The Ministry of Information Technology and Telecommunication (MoIT) introduced the draft “Semiconductor Policy and Action Plan,” aimed at advancing Pakistan’s semiconductor industry through grants, subsidies, and incentives.
Key proposals included extending Special Technology Zone (STZ) benefits, exempting import duties on equipment, offering soft loans with a 25% interest rebate, and providing 25% tax rebates.
A Rs10 billion National Semiconductor Fund is also planned to support startups, offer soft loans, and incentivize talent retention while attracting international firms and diaspora over the next decade.
The policy, developed after extensive consultation with stakeholders, outlined a comprehensive strategy for building a sustainable semiconductor ecosystem. It seeks to leverage Pakistan’s youthful population to meet local and global market demands, enabling semiconductor companies to expand and compete globally. The initiative is expected to enhance the economy, bolster national security, and strengthen essential infrastructure.
Pakistan’s domestic market, valued at just $600-800 million, remains heavily dependent on imports. In this context, the emphasis on import substitution and building local capacity has become a natural response. However, effectively navigating this path requires a balanced approach—one that meets international commitments while promoting long-term, sustainable development.
While the proposed policy offers significant economic potential, media reports have mentioned conflicts with the IMF’s Extended Fund Facility (EFF) guidelines, which discourage subsidies and low-cost financing. IMF documents from October 2024 criticized Pakistan’s fiscal policies for inefficiencies due to excessive subsidies, even though such measures make its financing and tax environment more competitive than peer economies.
Global semiconductor industry
The international semiconductor market, valued at $600 billion in 2023, is expected to reach $1 trillion by 2030, with 70% of growth driven by computing, automotive electronics, wireless connectivity, and power management.
The global semiconductor industry consists of three segments
- chip design
- fabrication
- assembly, testing, and packaging (ATP)
China, South Korea, the US, and India are investing billions to boost their semiconductor industries amidst geopolitical tensions and supply chain disruptions.
- China is targeting 70% self-sufficiency by 2025 with $155 billion in investments.
- South Korea has committed $450 billion to chip foundries.
- US has allocated over $52 billion for domestic chip manufacturing.
- The EU has pledged €11 billion.
- India has introduced a $10 billion semiconductor package.
- Saudi Arabia’s Alat plans $100 billion investments by 2030, with semiconductors as a key focus.
Taiwan dominates semiconductor production, while the United States excels in EDA tools and chip design. China holds a strong position in the ATP (OSAT) market. Each segment of the semiconductor industry—fabrication, chip design, and ATP—requires distinct investments, human resources, and offers varying returns on investment. However, focusing on fabrication or ATP alone does not ensure profitability or self-sufficiency in the sector.