After achieving 94% local assembly in mobile phones, Pakistan has a new phone manufacturing policy. What does it hope to achieve? 

The last time Pakistan introduced a policy for the manufacturing of mobile phones was in 2020. At the time, almost 70% of all phones in Pakistan were imported. In the six years since, the share of locally assembled phones in the Pakistani market has risen to close to 95%. 

It is an impressive achievement in some ways, but only the beginning in others. The near-complete shift towards local assembly means it only took a few years for tech companies to set up assembly lines and provide cheaper models to the market with the same brand names. The PTA issued 37 manufacturing licenses in this time, and nearly all phone brands in the world are now locally assembled in Pakistan, with the most glaring exception being Apple.

Of course, local assembly does not mean local manufacturing. Local assembly simply means that all the components of the devices are imported and then they are put together in Pakistan. It is similar to how Pakistan’s automobile market works. To drive real growth, the core components, or at least some of them, need to be produced from scratch in Pakistan and then assembled. In the case of Pakistan’s automobile market, it has been nearly half a century of the industry stuck in the assembly stage and unable to move towards true localisation. 

Mobile phones, of course, are a different ballgame. They are a smaller, high volume, and low margin product. Their size and ubiquity are what allowed so many investors to put up their hands to assemble them locally. As such, moving towards local manufacturing could be possible as well, but will require significant investment and regulatory cooperation. 

That is why the government has introduced a new policy for local manufacturing of mobile phones and electronics. The policy, which will run from 2026-33, has been drafted by the Engineering Development Board (EDB) and a final version has been dispatched to the Prime Minister for approval. But what is the state of Pakistan’s mobile industry, what will the policy do to encourage localisation, and how long could it take? 

The policy and the market 

The new policy is aimed at encouraging real value addition in the Pakistani mobile and electronic devices market. While the 2020-2023 Policy also had this as an aim, it failed to realise it properly. Localisation remained in single digits and that too of mostly low-value inputs, and assemblers continued to rely overwhelmingly on imported parts to manufacture phones.

However, one major objective achieved through the previous policy was the increased localisation of mobile phone production in Pakistan. This increase was meteoric. In 2019 the market was dominated by bulk-imported mobile phones, with locally assembled mobiles phones accounting for around 34 percent of the total market. By 2025, however, the latter’s share had grown rapidly to reach almost 94 percent.

[caption id="attachment_228178" align="aligncenter" width="630"] Source: Pakistan Credit Rating Agency[/caption]

Behind this was a slate of government incentives to encourage local manufacturers to set operations up with the result being the establishment of 37 local assembly plants. Other incentives included making importing CBU kits almost 25 to 30 percent more expensive as compared to CKD kits. At the same time, this increased local assembly was encouraged by the rising demands of a growing population driven by an attempt to be part of not only global but also local economy, and incentivised by increasing internet penetration in remote areas.

Yet, this policy failed to achieve its aims of achieving localisation. More than 90 percent of the parts going into locally assembled mobile phones were still being imported.

And here enters the new policy for the years 2026 to 2033.

It aims to start where the previous policy left off, and is more ambitious in its objectives. It seeks to turn Pakistan into an export-competitive electronics manufacturing hub, producing high value devices and components through progressive localisation and adoption of latest technologies. Elaborating on this mission, the policy targets a 50 percent localisation rate, and to increase exports to reach beyond Usd 500 million. This would be done by not only instituting globally certified testing procedures and partnering with leading local educational institutions, but also through a “fiscally neutral, performance-linked incentive regime” which will help Pakistan advance into global supply chains.

This performance-linked incentive regime is essentially a confluence of levies and R&D allowances on the export of mobile phones from Pakistan. Most important of these, however, is the Technology Innovation Fund (TIF), which is essentially to be funded by imposing progressive levies on imported CBUs and CKD components, with a rate structure that varies from 1 to 5 percent depending on the device category and value. The policy projects the revenue collected from this levy over the seven years of the policy to be Pkr 104 billion, which will constitute the core funding for the 8 percent rebates on exports. This is conceived as a self-sustaining alternative to reliance upon government budget to encourage exports of locally produced devices.

The policy, however, stipulates certain benchmarks that need to be met in order to gain access to the TIF rebates. Two of these benchmarks merit mention. First, each licensed OEM would be required to secure an export market share of at least 10 percent of the principal’s designated territory. And second, by the second year of the policy, the OEMs need to be compliant with international standards such as CE Marking, ISO 14001 (Environmental), and WEEE (e-waste) directives, in order to remain eligible for incentives.

It has also been reported that the policy would also involve inviting tech giants such as Apple and Samsung to set manufacturing facilities in Pakistan. According to the Mobile and Electronics Manufacturing Framework approved by the EDB, the government will also target the re-export of refurbished mobile phones. These mobile phones would be imported for the sole purpose of refurbishment, upon which they will be exported. The government estimates that between 3 and 4 crore units can be refurbished each year, with a potential to bring in between $300-400 million in yearly export revenues.

