Pakistan Cellphone Production Drops 35% Amid AI Chip Costs and Taxes

Cellphone production in Pakistan fell 35% ^[1] in April 2024 as manufacturers faced rising costs and new tax burdens.

This decline highlights the vulnerability of local electronics assembly to global supply chain shifts and domestic fiscal policy. As the industry struggles with profitability, the drop in output could lead to higher consumer prices and reduced availability of affordable devices.

Industry players said the downturn is primarily driven by the global race for artificial intelligence chips. This shift has redirected semiconductor resources, increasing the cost of standard mobile components used in local assembly. The resulting price hikes have squeezed margins for manufacturers who cannot easily pass these costs to consumers.

Adding to the pressure is the imposition of an 18% Goods and Services Tax ^[1]. This tax has further increased the cost of doing business and reduced overall demand for new handsets. Manufacturers said the combination of expensive raw materials and high taxation has made it difficult to maintain previous production levels.

The downturn occurred in April 2024 ^[1], marking a significant contraction for the sector. Local manufacturers are now grappling with a market where the cost of production is rising while the purchasing power of the average consumer remains stagnant.

Industry representatives said the current environment is unsustainable. They noted that without relief from the tax burden or a stabilization of component costs, the domestic mobile industry may continue to shrink, further increasing the country's reliance on imported finished goods.