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The untapped potential for manufacturing cellular phone handsets

Written By Engineer Hussain Ahmad Siddiqui

Despite rising inflation and higher cost, the demand of mobile telephone handsets in local market continues to grow manifold. Currently, Pakistan imports cellular phone handsets valuing Rs 3.72 billion a month on average. Nonetheless, in April 2011 alone, the imports of handsets valuing Rs 8.67 billion was recorded, whereas handsets worth Rs 8.33 billion were imported in March this year.

During the period July 2010 to April 2011, foreign exchange equivalent to Rs 37.82 billion was spent on imports of mobile phone handsets, registering an increase of 75% over the last year’s corresponding period that amounted to Rs 20.82 billion.

The local market, reckoned as the second fastest mobile growth market in South East Asia, is poised to reach the mark of one-billion-dollar annual demand of handsets by the year 2015. Total number of annual cellular subscribers has increased by February 2011 to 105.5 million on networks of five major cellular operators, with annual cellular density of over 63%.

Total number of handsets at present is estimated at 130 million, whereas 20 million handsets are imported annually. As the market introduces different models with innovative features and technologies, about 20 percent of mobile phone users change their sets once a year, another 20 percent twice a year and another 20 percent after every three years. There are some 150,000 mobile phone shops across the country.

The phenomenal growth of mobile telecom sub-sector in Pakistan, which has an investment of over $3.4 billion, provides significant potential for manufacturing of cellular handsets indigenously. On the other hand, it is imperative for the government to limit its import as huge import of handsets is causing heavy drain on foreign reserves.

The handset consists of 40-60 components of hardware and software, most of which can be produced availing existing facilities, while key semiconductor components can be imported from the OEMs (Original Equipment Manufacturers). In the first phase, assembly of handsets can be undertaken, which may commence within a few months of signing and implementing of requisite contracts. This will follow progressive manufacturing, achieving optimal indigenization.

To materialise the idea of local manufacturing, the government has to adopt a focused strategy, formulating a consistent 5-10 years’ policy, thereby extending major fiscal and financial incentives to the telecom industry in general, and to mobile phone manufacturing, in particular. In the first instance, market data and forecast for new mobile handsets has to be drawn realistically, categorising demands separately for advanced imported models and proposed low-cost indigenous handsets. The selected mobile handsets for local manufacturing should be compatible with global trends taking into consideration the evolution of latest mobile technologies, such as GSM, CDMA and future generation wireless networks.

This would enable us to select hardware, technology features and functionality of handsets conforming to rapidly changing international standards. Pakistan is well placed in communication electronics and consumer electronics in terms of technology, production facilities and human resources. In fact, component supply base already exists.

Multinationals such as Siemens, Alcatel, ZTE, local public sector companies such as Telephone Industries of Pakistan, Carrier Telephone Industries (CTI), National Radio Telecommunication Corp (NRTC) and National Institute of Electronics (NIE), and a host of private companies are actively engaged in the field.

A hi-tech telecom company based in Islamabad, Comcept (Private) Ltd, is developer and manufacturer of GSM and CDMA payphones, fixed wireless payphones and special purpose electronic modules, not only is meeting domestic demand but also exporting its products. The company undertakes contract design and manufacturing for electronic projects and provides outsourcing service to the OEMs.

Instead of duplicating manufacturing facilities, it will be advisable to utilise optimally the existing infrastructure. It is estimated that initially a low production of 1.5 million handsets a year would be economically viable. In the next phase, manufacturing of an entire range of cellular phone sets, with increased volumes, could be undertaken.

Components and spare parts can also be supplied to the OEMs under co-manufacturing arrangements. The cellular handset industry is labour intensive and it will create additional job opportunities. Once we master the technology and achieve significant local market share, Pakistani mobile handsets may be introduced in export markets as well.

African, Middle Eastern and parts of South Asian countries are growing markets for low-cost cellular handsets. Sometime back, the Board of Investment had explored the possibilities with the leading mobile handset OEMs, such as Nokia, Siemens and LG, and also with the local Telecom Foundation, to consider as an attractive option for progressive manufacturing of their products. Sadly, there has been no progress.