Will it Work?

The government’s aim is largely correct. Increased localisation is the way to go, not only for its technological and forex revenue benefits, but also because it is a way to generate livelihoods for the many. It is also to be welcomed that the government acknowledges that mere local assembly is not sustainable in the long term, and that it seeks to push local OEMs to export their products abroad. The fact that the government is thinking about ways to finance these policies that are not as dependent on the caprices of the current government also shows that the sights are set firmly on the future.

Yet there are some points which complicate the prospects of achieving what the government sets out to do in the policy through the measures it proposes in the policy itself. First, although the policy stipulates that every OEM should be exporting phones and capturing 10 percent share of a particular territory of the brand owner’s market, the real export market of mobile phones is not such an easy or straightforward matter.

The major exporter of mobile phones in the world is China, which has not only its own brands like Xiaomi, Vivo, Oppo, but also manufactures phones of global brands, most notably Apple’s iPhones. It has been estimated that around 9 in 10 of the 200 million iPhones sold per year are made in China. Another massive exporter of phones is Vietnam, where most Samsung phones are made. In fact, Samsung had to shift its manufacturing from China to Vietnam due to the intense competition there.

Although there are other countries that manufacture phones, including Turkey, India, Egypt, Algeria, Mexico, Malaysia, Indonesia, and Bangladesh they are mostly assemblers. Profit talked to an industry expert who highlighted that these countries are already serving certain key markets, and for Pakistan to make inroads into these markets might not be as easy as said. “Just saying that we will export to certain countries in Africa, for example, doesn’t cut it. Countries in Africa already have a free trade agreement among themselves, so why would they choose Pakistan over Egypt? We have to carefully think about what countries we want to export to,” says one industry expert on the condition of anonymity.

At the same time, these other countries have well-established supply chains to export their products, whereas Pakistan would have to start anew. In this case, government assistance with access to newer markets, through trade agreements for example, would also be required, something the policy does not stipulate for. This is especially needed since the government has linked access to TIF rebates to ramping up export performance, which without government facilitation into foreign markets might not go about as smoothly as envisaged.

In addition, the expert Profit approached pointed out how most such countries which have been setting up local production – and which are big markets on their own – the import of CBUs is heavily taxed, making the imports of Pakistani mobile phones not very favourable for such countries.

Then again, there are certain points in the policy for which there is little explanation by way of a roadmap. For instance, although the government has indicated a 50 percent localisation target to be achieved by 2033, there is little information on how exactly this is to be achieved. Although one can surmise the reasoning behind it, that they would encourage international manufacturers to set up manufacturing plants, probably through joint ventures with local companies, little vision is present on how these high-value manufacturers are to be brought into Pakistan to enable the local production of these high-value components.

One of such high-value components is the manufacturing of displays. While the policy offhandedly includes displays in the list of components to be eventually manufactured in Pakistan, it provides little information on how the government will facilitate these. Display manufacturing plants require high CAPEX, and even in manufacturing giants like Vietnam and India the government has incentivised such initiatives with tax exemptions. The policy is silent on what initiatives the government shall take to incentivise such things. This is not to say that the government will not do it, but simply that the policy doesn’t place the government under any obligations to do it. And without a more substantial government assistance, it is unlikely the aims set in the policy come through.

As far as the case of refurbished phones is concerned, the industry source mentioned that the revenue generation aims set by the government – i.e., Usd 300 to 400 million – is an aim, at best. “If I am importing 100 units for refurbishment, I would be lucky if I am able to export 20 of these units,” he said. These phones often have issues which do not easily lend themselves to refurbishing, and in order to make the government’s desired revenue figures, “they would need to import Usd 2 to 2.5 billion dollars worth of phones,” the expert estimated. Here, the government again appears to be aiming just a little too far.

There is another thing in this policy which complicates the whole enterprise, and that is the fact that it does not distinguish between local and international brands. According to the industry expert, “it is time that we take care of our own children instead of other people’s”. The reasoning behind this is that while most global brands already have set markets, and even the markets we hope to export those brands to (even if they are locally manufactured) might already have the presence of such brands.

On the other hand, investing in local brands might some day bear real fruit where Pakistan might have something of its own to add in the global market. The expert provided China as an example: “Did you hear of any of these brands, Xiaomi, Oppo, etc, 10-15 years ago?” He said this is a statement of hope, but stressed that it requires long term commitment to a sustainable policy that might actually pay dividends in the future, and that it might just be the most meaningful way forward.

While the targets might be unapproachable, they are not to be dismissed as unimportant prima facie. Instead, better ways to achieve them might be looked at. One thing, for example, that can be done to make things better is to encourage the development of local brands. In that way, provided there is substantial government support, Pakistan might be able to export phones that are local brands, and might carve a niche for itself in the global market.