Local cell phone industry meeting: 70 percent of country’s demand

KARACHI: Local cell phone industry has seen mushroom growth during the last two years on the back of mobile manufacturing policy and as per an industry official it was already catering to 70 percent of the total mobile phone demand in the country.

Aamir Allawala, CEO, Tecno Pack Electronics Pvt Ltd, said that by June this year, the local mobile phone manufacturers would be catering to more than 90 percent of the total demand.

“The industry would be manufacturing almost all phones except iPhone by June this year,” Allawala said. “The duties and taxes on CBU phones are enough to ensure viability of locally manufactured handsets.”

Local assembly of cell phones received a major boost in 2020 when the Pakistan government announced Mobile Device Manufacturing Policy. According to the Engineering Development Board, 30 mobile phone companies have been allowed to start production and many of them have started their operations.

“Between 50,000 to 60,000 people have already been employed by the industry,” Allawala said.

Currently, all major global brands are being produced in Pakistan. These include Samsung, Xiaomi, Tecno, Infinix, Nokia, Oppo, Vivo, Realme and Itel.

Assembling cell phones also made a business case in Pakistan because labour was much cheaper here when compared to China, where monthly labour cost was between $700 and $1,000, while in comparison, labour cost in Pakistan was $125/month.

However, he added that labour in China was more skilled and cost around 10 percent of total cost of mobiles.

“Localisation will increase gradually and prices may not see major change if we import a CBU or assemble it here,” he said. Most of the cell phones sold in Pakistan fell below the price tag of $200 due to duty structure. Duties increase significantly when the price of a cell phone crosses $200.

The CEO explained that duties and labour cost incurred for a cell phone below $200 were around Rs2,500. But if the same cell phone was imported, a duty of around Rs10,500 had to be paid on the phone.

“Still, mobile phones are still very affordable. You can buy a 4G smart phone for around $65 (Rs14,000) in Pakistan,” he said.

Depreciating exchange rates, inflation and increasing cost of utilities were the reasons why mobile and car prices were going up.

“Car prices didn’t budge much between 2001 and 2008 when exchange rate remained stable,” he said. Allawala is also a vendor to the auto industry and a former chairman of Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM).

Former Finance Minister Miftah Ismail a few weeks ago said that import substitution industries were not giving the desired results. They take incentives but they don’t localise and resultantly trade deficit increases.

Allawala said that the country lacks basic industries such as steel and plastic resins. The government should pave the way for the establishment of these industries through stable long-term policies.

He further said that the inconsistent government policies keep foreign investors away from Pakistan which subsequently discourages localisation.

Increasing exchange rates also kept investors wary of investing in Pakistan as it reduced the value of their investment in dollar terms. Also, the profitability of the local venture erodes in dollar terms due to devaluation, he added.

Other issues discouraging foreign investors were political instability and taxation/legal matters.

Not only has the country not been designing products but production of raw materials was also absent. However, the local industry has the potential to manufacture components and assemble the final product leading to creation of jobs for the Pakistani workforce.

“If the industry was not manufacturing components and assembling final products, Pakistani workers and engineers wouldn’t be able to find jobs. Just distribution and sales of finished CBU products, whether cars or mobiles, is never conducive for job creation” he said.