The Ministry of ICT has prepared a ‘Semiconductor Policy and Action Plan’, which proposes wide-ranging incentives for the development of the semiconductor industry in Pakistan.
However, the move runs counter to the IMF’s conditions under the Extended Fund Facility (EFF), which prohibits subsidies and low-cost financing.
The draft policy proposes giving Special Technology Zone (STZ) benefits, exemption from import duty on equipment, soft loans at a discounted interest rate of 25%, and 25% tax rebate to employees in the sector.
It also proposes setting up a National Semiconductor Fund worth Rs 10 billion to provide grants, soft loans, support for startups and incentives to retain local talent and attract international companies.
The ministry has outlined a five-point strategy to create a semiconductor ecosystem. This includes policy incentives, infrastructure development, human resources training, industrial cooperation, and research and innovation.
The policy focuses on chip design, the least capital-intensive area of the semiconductor value chain, as a starting point for Pakistan before venturing into manufacturing, assembly, test and packaging (ATP).
Despite the potential benefits, the policy violates the IMF’s strict guidelines under the Extended Fund Facility, which discourages the provision of subsidies and low-cost financing to industries. IMF documents issued in October 2024 highlighted Pakistan’s tendency to provide subsidies, making its fiscal policy less efficient than peer economies.
Globally, the 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 energy management.
Countries such as China, South Korea, the United States and India have invested billions to boost their semiconductor industries amid geopolitical tensions and supply chain disruptions.
The ministry emphasized that the policy aims to make Pakistan a hub for semiconductor design and manufacturing by 2047. It seeks to ensure economic growth, national security and self-reliance in critical technologies while creating opportunities for startups and entrepreneurs.
The draft policy acknowledges global trends, including the “chip wars” between the United States and China, which have exposed Taiwan’s dependence on semiconductor production.
Pakistan’s initiative, despite its ambition, comes at a time when other countries are aggressively seeking to achieve self-sufficiency in semiconductors, raising questions about its feasibility under the constraints of the International Monetary Fund.