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বাংলা
Dhaka Tribune

Uncertainty grips Bangladesh's mobile manufacturing industry

  • Made in Bangladesh initiative under threat
  • Production of 2G, 4G phones going down
  • Two factories temporarily closed
Update : 17 Aug 2023, 09:24 PM

The optimism that surrounded the launch of 14 mobile manufacturing facilities in Bangladesh, envisioned to meet domestic demand and facilitate exports, is now under threat. 

The prolonged downturn in the mobile phone market has cast a shadow over these factories, endangering the "Made in Bangladesh" initiative due to a shortage of buyers in the market.

According to a report, in June 2022, when the production of mobile phones in the country was more than 2 million units, this June it came down to 800,000. 

Market sources have expressed the fear that if this trend continues, the factories will be closed in the next one to one and a half years, and investment will continue to decrease.

Sources say many factories have been able to sustain themselves by laying off workers, reducing the double shift to one shift, reducing the number of lines, operating two to three days a week (the rest of the days being closed) and reducing the amount of losses. If the situation continues, there will be no way for the producers except to close down the entire factory, the concerned people think.

Apart from this, it is found that two mobile factories have stopped their production for several days.

In the budget of the current financial year, for the companies that will make their own components and manufacture mobile phones, VAT has been imposed at the rate of 2% instead of 0%. On the other hand, VAT has been levied in two ways for companies that assemble mobile phones.

Companies that manufacture mobile phones with at least two components in-house will have to pay VAT at 5% instead of 3%. Besides, those who import all parts and only assemble mobile phones have to pay VAT at the rate of 7.5% instead of 5%.

Basically, since the announcement of the budget for the current fiscal year, the mobile market has further collapsed. However, the mobile phone sector has already been in a slump for a long time due to the dollar crisis, rising shipping costs and the shortage of mobile chips.

When asked about the situation, Post and Telecommunication Minister Mustafa Jabbar said: “I have issued four DOs (semi-official letters) so far to resolve the tax issue but no work has been done.”

The minister pointed out that those who are in charge (of finance and taxation), may be trying to increase revenue by taxing a single mobile phone for Tk1,000. But if the previous rate (imposition of VAT) is maintained instead of Tk1,000, the price of mobile phones will decrease. And if the price is decreased, its sales would increase.

The government gets half of what the individual spends on mobile (revenue sharing). On the other hand, the issue of tax on the use of mobile services is there and has been for a long time. But by not doing so, the entire industry (mobile phone manufacturing in the country) is put at risk by earning more than that.

According to a Bangladesh Telecommunication Regulatory Agency (BTRC) report, the production of 2G mobile phones in the country in February this year was 16,69,000 and 462,000 4G mobile phones, in March 2G was 11,77,000 units and 4G was 570,000, in April there were 2G 808,000 and 4G 668,000, in May 2G 493,000 and 4G 378,000, in June 2G 849,000 and 4G 639,000 units.

On the other hand, in June 2022, the report showed that at that time the production of 2G mobile phones was 2,015,000 and 4G phone production was 848,000 units.

It appears that the production of 2G mobile phones in the country has decreased by more than half in a year. Production of 4G phones also fell by more than 200,000 units.

A mobile phone manufacturer, requesting anonymity, told Bangla Tribune that in the current situation, three-four out of 14 factories can survive in the future.

Rezwanul Haque, chief executive of Transsion Bangladesh (manufacturer of Infinix, Itel and Tecno mobile phones) expressed disappointment and said: “I don't see any hope for the mobile phone market to improve this year. The market may turn around at the beginning of next year.”

He said that production in mobile factories has decreased by more than 40%. More can be said on a case-by-case basis. Expressing the fear that many factories may be closed if this continues, he said: “Investment in the mobile factory sector will continue to decrease from next year. Factories may be downsizing.”

Asked about this, Bangladesh Mobile Phone Importers Association (BMPIA) Joint Secretary Mohammad Mesbah Uddin said that if the market continues as it is now, some factories will be closed.

In response to a question, he said, everyone is doing business at a loss. The market may pick up in Q3 (the third quarter of the current year). If the current sales increase by 20-30%, then the market will turn around. If not, the market will collapse even more.

He said that production has been reduced in some mobile factories. As the reason, he mentioned, sales in the market have decreased by about 50%. Of this 30% is due to a grey market| (illegal market) and 20% due to buyer crisis.

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