ANL 10.51 Decreased By ▼ -0.77 (-6.83%)
ASC 9.33 Decreased By ▼ -0.67 (-6.7%)
ASL 10.51 Decreased By ▼ -0.49 (-4.45%)
AVN 68.40 Decreased By ▼ -3.90 (-5.39%)
BOP 5.92 Decreased By ▼ -0.14 (-2.31%)
CNERGY 5.20 Decreased By ▼ -0.32 (-5.8%)
FFL 6.41 Decreased By ▼ -0.39 (-5.74%)
FNEL 6.10 Decreased By ▼ -0.18 (-2.87%)
GGGL 11.05 Decreased By ▼ -0.27 (-2.39%)
GGL 15.17 Decreased By ▼ -1.25 (-7.61%)
GTECH 9.00 Decreased By ▼ -0.92 (-9.27%)
HUMNL 6.35 Decreased By ▼ -0.50 (-7.3%)
KEL 2.55 Decreased By ▼ -0.15 (-5.56%)
KOSM 2.89 Decreased By ▼ -0.16 (-5.25%)
MLCF 28.65 Decreased By ▼ -1.01 (-3.41%)
PACE 2.90 Decreased By ▼ -0.20 (-6.45%)
PIBTL 6.00 Decreased By ▼ -0.10 (-1.64%)
PRL 14.75 Decreased By ▼ -0.61 (-3.97%)
PTC 6.93 Decreased By ▼ -0.10 (-1.42%)
SILK 1.01 Decreased By ▼ -0.06 (-5.61%)
SNGP 26.60 Decreased By ▼ -0.85 (-3.1%)
TELE 10.18 Decreased By ▼ -0.97 (-8.7%)
TPL 9.00 Decreased By ▼ -0.32 (-3.43%)
TPLP 15.76 Decreased By ▼ -1.29 (-7.57%)
TREET 30.05 Decreased By ▼ -1.50 (-4.75%)
TRG 73.71 Decreased By ▼ -1.96 (-2.59%)
UNITY 21.57 Decreased By ▼ -0.99 (-4.39%)
WAVES 12.30 Decreased By ▼ -0.88 (-6.68%)
WTL 1.45 Decreased By ▼ -0.10 (-6.45%)
YOUW 4.91 Decreased By ▼ -0.33 (-6.3%)
BR100 4,220 Decreased By -102.1 (-2.36%)
BR30 14,376 Decreased By -657.6 (-4.37%)
KSE100 42,667 Decreased By -838.4 (-1.93%)
KSE30 16,213 Decreased By -325.9 (-1.97%)

Smartphone manufacturing policy was unveiled in March 2020. And by now there are commitments from a few players to assemble 1.5 million units a month – 18 million units per annum in a year’s time. Last week, Airlink did a launching ceremony of its factory situated in Lahore. The factory is following international standards and has a capacity to produce 500,000 units a month with a plan to ramp up the assembly to make 800,000 units each month by April 2021 in full three shifts. Based on seasonality and other demand factors, the company is geared up to produce 6 million units a year.

Apart of Airlink, another factory in Karachi has a capacity to produce 6 million units a year. These two factories are functional. Airlink was into the mobile phone distribution business and is now vertically integrated from assembling to retailing. The other company - Transsion Tecno has a long experience of manufacturing in automobile parts. Another player, Vivo has also bought land for factory in Faisalabad and is panning to produce 300,000 units a month. Yet another company Inovi Telecom’s claim is to assemble 200,000 units a month.

Combining all these, around 18 million units a year (1.5mn units a month) will be produced in Pakistan by 2022. Right now, the market size of smartphone is around 36 million units a year – mainly relying on imports. This market size has a potential to grow as a good chunk of consumers are on feature phones and these may slowly transit to smartphones. Plus, every year, there are around 2 million youth coming of age for smartphone use.

That is why Samsung and other players are thinking about starting to assemble in Pakistan. Samsung is big in Pakistan and is catering to high, middle, and low-end smartphones. In the low and medium size, the company must come in local assembling to remain viable – as per new policy, the smartphones under $200 price would not be viable to sell as imported units.

The existing two players (Airlink and Tecno) are contract manufacturers. Samsung is eying a partnership with a contract manufacturer in Pakistan. It is in talks with a few select groups in Pakistan for partnership including biggies like Nishat and Lucky. Samsung is also considering Airlink for partnership – the edge Airlink would have is its expertise in selling.

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 Rs5 billion worth of phones a month. The WC need would be somewhere around Rs20 billion (considering three cycles a year). 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 smartphone industry has a potential to become big. The market grew multiple times in the last decade. But to-date its largely relying on imports. And prior to the implementation of Device Identification, Registration and Blocking System (DIRBS), the market was largely operating in the shadows.

The official import number of smartphones in FY18 was recorded at $450 million (but actual estimate was around $1.3 billion). In FY21, the eight months official imports are standing at $1.3 billion and this may cross $2 billion in full year. Bringing this to formal sector has two advantages. One is to fetch tax revenues – FBR may get Rs60 billion in taxes on smartphone imports.

The other is to incentivize local assembling. Engineering Development Board and Ministry of Industries came up with a policy in March 2020, and today we see the enthusiasm amongst big groups to venture in these. Hammad Azhar is bullish on the potential of this industry as he thinks that in a few years, this industry may become bigger than automobile. For that to happen, the backward integration of the industry i.e., making parts like battery, chargers and etc are imperative.

Comments

Comments are closed.