today it has become one of the largest telecom markets threatening its strong neighboring countries like China. Today there are more than 300 mobile manufacturing companies in India. According to a report titled ‘Indian Mobile Phone market: Emerging Opportunities for fulfilling India’s Digital Economy Dream’, in 2016, two out of every three mobile phones sold in India were domestically produced. By 2020, almost 96 percent of mobile phones sold in India will be locally manufactured. In the recent budget of 2018 Indian government hiked the customs duty on mobile phones to 20 percent from 15 percent- a move taken to help boost local manufacturing of mobile phones and the related components.

Pakistan, on the other hand, is a completely different story. Although our industry also witnesses the hike in taxation every year, its purpose is to decrease budget deficit rather than controlling exports and promoting local manufacturing. But despite the tax policies and unsuitable policies, the mobile market has increased as cellular operators are offering variety of services to encourage the use of mobile phones. According to Pakistan Bureau of Statistics, mobile imports observed a remarkable growth of 14.38% in the first half of 2017-18 (July to December) with an increase of $376.498 million, as compared to $329.177 million in 2016-17 (July to December). With local manufacturing, import expenses can be easily brought down. There are also a number of other benefits that local manufacturing can bring to our industry and country as a whole.

• Local manufacturing will result in lesser reliance on foreign countries to fulfill local needs. It will also help in saving foreign exchange and increase in Foreign Direct Investment.
• Availability of locally manufactured devices will ensure a decrease in grey channel mobile imports.
• Through local mobile manufacturing Pakistan will be able to change its status from consumer market to producer market. Its image in the international market will also improve that will help in attracting international companies to start doing business in Pakistan.
• Establishment of local manufacturing companies will create a number of job opportunities for the socio-economic development of the country.
• Once mobile manufacturing starts, it will take along other industries along with it such as component manufacturers, circuit designers, accessories, packaging, and software industry to cater mobile software requirements, R&D and so on.

Although our industry also witnesses the hike in taxation every year, its purpose is to decrease budget deficit rather than controlling exports and promoting local manufacturing

Our IT and Telecom industry is evolving at an impressive pace therefore, PTA and government should work together with the industry stakeholders and encourage them to make an investment in local mobile manufacturing in Pakistan. Now that cellular companies are expanding their services to rural and far-flung areas, the demand for low-priced smartphones is increasing rapidly hence, creating a huge opportunity for mobile manufacturers. The prices of international smartphones are out of reach of many Pakistani consumers although some mobile manufacturers like QMobile have introduced low-end smartphones. Mobile operators like Telenor and Jazz have also launched their own low-end 4G phones but the demand is still there.

Now that cellular companies are expanding their services to rural and far-flung areas, the demand for low-priced smartphones is increasing rapidly hence, creating a huge opportunity for mobile manufacturers

There are a number of things that government can do in order to promote local manufacturing in Pakistan. For this purpose government should:

• Cut down import duties
• Build a strong modern infrastructure of highways, rail lines, and airports.
• Provide a secure business environment for investors through stable policy and incentive system.
• Ensure subsidized electricity and power facilities.
• Develop a clear and comprehensive policy regarding CKDs (completely knocked down) and SDKs (Semi-Knocked down)

Once mobile manufacturing business flourishes in Pakistan, it will not only allow us to cater the local needs but if things go right, we will also be able to offer our products to other smaller markets of the region as well. There is no shortage of opportunities and talent but due to non-availability of a supportive environment, we lag behind in this industry. We not only need friendly government policies to motivate business to invest in this industry but at the same time, we also need to build infrastructure and minimize the cost of finance especially of power and water that are key to electronic manufacturing.

China has been the biggest manufacturing market for the past many years but now the market dynamics are changing in China. In last few years, labor cost in China is increasing, eroding the advantage of Chinese manufacturers to some extent. Besides, the country is moving up the value chain, there are not enough people in China willing to do manual low-paying jobs. Since the standard of living has improved, feature phone manufacturing will soon be pushed out of Chinese market as locals are moving towards expensive phones.

Once mobile manufacturing business flourishes in Pakistan, it will not only allow us to cater the local needs but if things go right, we will also be able to offer our products to other smaller markets of the region as well

So now, it has become difficult for manufacturers to maintain their margins in China, resulting in mobile phone manufacturers to shift production in other regions. India has been quite successful in taking advantage of this situation, international brands like Samsung, Xiaomi, Oppo and Apple have started their production plants in India whereas many smaller local brands have also emerged in the country after Indian Prime Minister’s “Made in India” initiative. Pakistan is also one of the fastest growing mobile phone markets, we have the talent and the opportunity, all we need is sound and strategy, for which all stakeholders will have to come together and decide how we move forward? The sooner we do it, the better it will be.