14 cell phone cos manufacture2.5 cr handsets yearly in BD
Farhad Chowdhury: Mobile manufacturing is a growing industry in Bangladesh. The industry that started its journey a few years ago, is now a combination of several local and international brands. A number of foreign brands have already received mobile manufacturing licenses in a joint venture with 14 local brands and local manufacturers. In the Fiscal Year 2020-2021, more than 4 (4.12) crore handsets were manufactured and imported to Bangladesh. Of which, 63 percent or more than 2.5 crores (2.59) of handsets were assembled or manufactured locally in Bangladesh. While the mobile market of Bangladesh was once dependent on imports only, many local brands are now leading the local market and exporting globally.
The journey of the mobile manufacturing industry in Bangladesh began with assembling mobile phones. According to a source, the assembling of phones started in Bangladesh for the first time in July 2014. The state-owned telephone industry company Limited (TSS) and another private company, OK Mobile BD Inc USA, in partnership, assembled a feature phone and a smartphone and launched for the first time in the country. In 2016, local electronics producer Walton started manufacturing phones exclusively under their own brand.
|Company Name||Mobile Brand|
|Walton Digi-tech Industries Ltd||Walton|
|Alamin and Brothers||5 Star|
|Carlcare Technology BD Ltd||itel and Techno|
|Best Taicool Enterprise Ltd||Vivo|
|Benley Electronic Enterprise||Oppo|
|Telephone Shilpa Sangstha Ltd (TSS) and OK Mobile BD Inc USA||Okay Mobile|
|Vibrant Software (BD) Ltd||Nokia|
On the other hand, global brand Samsung started production in Bangladesh in 2018 with their local assembling partner Fair Electronics. In the same year, another local brand, Symphony, started manufacturing smartphones and feature phones in the country. In 2019, Carlcare Technology BD Ltd started production of Tecno and Itel’s smartphones at the local manufacturing factory in Bangladesh. In the same year, the global brand OPPO, and in 2020 REALME, and in October 2021, the Chinese brand Xiaomi began assembling phones locally. Nokia has joined Vibrant Software (BD) Ltd, a joint venture between Union Group of Bangladesh and UK-based Vibrant Software, to join the list of local assemblers.
Currently, there are 14 licensed companies to assemble and manufacture mobile handsets.
In 2018 Samsung assembled 6 lakh smartphones, 13 lakhs in 2019, and in 2020 17 lakh. In addition, more than 99 percent of Samsung branded smartphones and tabs are currently being manufactured locally. Meanwhile, despite the Corona epidemic in 2020, the local Walton produced about 40 lakh feature phones and 4 lakh smartphones. According to a source, Carlcare Technology BD Ltd. is manufacturing 55 lakh units of Techno and 15 lakh units of itel handsets every year. Xiaomi, on the other hand, plans to assemble about 30 lakh units of smartphones a year at their factory in Gazipur and is soon about to start complete local production.
Samsung is leading the smartphone market in Bangladesh with a market share of over 30% (30.46%) as of September 2021 estimates. Also, XIAOMI, VIVO and OPPO are in the second, third and fourth positions respectively.
The market size of mobile handsets in Bangladesh in 2020 was around Tk 10,000 crore or more than $1.2 billion. The annual demand for new mobile handsets in Bangladesh is around 3 crore 50 lakhs units, of which 90 lakh are smartphones and the remaining 2 crore 60 lakh are feature phones. Out of the total annual demand, 2 crore 6k1 lakh units or about 75% are being manufactured and assembled in local factories. According to BMPIA officials, an average of 1 crore 10 lakh smartphones are being manufactured or assembled locally in Bangladesh every year, some of which are also being exported abroad after meeting the local demand.
In case of feature phones, more than 60 percent are being manufactured and assembled in the country. In addition, about 15,000 people have been employed in 14 manufacturing plants across the country. There are plans to hire 10,000 more workers due to the active growth of local manufacturers.
International Brands Producing Locally
As of 2017, the import tax on components used in smartphone manufacturing was more than 37 (37.07%) percent. This is later reduced to a minimum of 1 percent for phones assembled in the Complete Knock-Down (CKD) process, and 10 percent for phones assembled in the Semi-Knock Down (SKD) process. On the other hand, the government has increased the tax rate on imported handsets to encourage foreign brands to manufacture locally. At present, the government-fixed tax rate for locally manufactured smartphones is 1 per cent, while the tax rate for locally assembled smartphones is 15 percent and the tax rate for imported smartphones is 57 percent. As a result, global manufacturers are now starting production of their mobiles locally.
Local Manufacturers Exporting
After meeting the local demand, locally assembled Bangladeshi manufactured phones are being exported abroad. In March 2020, Walton was the first local manufacturer in the country to export smartphones to the USA. In addition, in October 2021, Symphony became the second local manufacturer in the country to start exporting “Made in Bangladesh” smartphones to Nepal.
