Azeem Ahmed Khan

The mobile phone manufacturing industry, which is one of the top five industries across the globe, offers enormous export potential for Pakistan. With a global sales revenue of $418.88 billion in 2022, according to Statista, it can play a significant role in the country’s economic growth. With a population of 220 million, 50% of whom are under the age of 30, Pakistan is a major market for mobile devices. "Our country has become the eighth largest mobile phone market in the world," Aamir Allawala, Vice Chairman Pakistan Mobile Phone Manufacturing Association (PMPMA), told WealthPK.

According to Trade Map data, Pakistan has become the world's seventh-largest phone importer. Due to this, international businesses found the Pakistani market to be a desirable location to establish their production facilities. According to the Engineering Development Board, 31 companies are now fulfilling 95% of domestic demand by producing 2.5 to 3 million phones per month. Allawala informed that an average Chinese assembly line worker now costs around $1,000 dollars per month, while it costs only $100 per worker in Pakistan. To take advantage of this situation, 11 global brands have moved to Pakistan to manufacture smartphones. They include Samsung, Xiaomi, Nokia, Infinix, Oppo, Vivo, Techno, ZTE, Realme, Redmi, and Itel. In addition, 20 domestic companies are also operating, most of which produce only 2G phones.

In order to promote domestic production, the Pakistani government announced the Mobile Device Manufacturing Policy in 2020. The very following year, in 2021, 30 manufacturing facilities were built. By 2025, the sector hopes to reach its 49% localisation goal, which includes the production of motherboards, lithium-ion batteries, cables, LCDs, and phone chargers. But sadly, due to a shortage of raw materials, the production of mobile phones is currently operating at less than its installed capacity. 

“The main hurdle is that letters of credit (LCs) for imports have been closed since January 2023, so the required parts and components cannot be imported,” Allawala said. He said some 2G phone materials are accessible, but the production of smartphones has been completely halted until the availability of raw materials. The PMPMA has pleaded with the government to exercise some leniency in importing parts for smartphones in order to allow the sector to flourish, which has already employed approximately 40,000 people just within two years after it was established.

Mobile phone manufacturing is a labour-intensive industry because it mostly involves manual handling, and the tiny parts are picked with tweezers. "There is automation as well, but only in key processes," Allawala said. He said that because each smartphone is built, tested, and finally packaged by hand, the entire production process takes three to four days to complete a phone. “The companies, after waiting for four months for the industry to rerun, have started to lay off workers. About 100 Chinese nationals were working in Pakistan, of whom 80% have gone back. If this situation continues, the global brands may ultimately lock their premises,” Allawala cautioned.

Before the domestic production was stopped, Pakistan was meeting about 95% of its demand from local production, and only 5% was imported. This was going to provide a good opportunity for Pakistan to establish itself as an export hub. After capturing the domestic market, all major international brands intended to export phones from Pakistan. According to Allawala, the mobile phone business is asking for some relief and incentives and is counting on the government to act favourably.

The PMPMA vice chairman said the government should develop a plan to begin exporting mobile devices. Citing the example of Vietnam, he said it started from zero in 2014, and today the exports of only one company, Samsung, stand at $40 billion. “Similarly, China today gets more than $125 billion per year from mobile phone exports. Even if we achieve 10% of such share, we can create a big export industry,” he pointed out.

According to the Pakistan Telecommunication Authority (PTA), the industry produced about 16.70 million mobile phones during the first nine months of 2022. After domestically-made phones entered the market, the import of phones almost completely ceased due to the cost savings, favourable pricing, and quality that was on par with imported phones. On the assembly line, Pakistan can create between 1,500 to 1,800 smartphones each day, along with 2,500-3,000 2G phones. It is believed that once political and economic stability is restored in the country, production will bounce back and Pakistan will soon emerge as a leading smartphone manufacturer and exporter.

Credit: Independent News Pakistan-WealthPk