The relatively-new domestic mobile phone manufacturing industry has been hit hard by high inflation, dollar price hike, and increased value-added tax as their sales plummeted amid cautious spending by consumers.
This is compelling manufacturers to cut production as they are facing a crisis that they even did not experience at the height of the Covid-19 pandemic.
The smartphone manufacturing industry is particularly finding itself at the sharp end of the current downturn.
However, sales of feature phones remain steady.
Smartphone manufacturers sold about 900,000-1 million units of devices per month in 2021.
Monthly sales dropped to 600,000 units in the last quarter.
Data from the Bangladesh Telecommunication Regulatory Commission also reflected this.
In January, around 1.4 million smartphones were produced by local manufacturing plants.
It slumped to 670,000 units in May and 900,000 in June, data from the regulator showed.
Industry insiders say they sold 1 million phones per month on average in the first six months of 2021, but it declined to 650,000 in the same period this year.
There is no sign that sales would bounce back soon as the situation is worsening day by day and the higher consumer prices and the volatility in the foreign exchange market are expected to continue in the coming months amid the raging war in Ukraine.
In Bangladesh, local handset production has made an impressive stride in recent years, aided by the government's huge tax benefits unveiled in the fiscal year of 2017-18.
Since then, 14 plants have been set up, creating jobs for around 17,000 people.
Another four plants are in the pipeline.
But the recent withdrawal of a 5% VAT exemption at the sales stage, along with the current global crisis, has cast a negative impact on the local industry, according to industry people.
The escalated dollar price and the increased VAT have directly contributed to the hike in device prices.
The American greenback traded at Tk86 six months ago, whereas it has rocketed to Tk115 recently amid US dollar shortages, fueled by unprecedented import bills, which have comfortably trumped foreign currency receipts in the form of exports and remittances.
As a result, the price of a Tk10,000 handset has gone up to Tk12,500, eating into profit margins for the manufacturers.
Industry people described the increased VAT as the second-biggest blow for the handset market.
Before the current fiscal year that began on July 1, there was about 58% tax on smartphone imports, whereas the tax on locally assembled and manufactured handsets was about 15%.
Local businesses also urged the government to activate the National Equipment Identity Register, a system used to ensure devices' authenticity, since there is a surge in the grey market in Bangladesh.
The annual handset market stands at Tk11,000-12,000 crore.
The demand for mobile phones was 41 million units in 2020-21 and 63% of the demand was met by local manufacturing.
In the first six months of 2022, about 185 million handsets were locally manufactured.
Of them, 65% were feature phones, according to the BTRC.