There are more than 164 million mobile phone users in Pakistan. The Telecom Authority of Pakistan (a govt agency) had recently noted that the country’s annual demand for smartphones is around 40 million units
As a part of our daily news intake, we read more than one story on how our neighbor China is doing in terms of electronics, especially mobile phones manufacturing. But have you ever wondered what’s the mobile phone ecosystem in Pakistan like?
When India, around May 2020, was releasing its production linked incentive for mobile phones in the country, Pakistan was in the stages of implementing the smartphone manufacturing policy it had announced in March the same year. Currently, as per the latest stats available on different media sites originating from Pakistan, the country has been able to manufacture (they also refer to assembling as manufacturing, like we do here in India) 1.2 million handsets in January and February 2021. It is worth mentioning here that Pakistan is the 8th largest smartphone market in the world.
There are more than 164 million mobile phone users in Pakistan. The Telecom Authority of Pakistan (a govt agency) had recently noted that the country’s annual demand for smartphones is around 40 million units. Pakistan’s Bureau of Statistics explains that a total of $498 million worth of smartphones were imported in the country during July to November 2019 period. These figures do not include the amount of smartphones smuggled in the country.
In fact, smuggling of smartphones was one of the compelling reasons that made the government of Pakistan announce a new smartphone manufacturing policy in 2020. The government of the country had blocked around 89,000 IMEIs numbers following reports of smuggled smartphones. Pakistani Authorities, in June 2020, had stopped 7,000 smartphones from entering into the country illegally.
Pakistan Federal Board of Revenue, in January 2020 had announced reduction in sales tax and income tax at import stage for smartphones priced below Rs 15,000 (one Pakistani Rupee equals 0.47 Indian Rupee). The decision, was immediately criticised by local manufacturers of smart phones in the country (sound similar?). G’Five, last year, become the first company to assemble first ever smartphone in Pakistan.
The country’s new policy includes the removal of fixed income tax on CKD/SKD manufacturing of mobile devices costing up to $350. It, at the same time has increased fixed income tax on the $351-500 category of smartphones by Rs 2,000 and Rs 6,300 on the $500 smartphone category.
Pakistan is also offering three per cent allowance on research and development to local manufacturers for exports of mobile devices. Additionally, the locally assembled are exempt from four per cent withholding tax on domestic sales. When this policy was announced in Pakistan, a total of 16 assemble facilities were functioning in the country.
What’s the current situation
As mentioned earlier, the Pakistani mobile manufacturing ecosystem was able to manufacture 1.2 million handsets during the first two months of 2021. A few players have made commitments to manufacture 1.5 million units every month. Airlink, a smartphone brand, while announcing its new facility in Lahore noted that it has the ability to manufacture 500,000 units every month, and is looking to increase the same by 800,000 units per month.
Several Pakistan-based media houses, without naming a smartphone manufacturing facility located in Karachi, have noted that this facility will be manufacturing close to six million smartphones every year. Transsion’s Tecno, which is also a major player in India, also has been manufacturing smartphones in Pakistan for a long time. Vivo, as per reports, has also bought land in Pakistan’s Faisalabad, and has plans to manufacture some 300,00 units every month. Another brand that goes by the name of Inovi Telecom, has claimed to be assembling 200,000 units every month.
“Smartphone assembling is a low capex and high working capital business. Airlink’s capex is around Rs600-700 million; but its working capital requirement is much bigger. If it sells at an average price of $60 per unit, for 500,000 units, it will be selling around Rs 5 billion worth of phones a month. The WC need would be somewhere around Rs 20 billion (considering three cycles a year),” read a report by Brecorder.
It continues, “The company has arranged the working capital from bank credit lines; but is also planning to list on the stock exchange. This will be first of its kind listing on the PSX.”
The website explains that while official import number of smartphones in FY18 was recorded at $450 million, the actual estimate was around $1.3 billion (some explanation to the smuggling part). In FY21, the eight months official imports figures for smartphones in Pakistan are at $1.3 billion. This figure, as per the website, may cross $2 billion in full year.
Hammad Azhar, Pakistan’s Minister for Industries and Productions Hammad Azhar, last year had tweeted, “Met with Samsung Pakistan managing director and chief executive officer. They appreciated both policies and are now actively considering setting up a smartphone assembly plant in Pakistan.”
One of his other tweets, at almost the same time, read, “Smartphone production in Pakistan is multiplying following the Device Identification, Registration and Blocking System (DIRBS) implementation and Mobile [Device Manufacturing] Policy launched recently.”
A website named Tokery points out towards Samsung as the most used smartphone brand in Pakistan. Samsung is followed by Huawei, Apple, Oppo, Realme, Vivo and Infinix.
