Local production of handsets saw a significant increase in the first half of the year, but manufacturers continue to face challenges due to reduced demand for high-end smartphones.

Industry insiders also foresee a bleak future after sales dropped drastically in July and August, when student-led protests and the imposition of a nationwide curfew disrupted normal business activities.

More recently, operations have been impacted by flash floods that have inundated 10-11 districts of eastern part of the country.

According to the Bangladesh Telecommunication Regulatory Commission (BTRC), handset production rose 38.45 percent year-on-year in the first six months of 2024, hitting 1.33 crore units.

However, just over three-quarters of the units produced were feature phones. Only 21.60 percent were smartphones.

Industry people added that the local handset industry had been in crisis since the second quarter of 2022.

This was brought on by the rising value of the US dollar against the local currency, which in turn led to difficulties opening letters of credit (LCs).

Persistent inflation has further aggravated the situation, causing consumers to increasingly cut back on spending, particularly on splurging on smartphones.

Smartphone production had steadily increased till March 2022, accounting for around 40 percent of local handset production that month.

However, due to the impacts of falling real incomes, consumers began to prefer feature phones.

In 2023, domestic handset production slowed for the first time since local manufacturing began in 2017, signalling the start of the sector's ongoing struggles.

"The quantity alone does not reflect the full picture," said Jakaria Shahid, president of the Mobile Phone Industry Owners' Association of Bangladesh (MIOB).

"We are currently selling handsets to merely survive, without any profit. We are struggling to cover our costs."

Furthermore, he added, consumers are not replacing handsets as frequently as before. Many are opting to continue using old or even broken devices, he said.

The first six months of the year are typically the peak season as the period coincides with two Eid festivals, which are major occasions for handset sales.

The MIOB reported that smartphone sales increased by 15 percent to 38 lakh in the first half of this year while feature phone sales rose a little over 5 percent to 51 lakh.

"The downturn began during the protests in July, and now we are facing floods," said Rezwanul Hoque, vice-president of the MIOB. "There have been very few sales in recent days and we anticipate a challenging year ahead."

Another significant threat is the expansion of the grey market, which now accounts for about 35 percent of the local handset market, according to the MIOB.

"Many people use used or refurbished phones that were smuggled into Bangladesh illegally, posing a major challenge for us," Hoque noted.

Although the US dollar crisis has somewhat eased, with improved access to dollars and an easier time opening LCs, the rising price of the greenback continues to impact the industry negatively, he added.