Smartphone prices may go down as Pakistan’s home production reaches 90% in June

Cell phone prices in Pakistan may go down by 10 to 15 percent as the local assembly is set to cater to 90 percent of the total cell phone demand by June 2022.

CEO of Tecno Pack Electronics Pvt Ltd, Aamir Allawala, said that the nascent cell phone industry in Pakistan has already created 60,000 jobs since the mobile industry policy was rolled out in July 2020. The industry is also expected to cater to 90 percent of the cell phone demand in the country by June 2022.

An industry source said that the duty incentives on local production and cheaper labor in the country would see prices of cell phone going down by 10 to 15 percent. The source requested to remain anonymous.

Allawala’s company can produce approximately 10 million cell phones annually. They have been assembling Infinix, Tecno, ITEL, and Nokia phones in Pakistan.

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“Price can be expected to go down because the mobile industry is labor-intensive. For instance, labor cost is $1,000 in China and in Pakistan, it is $150,” he said. However, he declined to share the exact changes in prices in percentage terms. He said that before the policy, the duties on imported completely built units (CBUs) were also low, therefore, big price change shouldn’t be expected.

He said that the majority of phones manufactured in Pakistan fall below the $200 price tag because of the duty structure that favors cheaper phones.

He said that the duty of semi-knocked down units and labor cost on a $200 cell phone is around Rs2,000. While in comparison, regulatory duty on a $200 cell phone is Rs. 10,500.

According to the Engineering Development Board, 30 cell phone companies received permission to manufacture mobile phones in Pakistan. Out of the 30, 19 have already started their operations.

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Allawala said that the localization will increase in the industry gradually, which would eventually make a case for exports as well.

He added that the exchange rate will also have a direct impact on locally assembled handsets, but to a lesser extent when compared to CBU imported handsets.

Air Link Communication CEO, Muzzaffar Hayat Piracha, said that due to the current government’s mobile phone policy, the duties and taxes for locally assembled phones have been significantly lowered.

“Thus, the price automatically becomes lower. The SKD versus CBU tax structure has a big gap. In some cases there is almost 30 to 35% difference in duties,” he said. “In a nutshell, the local assembly is definitely helping to keep the prices lower.”

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Air Link is currently manufacturing Tecno, iTel, TCL, Alcatel, and Xiaomi mobile phones at its factory.

“Right now, Airlink is the only company that is catering end-to-end consumer needs. We are a vertically integrated company. From manufacturing, distribution to retail and e-commerce, we have it all covered,” Piracha said.

Piracha said that the company has a total capacity of producing approximately 0.8 million phones per month, and they were working to enhance it further.

The CEO said that there was immense potential in the country’s cell phone industry. “Pakistan is the fifth most populous country in the world. Smartphone penetration in Pakistan is only 36 percent at the moment, we see a huge gap that needs to be filled. With better cellular coverage and internet penetration we can upgrade our feature phone user to smartphone user,” he said.

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Piracha further said that the industry is still budding, and therefore, the localization will take a few years.

“Localization happens when an allied industry is developed alongside. Government has a three-year plan, but it is still under development,” he said.

He said that there was also potential for the export of cell phones from Pakistan. “The attractive government policy in the form of favorable taxes and rebate on exports will prove to be extremely beneficial to stimulate the exports,” he said.

To a query about industry challenges, Piracha said that there were multiple factors in play and a few of them are global too.

“The disruption of the supply chain during the pandemic disturbed the market enormously. Global smartphone industry is still recovering from the chipset shortage for phones. Locally, our government has been very supportive in creating a conducive environment for businesses and especially the telecom sector. A lot of our challenges have been resolved as a result of continuous efforts of all major players,” he explained.

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