Written by Akhlaqur Rahman Sachee

The mobile phone is the magic lamp of the 21st century, which has dramatically changed our lifestyle. It has shaped how we do almost everything in our daily life. It has brought the whole world under our fingertips. Not only has it shortened time and distance, but it has also provided numerous innovative solutions such as internet connectivity on the go, mobile financial services, telemedicine, and the list goes on.

Bangladesh, a country in which mobile phone was first introduced in the year 1993, experienced its very first local mobile phone manufacturing plant being established in 2017, just within a time span of 25 years. The industry, which was previously dependent on imports only, is now capable of fulfilling more than 80% of its demand through local assembling, thanks to the changes in the government’s fiscal policy in 2017 to reduce the import duty on mobile phone components to 1% for the Complete Knocked Down (CKD) process and 10% for the Semi Knocked Down (SKD) process, which was 37.07% cumulatively before 2017. Bangladesh, having the prospect of achieving a smartphone adoption rate of 62% by the year 2025 as per a report by the GSM Association, surely has all the positive factors present in it for another ‘Made in Bangladesh’ dream to come true.

Mobile Phone Manufacturing Industry in Global Perspective

In the global context, the mobile phone manufacturing industry has always been dominated by China and Vietnam. These two countries alone are used to fulfill nearly 85% of the global demand. However, as per The Economic Times, India surpassed Vietnam in 2017 in terms of the number of units produced. The country plans to grab more than 7% of the global export market, which is projected to be valued at USD 369 bln in 2025.

China: China is the largest mobile phone manufacturing country in the world. As per Statista, the country has the capability to produce more than 1.50 bln units of mobile phones per year. The country is currently fulfilling around 49% of global demand. All the three activities of the mobile phone manufacturing industry value chain, R & D, manufacturing of key components and final assembly, are performed here. Some of the most well-known brands in the world, like Huawei, Xiaomi, OnePlus, Oppo, Vivo, Honor, and Realme, are also from this country.

India: India is currently the second-largest mobile phone manufacturing country, having the capacity to produce over 300 mln units per year. More than 250 manufacturing plants are located here. Almost all the globally renowned brands, such as Apple, Samsung, Xiaomi, Oppo, Vivo, etc., have established their manufacturing facilities in the country. However, India’s value addition to the manufacturing process is less than 20%. Most of the key components are imported from China, and the final products are assembled in India.

Vietnam: Vietnam held the second position for quite a long time until India took over the position. Like India, where the final assembly of the products takes place, multiple global giants have established their manufacturing plants in Vietnam. The yearly production capacity of Vietnam is around 253 mln units. Samsung alone has launched six manufacturing plants in Vietnam, and 60% of Samsung’s global production takes place in Vietnam. However, Samsung plans to shift the majority of its production to India by the year 2024 to ensure better risk distribution.

Other than the countries mentioned above, Taiwan, Hong Kong, Indonesia, South Korea, Thailand, and some other countries are contributing to fulfilling the global demand for mobile phones.

Top Mobile Phone Vendors Worldwide

Motorola DynaTAC 8000X was the world’s very first commercially available mobile phone and was released in the year 1983. In the earlier part of the mobile phone development history, Motorola’s major competitors were Nokia and Siemens. However, the modern era in the history of mobile phones began with the introduction of the iPhone in the year 2007 and the introduction of the first-ever commercially available android smartphone, HTC Dream, in the year 2008. Since then, continuous R & D for software and hardware up-gradation has never stopped. Currently, there are hundreds of vendors serving our needs for handheld devices.

Samsung: Samsung, a South Korea based mobile phone vendor, is in the top position worldwide in terms of the number of units sold. Samsung is well-known for its build quality, user-friendliness, and cost effectiveness.

Apple: Apple is the biggest tech company in the world, and iPhone is the best smartphone in the premium segment. Continuous innovation has helped this American multinational company grab a large share of the smartphone market.

Xiaomi: Xiaomi is a Chinese multinational tech company. Because of offering one of the best price-to value ratios in the market, it managed to give tough competition to the big names of the industry soon after launching.

Huawei: Huawei is another Chinese multinational tech giant. They are offering a wide variety of mobile phones in multiple segments at multiple price points, and that has made the brand very dear to smartphone buyers.

