If things move according to plan, you would be able to replace your imported cellular handset next year with one `Made-in Pakistan`.

The ministry of information technology has initiated talks with Chinese companies to set up manufacturing facilities for low-cost cellular handsets. These include China Mobile and Huawei Technologies that have presence in the telecom sector of Pakistan.

Earlier, the Board of Investment had explored the possibilities with the leading mobile handset OEMs (Original Equipment Manufacturers), such as Nokia, Siemens and LG, and also with the local Telecom Foundation, to consider as an attractive option for progressive manufacturing of their products. Nokia, having 60 per cent market share in the country, has no plans in near future to establish manufacturing facilities here, whereas LG has shown interest in the proposal.

In recent years, a strong year-on-year growth in the telecom sector has attracted gross investment of $3.9 billion in 2006-07. The sector was a major recipient of foreign direct investment (FDI) at $ 5.6 billion over the last five years. Despite economic slow down, gross investment in telecom sector in 2007-08 was $3.1 billion. There are over 90 million subscribers to mobile phone network, with mobile density of 56.2 per cent, and the number is increasing by about two million subscribers per month.

Total number of handsets is estimated at 130 million, as at present 20 million handsets are imported annually. According to the survey conducted by the Pakistan Telecommunication Authority (PTA) in 2007, about 20 per cent of mobile phone users change their sets thrice a year, another 20 per cent once a year and another 20 per cent after every two years. In the year 2005-06 handsets valuing $569 million were imported, whereas additional handsets worth $670 million reached the country in 2006-07, registering an increase of 18 per cent over the previous year. The local market, reckoned as the second fastest mobile growth market in South East Asia, is poised to reach the mark of one-billion-dollar annual demand of handsets.

To materialise the idea of local manufacturing, the government has to adopt a focused strategy, formulating a consistent 5-10 years` policy, thereby extending major fiscal and financial incentives to the telecom industry, in general, and to mobile handset manufacturing, in particular. In the first instance, market data and forecast for new mobile handsets has to be drawn realistically, categorising demands separately for advanced imported models and proposed low-cost indigenous handsets, taking into account market for second-hand sets.

The selected mobile handsets for local manufacturing should be compatible with global trends taking into consideration the evolution of latest mobile technologies, such as GSM, CDMA and future generation wireless networks. This would enable us to select hardware, technology features and functionality of handsets conforming to rapidly changing international standards. Last month, China`s largest domestic mobile phone handset manufacturer, Beijing Tianyu Communication Equipment, signed an agreement with the American wireless telecom R&D company QualComm for manufacturing of 3rd generation (3G) sets to be used for the system which is being introduced in China by mid-2009.

Pakistan is well placed in communication electronics and consumer electronics in terms of technology, production facilities and human resources. In fact, component supply base already exists. Multinationals like Siemens, Alcatel, ZTE, local public sector companies such as Telephone Industries of Pakistan (TIP), Carrier Telephone Industries (CTI), National Radio Telecommunication Corp (NRTC) and National Institute of Electronics (NIE), and a host of private companies are actively engaged in the field.

A typical example is cited of a hi-tech telecom company based in Islamabad, Comcept (Private) Ltd, as developers and manufacturers of GSM and CDMA payphones, fixed wireless payphones and special purpose electronic modules, meeting domestic demand and exporting its products. The company undertakes contract design and manufacturing for electronic projects and provides outsourcing service to the OEMs. Instead of duplicating manufacturing facilities, it will be advisable to utilise optimally the existing infrastructure.

The handset consists of 40-60 components of hardware and software, most of which can be produced availing existing facilities, while key semiconductor components can be imported from the OEMs. The cellular handset industry is labour intensive and it will create additional job opportunities.

In the first phase, assembly of handsets can be undertaken, which may commence within a few months of signing of requisite contracts and mobilisation. This will follow progressive manufacturing.

It is estimated that initially a low production of 1.5 million handsets a year would be economically viable. In the next phase, manufacturing of an entire range of cellular phone sets, with increased volume, could be undertaken. Components and spare parts can also be supplied to the OEMs under co-manufacturing arrangements.

Once we master the technology and achieve significant local market share, Pakistani mobile handsets may be introduced in export markets as well. African, Middle Eastern and parts of South Asian countries are growing markets for low-cost cellular handsets.

The writer is on the Board of Directors, National Engineering Services Pakistan Pvt Ltd--NESPAK