Pakistan Sees 55% Mobile Phone Production Growth in May 2024

Pakistan Sees 55% Mobile Phone Production Growth in May 2024

Pakistan has recorded a remarkable 55% growth in mobile phones manufacturing year-on-year (YoY) in May 2024, according to the latest data from the Pakistan Telecommunication Authority (PTA).

Local mobile companies in Pakistan manufactured and assembled 2.23 million mobile phones in May, boosting the total for the first five months of 2024 to 13.1 million units, an impressive 168% increase YoY.

Analysts at Topline Securities attribute this growth to last year’s import restrictions by Pakistan coupled with a gradual economic recovery. This growth marks a significant milestone, with local manufacturing now meeting 95% of the country’s mobile phones demand, a substantial rise from the five-year average (2019-2023) of 67% and the eight-year average (2016-2023) of 47%.

A significant shift has occurred in the past three years, transitioning from imported to locally manufactured and assembled mobile phones in Pakistan. This transformation began with the government’s 2020 local mobile manufacturing policy, which aimed to encourage international mobile players to establish assembly plants in Pakistan. As a result, all brands of mobile phones, except the iPhone, are now being manufactured or assembled locally.

The affordability of locally manufactured mobile phones has driven this shift. These phones are priced 15-20% lower than their imported counterparts of the same quality. In 2016, only 1% (0.29 million units) of mobile phones were assembled locally, while 99% (21.36 million units) were imported. By 5M2024, imports had dropped to just 5% (0.75 million units), with local manufacturing and assembly accounting for 95% (13.08 million units).

Of the 13.08 million locally assembled mobile phones in 5M2024, 62% (8.1 million units) are smartphones, while the remaining 38% (4.98 million units) are 2G phones. The highest demand for mobile phones in Pakistan was in 2020, with 37.56 million units, driven by the COVID-19 pandemic’s rise in remote work, e-commerce, and online education.

Channel checks suggest that, based on the current monthly run rate and the recent imposition of an 18% sales tax on all mobile phones in the Budget FY25, total mobile phone demand may reach 30-35 million units in 2024, compared to 22.9 million units sold during 2023 in Pakistan.

In the listed sector, Air Link Communication (AIRLINK) emerges as a major beneficiary of the expanding market and growing share of local mobile phones. AIRLINK is trading at an FY24E PE of 8.4x and FY25F PE of 5.4x. Similarly, 7% of Lucky Cement’s (LUCK) consolidated revenue comes from its mobile business, benefiting from rising local demand. LUCK is trading at an FY24E PE of 4.1x and FY25F PE of 3.6x.

This growth underscores Pakistan successful shift towards self-sufficiency in mobile phone manufacturing, driven by favorable government policies and economic recovery.