Oppo: Oppo is a subsidiary of BBK Electronics, which is a prominent consumer electronics manufacturer based in China. Oppo has already ensured a position in the list of top vendors for design, build quality, and affordability.

Vivo: Vivo is another subsidiary of BBK Electronics. Vivo is more performance-oriented, whereas Oppo focuses on the design and looks. Vivo has recently teamed up with Zeiss to make more changes to the way smartphone cameras work.

Nokia: Nokia is a Finnish mobile phone manufacturer brand which was once the largest mobile phone vendor in the global market. Failure to keep up with consistent innovations from Apple and Samsung, as well as a poor choice of the operating system, led to the company’s acquisition by Microsoft in 2014. However, it was bought back by former Nokia executives in 2016, and it is trying to come back to the market by adopting Android as the operating system for its smartphones.

Snapshot of the Mobile Phone Manufacturing Industry in Bangladesh

A report published by Nikkei Asia stated that the initiatives of the Bangladesh government in 2017 to patronize local manufacturing of mobile phones by bringing changes to the import duty structure created an effective price gap of 15% to 26% between imported mobile phones and locally assembled mobile phones. In the very same year, Walton started to operate its first manufacturing plant, located at Gazipur. In the later years, Symphony, Samsung, Oppo, Vivo, Nokia, Xiaomi, and some other renowned names established their manufacturing plants here in Bangladesh. As per the Bangladesh Telecommunication Regulatory Commission (BTRC), a total of 14 manufacturing plants are assembling mobile phones for various globally and locally renowned brands in Bangladesh. As per a recently published report by The Business Standard, the market size of mobile phones in Bangladesh is worth BDT 15,000 crore. In terms of quantity, the annual demand for handsets is around 35 mln units. Manufacturing plant establishment initiatives by some of the local and global brands and their contributions to the industry have been discussed here.

Walton: Walton is the pioneer in the local mobile phone manufacturing industry. The local tech giant’s initial investment was more than BDT 1,000 crore to establish their first manufacturing plant at Gazipur in 2017. The factory has the capacity to produce around 7 mln units of handsets every year, of which 1.20 mln units are smartphones. The facility has created employment opportunities for more than 2,000 people.

Symphony: In the year 2018, Symphony started operating its manufacturing plant located at Ashulia, which can produce 5 lakh units of mobile phones monthly. The local brand has already occupied 28% to 30% of the local feature phone market. More than 1,200 people have been employed by their manufacturing facility.

Samsung: Fair Electronics established the very first manufacturing plant assembling mobile phones for a foreign brand. In collaboration with Samsung, they have established a state-of-the-art manufacturing facility at Narsingdi. The factory has created employment opportunities for around 1,250 people, and it is capable of fulfilling almost 100% of the demand for Samsung mobile phones in the local market.

Xiaomi: Xiaomi established a manufacturing plant with a total area of 55,000 square feet at Gazipur in the year 2021. Around 3 mln handsets can be produced in this facility every year, and more than 1,000 people are working here.

Nokia: In collaboration with Union Group, Nokia has already started assembling mobile phones in Bangladesh by establishing a manufacturing plant in Gazipur. The factory is capable of producing around 9,000 handsets per month. More than 200 people are working here to keep the facility running.

As per a report by The Daily Star, 14 manufacturing facilities in Bangladesh fulfilled around 63% of the total local demand for handsets in 2020–21, which is more than 25 mln units in terms of quantity. They have invested around BDT 5,000 crore in total in the industry, and the industry as a whole has the capacity to produce 40 mln units per year currently, according to The Business Standard. Altogether, more than 15,000 people are employed in the industry, of which 98% are Bangladeshis, other than a few senior officials.

Prospect of the Mobile Phone Manufacturing Industry in Bangladesh

The mobile phone manufacturing industry has already proven itself as a prospective industry, which has surely a long way to go in the upcoming years. Some key growth aspects of the industry have been enumerated below.

Large Untapped Local Market: A report by Fitch Ratings stated that sales of mobile phones in Bangladesh may grow by more than 7% in the upcoming years. Sales have already grown by 17% in value and 8% in the number of units over the last five years, according to the Bangladesh Mobile Phone Importers Association. These figures clearly indicate that there is still a huge unserved market in Bangladesh and that the mobile manufacturing industry has room to grow.

