State Financial Support for Smartphone Production

EghtesadOnline: The Central Bank of Iran and Post Bank of Iran, affiliated to ICT Ministry, will invest 2 trillion rials ($14.8 million) in the domestic production of smartphones to curb dependence on foreign suppliers.

News ID: ۷۴۹۳۵۸

05 January 2020

On Tuesday, ICT Ministry, CBI and PBI, along with the domestic mobile operators Mobile Telecommunications Company of Iran and MTN-Irancell, signed a multilateral agreement to streamline the production of smartphones in Iran, the ministry's website reported.

The two banks are to invest 1trillion rials ($7.4 million) each in the project, according to Financial Tribune.

Speaking at the signing ceremony, Information and Communications Technologies Minister Mohammad Javad Azari Jahromi said preliminary studies show the initiative will yield over two million smartphones in two years.

Jahromi said assuming an average price of 25 million rials ($186) for each handset, the domestic market value of the industry will exceed 50 trillion rials ($373 million) in two years.

"In a move to bolster the operation of the project, another agreement is being devised with the Ministry of Industries to lower the import tariffs of smartphone parts. This will cut the final price of the phones. Currently, the tariff stands on 15%," he said.

Jahromi said work is underway to designate the required space for the project at the Tehran-based Research Institute for Information and Communications Technologies, Sajjad Park—ICT Ministry's specialized tech park and Payam Special Economic Zone adjacent to Payam International Airport in Karaj, Alborz Province.

"So far, four domestic knowledge-based companies have expressed willingness to participate in the smartphone production plan. One of them has produced a prototype and when the ecosystem is in place, three more firms will join the venture and officially begin work," he said.

The move is in line with the government's policies of indigenizing ICT infrastructures, curbing the country's dependence on imports and discouraging capital flight.

Focus on Domestic Potentials

Speaking on the sidelines of the signing ceremony, Mehdi Sadeqi, a deputy industries minister, said so far two events have been held for the localization of ICT infrastructures, which have led to fruitful agreements.

"The forged deals are estimated to curb the outflow of €118 million for imports per year," he said.

“This makes ICT the country's second frontrunner in terms of localization, after the domestic auto manufacturing sector that has managed to save up to €280 million annually.”

The localization deals are expected to boost competition between local producers both qualitatively and quantitatively.

In early December 2019, Industries Minister Reza Rahmani said Iran's ICT sector will become less dependent on imports and more self-reliant by 2021, thanks to the expansion of domestic production units.

“Within two years, infrastructures of information and communication technologies will mostly be localized, curbing an annual capital flight of over $10 billion,” Rahmani told IRIB News.

"In line with strengthening domestic manufacturers and increasing the share of Iran-made products in the field, the import of more than 1,500 communication products has been stopped over the past several years, as they can be produced by local manufacturers using domestic equipment and technology."

The industries minister noted that the role of locally-made devices in the field is expected to expand, making the ICT sector independent of foreign sources and help boost exports.

In the last Iranian year (ended March 20, 2019), Iranian producers of ICT products earned $24 billion by exporting to over 15 regional countries, which figure is expected to double by 2021.

Rahmani said Iran has the potential to sell communication products worth over $700 billion to the Chinese market.

Recently, Majid Sadri, the head of Telecommunications Company of Iran, told the media that a large part of the required infrastructures will be localized shortly.

He believed that Iran is already self-sufficient in the production of modems, copper cables, data transfer equipment, ICT charging and maintenance services, wavelength-division multiplexing technologies and fiber-optic communications, which have been mainly imported so far.

Sadri emphasized that adhering to standards is of high importance in the production of equipment in the field of communications.

"In line with the ultimate goal, we will increase the use of domestically-made devices in TCI and encourage local makers to use the world's latest technologies to enhance the quality of their products," he said.

ICT Developments

The expansion of communications services and promotion of telecom infrastructure investment have been high on President Hassan Rouhani’s agenda since he took office for the first time in 2013.

Data released by the Communications Regulatory Authority of Iran in October 2019 show that the sector has observed a significant growth over the past few years.

Internet penetration rate has reached 90.78% in the country, but the mobile internet penetration rate is lower and stands at 78.14%. About two years ago, the rates stood at 53.53% and 41.72% respectively.

Iran has over 64 million mobile internet subscribers, in addition to the registration of 10.3 million landline internet subscriptions. The numbers are significantly higher compared to two years ago—33.2 million and 9.4 million respectively.

The total number of internet subscribers has reached 74.5 million.

Data show Iran's mobile communications network has grown fast over the past few years with the registration of 93 million mobile subscriptions. The number is significantly higher from the 63 million registered five years ago.

Iran has 1,241 cities and a population of 83 million. The country’s mobile communications penetration rate has reached 113.34%.