Rise in local mobile phone manufacturing in Pakistan
Significant growth in local mobile phone production
In May 2024, Pakistan saw a remarkable increase in the manufacturing and assembly of mobile phones, with 2.23 million units produced locally. This represents a 55% year-over-year (YoY) growth, as reported by the Pakistan Telecommunication Authority (PTA).
Year-to-date performance
From January to May 2024, a total of 13.1 million mobile phones were manufactured and assembled locally, marking a 168% YoY increase. This surge is attributed to import restrictions imposed last year and the gradual economic recovery.
Local production fulfills the demand
Currently, 95% of Pakistan’s mobile phone demand is met through local manufacturing and assembly. This is a significant rise compared to the average of 67% over the past five years (2019-2023) and 47% over the past eight years (2016-2023).
Shift from imports to local manufacturing
Over the last three years, Pakistan has shifted significantly from importing mobile phones to local production. This change was driven by the government’s 2020 policy to encourage international mobile companies to set up assembly plants in Pakistan.
The cost advantage of locally produced phones
Locally manufactured mobile phones are more affordable, offering a 15-20% price advantage over imported phones of the same quality.
Historical comparison of mobile phone production and imports
| Year | Imports (mn units) | Local Manufacturing/Assembly (mn units) | Total (mn units) |
|---|---|---|---|
| 2016 | 21.4 | 0.3 | 21.7 |
| 2017 | 18.1 | 1.7 | 19.8 |
| 2018 | 12.1 | 5.2 | 17.3 |
| 2019 | 16.3 | 11.7 | 28.0 |
| 2020 | 24.5 | 13.1 | 37.6 |
| 2021 | 10.3 | 24.7 | 34.9 |
| 2022 | 1.5 | 21.9 | 23.5 |
| 2023 | 1.6 | 21.3 | 22.9 |
| 5M2024 | 0.8 | 13.1 | 13.8 |
Current mobile phone types
Out of the 13.08 million locally assembled phones in 2024, 62% (8.1 million units) are smartphones, while the remaining 38% (4.98 million units) are 2G phones.
Demand forecast
Due to the imposition of an 18% sales tax on all mobile phones in Budget FY25, it is expected that the total demand for mobile phones in 2024 will range between 30-35 million units, compared to 22.9 million units sold in 2023.
Impact on companies
Air Link Communication (AIRLINK) is a significant beneficiary of the expanding market size and growing share of local mobile phones. It is currently trading at an FY24E PE of 8.4x and FY25F PE of 5.4x. Similarly, Lucky Cement (LUCK), which derives 7% of its consolidated revenue from its mobile business, will also benefit from the rising local demand. LUCK is trading at an FY24E PE of 4.1x and FY25F PE of 3.6x.
Disclaimer:
The information in this article is based on research by Topline Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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