Healthy Ecosystem of the Industry: This goes without any doubt that telecom operators are the major stakeholders in the industry. As per a report published by the GSM Association, connection penetration is 102% in Bangladesh, and subscriber penetration is 54% as of 2020. These figures indicate a better scenario than our neighbouring country, India. The coverage gap stood at only 5% in 2020 because of the continuous coverage expansion effort of the telecom operators. Currently, there are four telecom operators operating in Bangladesh: Grameenphone, Robi, Banglalink, and Teletalk, which are putting forth continuous effort to introduce modern network technologies and reduce the coverage gap to zero.

Growth Friendly Tax Policy: To help the industry grow, the government has designed the tax policy in such a way that the local mobile phone manufacturing industry enjoys some competitive advantages over imported smartphones and feature phones. The cumulative tax rates on imported smartphones and imported feature phones are 57% and 32%, respectively. However, the imposed cumulative tax rates on locally assembled handsets and locally manufactured handsets are only 18% and 13%, respectively.

Foreign Direct Investment (FDI): Xiaomi has recently invested around USD 10 mln to set up its manufacturing facility at Gazipur. A good number of hi-tech parks are already under construction, and many more have been proposed. Plants operating in those parks will enjoy various facilities like tax breaks, import duty exemptions, etc. The mobile phone manufacturing industry will directly benefit from these government initiatives as there will be more FDI inflow into the country.

Export Potential: The industry has enormous potential to be one of the major contributors to our export receipts, whereas nearly 85% of the contributions currently come from the Ready-made Garments (RMG) sector. Walton is the first local manufacturer to export smartphones to the USA in March 2020. Symphony shipped 15,000 smartphones to Nepal in October 2021. Export-friendly trade agreements with South Asian and African countries can open new doors for the local mobile phone manufacturing industry, as the industry has the capacity to contribute to our export basket after fulfilling the local demand.

Challenges

Even though the mobile phone manufacturing industry seems to have high growth potential, the industry is facing a set of challenges which may hinder the pace of growth. Some of the major challenges have been discussed in this part.

Affordability: Though local manufacturing facilities have helped cut the costs significantly, enjoying a quality mobile phone is still expensive for the majority of the population. As per the GSM Association, consumer tax as a share of Total Cost of Mobile Ownership (TCMO) in Bangladesh is higher than its regional peers, which is 35% in Bangladesh, whereas it is 25% and 23% in India and Pakistan, respectively.

Proposed VAT Policy: It has been proposed in the budget for the fiscal year 2022–23 to withdraw the existing 5% VAT exemption at the trading stage of mobile phone sets, which will affect the affordability of mobile phone consumers in Bangladesh. The prices of all the mobile components have increased significantly. Because of this proposed VAT policy, retail prices of the handsets will increase further, and this will certainly impact the purchasing behaviour of consumers.

Lower Value Addition: Chipsets, displays, and batteries are the main components required to produce mobile phones. None of them is produced locally, and there are only a few suppliers of these components located in China, South Korea, and Taiwan. As per a report published in The Daily Star, only 15% to 30% value addition happens here in Bangladesh. To exploit the full potential of the growing mobile manufacturing industry, backward integration is required in the industry.

Unofficial Mobile Phones: The government has imposed an import duty of 57% on imported smartphones and 32% on imported feature phones to help the local mobile phone manufacturing industry flourish. Alongside, BTRC has taken punitive actions several times to stop the entry of unofficial phones. However, it has been observed that almost 10% of the mobile phones sold have entered Bangladesh via various illegal channels. This is a threat to the local mobile phone manufacturing industry and the users of the devices.

Even after being faced with multiple challenges, it cannot be denied that Bangladesh, with a population of which 95% has access to telecommunication, has already achieved the objectives of Digital Bangladesh. Through the emergence of high-tech industries like the mobile phone manufacturing industry, the country is sure to make the dreams of Vision 2041 come true.

The writer is working as Senior Executive Officer at IDLC Finance Limited and he can be reached at akhlaqur@idlc.com.