The war of chips for digital supremacy: Can Pakistan make its mark?

A new race for digital supremacy is underway, and at its core is a tiny yet powerful component: the semiconductor chip. This small but crucial technology powers everything from smartphones and computers to electric vehicles and artificial intelligence.

In response to the growing importance of semiconductors, Pakistan has taken its first major step toward entering the global chip industry. The Ministry of IT and Telecommunication has developed Pakistan's first "Semiconductor Policy and Action Plan," aiming to position the country as a player in the trillion-dollar industry.

According to an official document obtained by Nukta, the global semiconductor market is expected to grow by 10.86% annually, reaching a value of $1.2 trillion by 2029. The industry, which surpassed $600 billion in 2023, is driven by demand in computing, data storage, automotive electronics, and power management.

Over the past five years, the semiconductor supply chain has experienced disruptions due to the ongoing "Chip War" between the United States and China. These geopolitical tensions, coupled with the COVID-19 pandemic, have prompted governments worldwide to invest heavily in semiconductor self-sufficiency.

Soft power

It is envisaged that the role of these electronic chips will increase manifold in the coming days, and semiconductor technology will become a concept of soft power.

China has set a target of achieving 70% self-reliance by the end of 2025 with a $155 billion investment, while South Korea has allocated $450 billion for chip foundries. The United States has committed $52 billion, the European Union 11 billion euros, India $10 billion, and Saudi Arabia recently announced a $100 billion investment in its semiconductor sector by 2030.

Currently, the U.S. and Taiwan dominate the semiconductor industry, prompting other nations to develop independent chip manufacturing capabilities. By 2030, the industry is expected to require one million skilled professionals worldwide.

Pakistan is now working on regulatory and legislative frameworks to create a favorable investment environment for the semiconductor industry. The new policy outlines tax and duty concessions, easy access to loans, and incentives to attract both local and international investors.

Key features

A key feature of the policy is the establishment of a National Semiconductor Fund worth PKR 10 billion, which will provide soft loans, grants, and support for startups.

The policy aims to boost Pakistan’s economy and national security by facilitating projects such as smart chips for national identity cards and passports.

Financial incentives will be extended to companies engaged in semiconductor design, research and development, and manufacturing. Additional benefits include:

• Import duty exemptions on semiconductor manufacturing equipment.
• A 25% interest subsidy on loans for setting up semiconductor plants.
• A 25% tax concession for employees in the semiconductor sector.
• Grants of up to PKR 10 million per startup.
• Simplified registration processes and reduced fees for semiconductor firms.

Public-private partnerships will be encouraged to establish design centers and fabrication infrastructure, while joint ventures will be promoted to build semiconductor manufacturing facilities.

A conducive environment will be created for the stability and transparency of investors in Pakistan.

By 2030, the policy aims to train 15,000 professionals, support 25 startups, and establish three foreign chip design centers. Over the next 20 years, Pakistan plans to set up 10 additional international chip design centers.