Increase in Local Demand
With the increase in the purchasing power of the people of Bangladesh, the smartphone penetration rate is also increasing. Especially the high adoption rate of smartphones among the young generation is another major factor in the industry’s growth. In addition, installment benefits like EMI have increased sales while purchasing smartphones, which positively impacts the local manufacturing sector. According to GSMA’s Mobile Economy Asia Pacific report 2020, 41 percent of mobile phone users in the country have smartphones; the rate is expected to reach 69 percent by 2025. As a result of the increasing demand for mobile phones in the local market, the country’s local mobile manufacturing industry has grown. With the increase in accessibility of the Internet in Bangladesh, Smartphone-centric services are also on the rise. At present, digital services like e-commerce, f-commerce, MFS, and online services in the country are being accessed by the mass through smartphones, making their daily activities easier and faster. As a result, the demand for mobile phones in the country has increased, booming the local mobile assembly and manufacturing industry.
Tax Rate in Local Manufacturing
The tax rate on smartphones manufactured in the country has played a significant role in the booming mobile manufacturing industry. The tax rate on smartphone imports in the country is 57 percent. On the other hand, the tax rate on various parts imported for locally assembled and manufactured smartphones ranges from 1 to 15 percent.
Due to the low tax rate on imported parts, foreign brands are also highly interested in manufacturing locally. Besides, hi-tech parks also contribute heavily in the handset and IT product manufacturing in Bangladesh. According to the Bangladesh Hi-Tech Park Authority (BHTPA), there are currently 11 Hi-Tech Parks in Bangladesh. After registering as a manufacturer, companies receive exemptions from BHTPA and Bangladesh Economic Zones Authority on various duties and taxes, including VAT. In addition, manufacturers located in high-tech parks receive 100% tax exemption on income for the first 3 years and tax exemptions at these different rates for the first ten years after the plant is set up. As a result, local manufacturers such as Walton Hitech Industries Ltd., Nokia, and Maximus are keen to set up factories in Hi-Tech Parks and increase production capacity.
|Year||Tax Exemption Rate|
“Made in Bangladesh” Campaign
The country’s Ministry of Commerce has launched the “Made in Bangladesh” campaign to encourage local smartphone manufacturing and assembly and to highlight the country’s overall growth and development, including in the private sector. In addition to new investments under the campaign, tariffs on imported handsets are being increased, foreign brands are being incentivized to enter the country, and duty on mobile component imports has been reduced.
According to Xiaomi, which recently started manufacturing in Bangladesh, built its factory with $10 million in Foreign Direct Investment (FDI) under the Xiaomi Made in Bangladesh program. In addition, some other brands have already set up their factories under this campaign. As a result, the country’s overall mobile manufacturing industry has grown.
Almost all components have to be imported for mobile phone manufacturing and assembling. The main components for mobile phone manufacturing are displays, chipsets, and batteries. Globally, only a few companies in Taiwan, China, and South Korea produce these chipsets. Companies like Samsung, BOE Technology, LG., and a handful of companies make displays. Apart from these major components, small supporting components like network IC, speakers, microphone, and vibration motor also need to be imported. As a result, the country’s mobile manufacturing industry is still dependent on imports for essential components.
Lack of Technical Skills
Bangladesh still lacks the technical skills required for innovation in the technology sector. Due to this, it is impossible to manufacture many essential parts in the country. At the same time, due to a lack of strong R&D facilities, local manufacturers have to focus on producing high-end parts and low-technology components.
Many sellers import illegal and unofficial phones and sell them for much lower prices. Although the government has prepared several policies, it is not possible to stop illegal phone imports due to the non-implementation of those policies. On the other hand, the local smartphone manufacturers are not taking any far-reaching plans with smartphones. Due to this, Walton once had a very competitive position in the smartphone market, but now they are losing that position to Chinese brands.
High Potential to Attract FDI
There are plenty of opportunities for hi-tech parks to attract foreign direct investments due to having various benefits like VAT and tax benefits, the industry’s potential growth, and an investment-friendly environment. Investment in the industry is already flowing through several local and global brands, which are likely to grow further. According to Light castle, the mobile manufacturing industry of the country is working to attain about $12 billion in investment by 2023.
Relocation of Business from China
The Mobile manufacturing business is relocating from China to countries like Vietnam and India. According to industry insiders, this advantage can also be grabbed if Bangladesh’s infrastructure and policies for quality assurance are made stronger and more effective. Moreover, many skilled young technicians and engineers are currently graduating in Bangladesh. At the same time, the available low-cost labor of the country is another positive aspect. The mobile manufacturing industry shifted from China has a special potential and possibility of relocating to Bangladesh.
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