Sico Technology plans to begin manufacturing at the end of this year, per directives of Minister of Communications and Information Technology Yasser Al-Qadi. The factory’s investments amount to $20m, of which Sico self-finances, while the Chinese side bears the remaining part.
According to Mohamed Salem, chairperson of Sico Technology, the production capacity of the factory will be 6,000 devices per day during the first year. In 2018, the capacity will reach 12,000 devices per day.
The factory will produce smartphones and tablets for the Egyptian market, as well as the Gulf and Latin American markets. The company also aims to offer shares on the Egyptian Exchange (EGX) to finance its future expansion plans, after manufacturing begins.
How did you decide on the plan to locally manufacture electronics?
I’m in dialogue with many Chinese companies to manufacture our products, from tablets to mobile phones. I have begun talks with a number of Chinese companies to manufacture those devices in Egypt. I also presented my idea to Communications and Information Technology Minister Al-Qadi, whom immediately tasked officials with detailing a vision for the plan, especially as it comes in line with the president’s initiative to focus on the electronics industry, which he launched in December at the Cairo ICT conference.
Egypt has an ambitious plan to manufacture electronics locally, so as to reduce imports and pivot to become a manufacturer rather than importer of electronics. This will increase Egypt’s foreign exchange income, create new jobs, and absorb population in new urban communities away from city centres.
What role can technology play?
Technological Zones will be the keystone of this trend, because they lie in close proximity to main cities in different governorates. They will be linked with a roads network. Collectively, this will create new communities. This is the reason why we decided to build our factory at the technological zone in Borg El Arab, Alexandria.
What role can the government play to promote the local manufacturing of electronics?
The government should provide incentives and protection for local manufacturers so they can compete with other companies. It should prioritise the local manufacturers and impose fees on imported products. Incentives also include training Egyptian experts with the support of the state or secure foreign consultants for manufacturers.
Consulting is one of the important services that the government should support. Consultancy companies have a major role, starting with designing the devices themselves, through choosing the operating systems, and marketing Egyptian brands abroad as well as registering them to maintain intellectual property rights. All of these are advantages are enjoyed by competitors abroad, while we suffer their unavailability in Egypt.
The electronics industry should also be included under the umbrella of export stimulation, which is the case worldwide. China had imposed a similar system and became a factory to the world. Egypt does apply it on several industries; however, it is not applied on electronics—despite the high value of the sector’s returns. The investment life cycle in Egypt spins 10 times per year. The state should also ease logistical procedures and provide air shipping, as electronics rely on speed.
Customs also should be faster. For instance, our products are shipped out from China to Dubai in 48 hours. We receive them in Egypt after one or two months.
Why does Egypt suffer from scarcity of consultancy services?
There are not many international consulting companies in Egypt. And it is very expensive to hire them. This is the reason why the government should provide these services, following suit with the cooperation between the Information Technology Industry Development Agency (ITIDA) and the International Data Corporation (IDC).
What are the competitive advantages for the manufacture of electronics in Egypt compared to China?
Most recently, Chinese companies started looking for new export bases as the Chinese government cut down the incentives it used to give local manufacturers. These companies now look at India for its large market, along with Vietnam and Indonesia to manufacture there. They are also considering Turkey, being the gateway to Europe.
During the visit of Al-Qadi to China, we put Egypt on their map, owing to the incentives and competitive advantages the state offers.
Egypt has a lower rate of manpower than China by 40%. And productivity can be controlled through management. Egyptian technicians and engineers have a high production capacity and are capable of competing with their counterparts in China.
Moreover, Egypt has a large internal market with a great appetite for electronics. It is also a gateway to African and European markets. Furthermore, the Chinese side has adopted the initiative of its president to revive the Silk Road with Egypt to form economic blocs with countries through which the old road passed.
Before signing the manufacturing agreement with China Megan Group, were there any other negotiations?
We were talking with a number of manufacturers in China to take advantage of their expertise in manufacturing locally. We agreed with Megan Group eventually. We are also in talks with two more companies to import production lines. They will soon visit Egypt to draw the operational plan and sign the contracts.
What is the operational plan for electronic manufacturing with Megan?
Before visiting China, we had a plan to assemble in Egypt during the first phase lasting six months. We planned to begin the actual manufacturing within the year. After the visit, Yasser Al-Qadi insisted we begin manufacturing from day one of having the factory. We asked us to equip the factory with major production lines to accommodate the expected future expansions.
We are currently working on studying the production lines and the timeline for shipping and installing the lines at the 3,000 sqm factory in Borg El-Arab, which we should receive by the end of this year.
In addition, we are teaching four Egyptian engineers Chinese, so we can send them over to Megan for training. When they come back, they will be the nucleus of the factory. The Chinese company will also send two experts to train the staff in Egypt, following the footprint of their successful experiences in India and Chile.
Which products will be manufactured locally?
The factory will produce mobile phones and tablets to meet the needs of the Gulf markets. We will export the production to markets included in free trade agreements to benefit from the competitive advantages of tariff exemptions, such as the countries of COMESA, GAFTA, and the Mercosur of Latin America, in addition to Slovakia and Latvia.
We also have plans to design and manufacture our own electronic devices, such as internet chips in smartphones, especially given that Egypt has a lot of good talents to work in the design industry.
What is the size of the earmarked investments?
Investments of the factory amount to $20m, of which 50% we will self-finance. The Chinese side will bear the remaining amount. It will have three production lines: two for manufacturing and one for packaging. The capacity of each production line in the first year will stand at 3,000 devices per day. It will increase to 6,000 devices in the second year for the first year. By 2018, both production lines will output 12,000.
Do you have plans to offer shares on the EGX?
We are considering this move to acquire funding for further expansions. However, this move can only come after manufacturing has begun locally, as the financial value of the company would have increased.
What is the current size of the company, and what is the target at the end of the year?
The company’s business size amounted to $25m in the last year. We aim to raise it to $35m before the end of this year. We also plan to sell 1m mobile phones and 400,000 smartphones before the year’s end.
What about cooperation with mobile operators?
We are cooperating with Vodafone to offer our products through their outlets. We also have a similar partnership with Zain in Kuwait. There are further negotiations to launch tablets for children and a project underway with the Saudi Lebara.