Engineers at mobile plants leave country

Industry on the verge of closure due to shortage of imported raw material

KARACHI:

Chinese engineers, working in mobile assembly plants of Pakistan, are leaving the country as the industry’s activities have come to a halt due to economic meltdown.

Former state minister and Board of Investment (BOI) chairman Muhammad Azfar Ahsan has sought the government’s intervention to revive the mobile manufacturing industry on a war-footing basis. The industry is threatened with complete shutdown including Transsion Tecno Electronics, a project of the China-Pakistan Economic Corridor (CPEC).

In a letter to the prime minister, Ministry of Finance, Ministry of IT and Telecom, Ministry of Planning and Development, Ministry of Industries and Production and Ministry of Commerce, the former BOI chairman highlighted that Transsion Tecno Electronics and 30 other mobile phone manufacturers, including global brands like Samsung, Xiaomi, Vivo, Oppo, Nokia, Tecno, Infinix and Itel, were facing shortage of raw material and components because of inability to open Letters of Credit since January 2023.

The situation has forced the companies to halt business activities and resort to massive job cuts, it said.

Transsion Tecno is a joint venture between China and Pakistan. It started production in early 2019 as a CPEC initiative. The company produced 300,000 smartphones per month and hired 12 Chinese managers, 400 Pakistani engineers and 2,500 employees, the letter stated.

Aamir Allawala, the CEO of Tecno Pack Electronics, a joint venture with Transsion Tecno, told The Express Tribune that around 30 to 40 Chinese engineers were working across the industry. “More than half of them have left as there is no work for them here,” he said.

LCs had been on hold since December 27, 2022. Consequently, all mobile phone plants had been closed, said Allawala.

The industry needs $100 million per month to stay afloat at even 50% capacity and keep 35,000-40,000 direct and indirect jobs, the letter quoted Ahsan as saying.

In the current economic downturn, mobile assembly plants are facing the same challenges like those encountered by other industries that depend on imported spare parts or raw material, Topline Securities information and communication technology (ICT) analyst Nasheed Malik remarked while talking to The Express Tribune.

These plants are struggling to obtain LCs and are receiving a small quota. Mobile assembly plants are operating at a very low capacity as they cannot import completely knocked down (CKD) units, he said.

JS Global ICT analyst Waqas Ghani Kukaswadia observed that it had been a challenging situation for Pakistani smartphone assemblers due to the scarcity of raw material, arising from the restrictions on opening LCs.

“Plants have low utilisation levels with some units on the verge of closure. The industry fears that thousands of jobs will be at stake if the situation continues,” he said.

Another primary reason for the slowdown was the decline in demand, caused by the current economic situation, he added.

“Demand for mobile phones has shifted from being a luxury item to a basic need. Our mobile phone companies cater to all segments, ranging from lower to high-end consumers. However, in a high inflationary environment, people tend to hold back their demand and delay the replacement of their mobile phones.”

Despite the current challenges, the long-term prospects for mobile assembly plants are promising, Malik anticipated. “Our huge population cannot afford expensive imported mobile phones, providing ample opportunities for local manufacturers to fill the gap,” he added.

The former BOI chairman urged the government and federal ministries to arrange foreign exchange to help revive operations of the labour-intensive industry.

“In these trying times, Pakistan must maintain the trust of foreign and local investors, so that growth is ramped up and employment opportunities are generated,” the letter elaborated.

He pointed out that the hi-tech industry is the backbone of the economy and, if left unaddressed, the situation may become irreparable. “We need to prove that Pakistan is still the land of opportunities with limitless potential.”

Published in The Express Tribune, March 4^th, 2023.

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