The Ministry of Information Technology and Telecommunication has prepared the “Semiconductor Policy and Action Plan,” proposing extensive incentives to develop Pakistan’s semiconductor industry.
However, the move contradicts the International Monetary Fund’s (IMF) conditions under the ongoing Extended Fund Facility (EFF), which prohibits subsidies and low-cost financing.
The draft policy suggests granting Special Technology Zone (STZ) benefits, exemption of import duties on equipment, soft loans at a 25% rebated interest rate, and a 25% tax rebate for employees in the sector.
It also proposes establishing a Rs10 billion National Semiconductor Fund to provide grants, soft loans, startup support, and incentives to retain local talent and attract international firms.
The ministry has outlined a five-point strategy to establish a semiconductor ecosystem. This includes policy incentives, infrastructure development, human resource training, industry collaborations, and research and innovation.
The policy focuses on chip design, the least capital-intensive area of the semiconductor value chain, as a starting point for Pakistan before venturing into fabrication and assembly, test, and packaging (ATP).
Despite the potential benefits, the policy violates the IMF’s strict guidelines under the EFF, which discourages subsidies and low-cost financing for industries. The IMF documents from October 2024 highlighted Pakistan’s tendency to offer subsidies, leaving its fiscal policy less efficient than peer economies.
Globally, the semiconductor market, valued at $600 billion in 2023, is expected to reach $1 trillion by 2030, with 70% of growth driven by computing, automotive electronics, wireless connectivity, and power management.
Countries such as China, South Korea, the US, and India have invested billions to strengthen their semiconductor industries amidst geopolitical tensions and supply chain disruptions.
The ministry emphasized that the policy aims to make Pakistan a hub for semiconductor design and manufacturing by 2047. It seeks to ensure economic growth, national security, and self-reliance in critical technologies while creating opportunities for startups and entrepreneurs.
The draft policy acknowledges global trends, including the US-China “Chip Wars,” which exposed dependency on Taiwan for semiconductor production.
Pakistan’s initiative, though ambitious, comes at a time when other nations are aggressively pursuing semiconductor self-sufficiency, raising questions about its feasibility under IMF restrictions.
