KARACHI: Lucky Motor Corporation (LMC) has signed an agreement with Samsung Gulf Electronics Co, FZE for producing Samsung mobile devices in Pakistan.

In a stock filing on Friday, Lucky Cement Ltd (LCL) has said that its subsidiary LMC, which is currently engaged in business of manufacturing, assembly, marketing, distribution and sales of Kia and Peugeot vehicles, has also initiated the process of seeking necessary regulatory approvals to carry on the business and in this endeavor, it has filed an application with the Pakistan Telecommuni­cation Authority (PTA) for securing the license.

The production facility for producing Samsung mobile devices would be located at LMC’s existing plant facility where vehicles are being rolled out at Bin Qasim Industrial Park, special economic zone. The production facility is anticipated to be completed by the end of December this year.

Lucky Cement said further information on the amount contemplated to be invested in the production facility and the capacity shall be discussed between Samsung and LMC in due course of time.

The Engineering Development Board (EDB) had approved Mobile Device Manufacturing Policy (MDMP) in 2020 and so far 21 companies had been given the green signal for cellphone assembly authorisation from March to June 2021.

When asked about the start of production of Samsung cellphones after possible completion of production facility by December 2021, an official in Lucky Cement Ltd, who asked not to be named, said as soon as the production facility is ready, the company would start cellphone manufacturing.

On production of specific models, he said “it will be a wide-range of models.” On total investment and job creation in the cellphone project, he said “it is still in working stage.”

Syed Atif Zafar, CFA at Topline Securities, said the investment size is said to be around $100 million (Rs16.5bn), where cash requirement for the investment is not a major concern. LMC is expected to generate average earnings before interest, taxes, depreciation and amortisation (EBITDA/year) of Rs15bn over next two years from its auto assembly plant).

The venture can generate annual revenue of around $300-600m and the project can make net profits of Rs1.0-1.5bn in its early years, he anticipated.

The government is also providing duty protection to the industry through its Mobile Device Manufacturing Policy, which can potentially reduce prices of locally manufactured sets by up to 50pc. The plant will be setup in a Special Economic Zone, which will provide tax exemption to the venture, he said.

Lucky owns 71.55pc of LMC, and expectations are high for this latest venture as Lucky Cement has been hugely successful with its recent initiatives like bringing KIA (another South Korea based company) to Pakistan to assemble automobiles and acquisition and then the turnaround of ICI Pakistan (ICI), amongst others.

Samsung had set up an assembly plant in Bangladesh in 2018, which has been termed a huge success. Samsung is presently producing 95pc of the Samsung phones sold in Bangladesh, with production of around 2.5m units annually, he said.

Mr Zafar said the annual Pakistan handset market size is estimated at 45m units with around 32m units being imported and 13m units being manufactured locally in the country. Of the 28m mobile sets imported in Pakistan during 2019, around 1.54m units were of Samsung (5.5pc of the units imported and 15-20pc in terms of value of imports).

In terms of value, the market size of mobile sets in Pakistan is estimated at $2.5bn, based on imports data provided by Pakistan Bureau of Statistics.

Published in Dawn, July 17th, 2021