The Ministry of Information Technology and Telecommunication has introduced a draft “Semiconductor Policy and Action Plan,” aiming to position Pakistan as a player in the global semiconductor ecosystem. This ambitious initiative includes tax rebates, soft loans with a 25% interest rebate, duty exemptions, and the creation of a Rs10 billion National Semiconductor Fund.
While the proposal holds transformative potential, it risks clashing with Pakistan’s commitments under the International Monetary Fund’s (IMF) Extended Fund Facility (EFF). The global semiconductor market, valued at over $600 billion in 2023 and expected to exceed $1 trillion by 2030, offers immense opportunities. However, Pakistan’s domestic semiconductor market, worth only $600–800 million and heavily reliant on imports, underscores the challenges ahead.
Drawing inspiration from global leaders like the USA, China, and South Korea, the policy acknowledges the capital-intensive nature of semiconductor manufacturing. These countries have made multi-billion-dollar investments, $155 billion by China and $450 billion by South Korea, far exceeding Pakistan’s financial capacity. Consequently, the draft policy emphasizes less capital-intensive sectors such as chip design and Assembly, Testing, and Packaging (ATP).
Chip design, in particular, aligns with Pakistan’s strengths: a youthful population eager for technical training and the potential to attract international firms. The draft policy’s emphasis on public-private partnerships and human resource development demonstrates a strategic approach to harnessing this demographic dividend.
The proposed policy builds on the Pakistan National Semiconductor Plan (PNSP) launched in January 2022. Despite its comprehensive roadmap, the PNSP’s lack of actionable follow-through highlights the need for pragmatic, transparent implementation strategies.
Transparency is especially critical given the IMF’s apprehensions about subsidies and financial incentives that could distort market dynamics. Any policy framework must balance strategic goals with fiscal discipline to maintain credibility with international partners.
Globally, the semiconductor industry thrives on collaboration between governments and private enterprises. Pakistan can adopt a similar model, where the government facilitates infrastructure and seed funding while private firms drive innovation and efficiency. Attracting international firms to establish design centers in Pakistan offers an entry point into the global value chain. Competitive advantages like a cost-effective workforce and untapped potential position Pakistan as an attractive alternative to traditional outsourcing hubs.
The policy’s focus on fostering research and development, international collaborations, and ecosystem building demonstrates an understanding of these imperatives. However, achieving this vision requires addressing key challenges, including political and economic instability, regulatory bottlenecks, and a need for substantial investment in education and vocational training.
The COVID-19 pandemic and US-China trade tensions have exposed vulnerabilities in the global semiconductor supply chain, opening doors for emerging markets like Pakistan. Transformative technologies such as AI, electric vehicles, and renewable energy continue to drive demand for semiconductors, underscoring the sector’s strategic importance.
Pakistan must adopt a phased approach, beginning with high-value, low-investment segments like chip design and ATP before venturing into capital-intensive manufacturing. The Rs10 billion fund should prioritize supporting startups, training programs, and initiatives to retain local talent while attracting diaspora experts.
Potential conflicts with IMF guidelines remain a significant hurdle. The IMF’s consistent stance against subsidies necessitates a fiscally prudent policy framework. Transparent mechanisms for fund disbursement and impact evaluation are critical to ensuring alignment with economic reform objectives.
The draft semiconductor policy is a visionary step toward building Pakistan’s technological and economic resilience. However, its success hinges on pragmatic execution. By leveraging public-private partnerships, focusing on high-value segments, and aligning with global trends and domestic constraints, Pakistan can lay the groundwork for a sustainable semiconductor ecosystem.
This endeavour, while challenging, holds the promise of positioning Pakistan as a competitive player in the global semiconductor market without compromising fiscal discipline or international obligations.
