Local mobile manufacturing surges 55% in May 2024, fulfilling 95% of domestic demand

Pakistan’s local mobile phone manufacturing and assembly industry has experienced significant growth, with 2.23 million units produced in May 2024, marking a 55% year-on-year increase, according to the latest data from the Pakistan Telecommunication Authority (PTA). 

This brings the total for the first five months of 2024 to 13.1 million units, up 168% from the same period last year.

This growth is due to end of import restrictions imposed last year and the gradual economic recovery. As a result, Pakistan now meets 95% of its mobile phone demand through local manufacturing and assembly, an increase from the five-year average of 67% (2019-2023) and the eight-year average of 47% (2016-2023).

All major mobile brands, except iPhone, are now being manufactured or assembled in Pakistan. 

Over the past three years, the country has shifted from imported mobile phones to local manufacturing and assembly, following the government’s local mobile manufacturing policy announced in 2020. 

This policy aimed to attract international mobile companies to establish assembly plants in Pakistan.

The affordability of locally manufactured phones, which are priced 15-20% lower than imported phones of the same quality, has also driven this shift. 

In 2016, only 1% (0.29 million units) of mobile phones were assembled locally, while 99% (21.36 million units) were imported. By the first five months of 2024, local manufacturing and assembly accounted for 95% (13.08 million units) of mobile phones, with only 5% (0.75 million units) being imported.

Within the locally assembled phones, 62% (8.1 million units) are smartphones, while 38% (4.98 million units) are 2G phones. 

The peak demand for mobile phones in Pakistan occurred in 2020, with 37.56 million units, driven by the COVID-19 pandemic and the subsequent increase in remote work, e-commerce, and online education.

According to Topline Pakistan Research, with the current monthly production rates and the recent imposition of an 18% sales tax on all mobile phones in the FY25 budget, the total demand for mobile phones in 2024 is projected to reach 30-35 million units, compared to 22.9 million units sold in 2023.

In the listed sector, Air Link Communication (AIRLINK) is a major beneficiary of the expanding market and the growing share of local mobile phones. AIRLINK is trading at an FY24E PE of 8.4x and an FY25F PE of 5.4x. 

Similarly, 7% of Lucky Cement’s (LUCK) consolidated revenue comes from its mobile business, which will also benefit from the rising local demand for mobile phones. LUCK is trading at an FY24E PE of 4.1x and an FY25F PE of 3.6x.