SIFC to push ahead with plan to develop chip industry

Govt needs to offer tax incentives, other facilities to encourage foreign firms

ISLAMABAD:

The Special Investment Facilitation Council (SIFC) has geared up to press ahead with the plan of developing a multibillion-dollar chip design and semiconductor industry in Pakistan.

Sources told The Express Tribune that the government would be required to provide tax incentives and other facilitating programmes to foreign companies, especially Chinese and US investors, to encourage them to set up chip designing centres in Pakistan.

They revealed that the proposal of a government-to-business (G2B) chip designing facility and development of the semiconductor industry was floated in the SIFC in a bid to draw investment of billions of dollars.

It was suggested that Pakistan would have to start from testing and research and then it should develop the semiconductor industry. Estimates suggest that the setting up of a foundry for semiconductor manufacturing requires an investment of around $6-7 billion. Apart from capital, Pakistan has scarcity of trained human resources as well.

“For developing the semiconductor industry, which is associated with smartphone and many other industries, we will have to take small steps by winning the confidence of companies like Intel, AMD, Nvidia, Qualcomm, MediaTek and Unisoc, which can invest in testing departments,” remarked Muhammad Naqi, CEO of Premier Code, while talking to The Express Tribune.

He pointed out that Pakistan had a dearth of skilled resources, for which “we will have to update our curriculum to ensure that we have the required people”.

Along with this, Pakistan needs to create a softer image of the country where visitors and investors can come without any security fears. “Small steps will help us to go a long way. We cannot jump from 0 to 100 but we will have to take a step-by-step approach to progress in the field,” Naqi said.

Read China says US subsidies, tax incentives for domestic chip sector discriminatory

Mobile phones are a low-hanging fruit, especially in Pakistan, owing to their high sales volume. The government can help local brands to expand their market share, go for localisation of components and value addition, and protect intellectual property rights.

China and India have adopted the same approach to make their local brands global giants.

Initial work on developing the chip and semiconductor industry kicked off in 2022. The government at that time formulated the Pakistan National Semiconductor Plan that laid down opportunities, challenges and recommendations.

It pointed to several challenges in developing the semiconductor industry, which was almost non-existent in Pakistan.

A major challenge is that Pakistan does not have a good reputation when it comes to the ease of setting up and operating a business. This can be overcome by highlighting the recent changes in the ease of doing business in the country.

It noted that Pakistani universities were not producing trained graduates who could work on designing chips. This can be addressed by setting up advanced training centres that will bridge the gap between the academia and the industry.

Also, the government does not offer any incentive plan to encourage chip designing companies to install such facilities. It recommended the resolution of the issue by offering world-class incentives that could help bring US and Chinese companies to Pakistan.

Pakistan has a complex customs regime that is difficult for companies to navigate and it is also quite expensive when compared with international standards. This can be simply addressed by implementing a one-stop shop solution with a “zero-in, zero-out policy”, experts say.

In terms of opportunities, Pakistan has a chance to become the next best destination for semiconductor design and manufacturing because of a large pool of low-cost human resources. This has now provided a unique opportunity due to the US-China trade war.

Published in The Express Tribune, March 28^th, 2024.

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